Sandwell Metropolitan Borough Council. Cabinet Member for Housing. 15 December 2011

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1 Agenda Item No. 4 Sandwell Metropolitan Borough Council Cabinet Member for Housing 15 December 2011 Availability of Financial Assistance to Vulnerable Home Owners (Cabinet Forward Plan Ref. No. H016) 1. Summary Statement 1.1 Sandwell has been at the forefront of innovative ways to assist home owners carry out repairs and improvements to meet the Decent Homes standard since the introduction of the Regulatory Reform Order in The Council was a founding and very active member of the West Midlands Kick Start Partnership which was probably the most successful scheme in the UK to provide financial assistance (including equity release loans) to vulnerable homeowners. 1.3 Kick Start was funded by the Private Sector Renewal Support Grant which was cut as a result of the Government s Comprehensive Spending Review. This has led to the decision to close Kick Start and a demobilisation plan has been put in place with all Kick Start activity ceasing by December This will impact on the assistance available to vulnerable homeowners in the Borough; during our participation in Kick Start over 350 vulnerable households in Sandwell have borrowed in the region of 5M to improve their living conditions. This fund will recycle over time and return to the authority. 1.5 For the West Midlands region as a whole Kick Start will have facilitated lending of over 36M to 2,785 vulnerable households. 1.6 This has helped Sandwell meet the previous Government s target of 70% of vulnerable households in the private sector living in a decent home by However, there is much still to do; the 2009 private sector stock condition survey found that there were still more than 26,000 non decent homes in the private sector with over 10,000 of these occupied by

2 vulnerable households. 1.7 Unless there is a reversal in Government Policy it is highly unlikely that previous levels of public sector funding will ever be matched. Therefore in order to continue to provide assistance the Council will need to work with organisations that can access private finance. Two organisations have already been identified as possible partners, The Home Improvement Trust (HIT) and The 6 Towns Credit Union. 1.8 Prior to our involvement with Kick Start the Council had already entered into a contract with the Home Improvement Trust to deliver its Houseproud scheme in the Borough (minute no. 48/04 applies). This contract was superseded by an agreement with Kick Start and the Trust. This will expire at the end of September as part of the demobilisation of Kick Start. 1.9 It is now proposed that the Council, enter into a new agreement with the Home Improvement Trust to deliver Houseproud and continue to develop products with the Credit Union any other suitable organisations that can access private finance to assist vulnerable homeowners living in non decent homes carry out repairs and improvements.

3 2. Recommendation 2.1 That the Area Director of Homes and Communities be authorised to enter into the necessary agreements with the Home Improvement Trust to deliver the Houseproud scheme for an initial period of 12 months with scope to review and extend this after this period; 2.2 That the Cabinet Member for Housing agree that the Council should continue to work with the Six Towns Credit Union and any other suitable external organisations who are able to access private finance to assist vulnerable homeowners carry out essential repairs, improvements and adaptations. In accordance with the authority delegated to the Cabinet Member for Housing, the following course of action has been agreed, which will be set out in the formal record of the decisions taken by the Member: (1) the recommendation(s) above is/are approved. (1) the recommendation(s) above is/are approved as now amended. (2) the recommendations above are not approved. Cabinet Member for Housing Date... Stephen Gabriel Strategic Manager Contact Officer Stuart Hall Senior Urban Renewal Officer Telephone

4 3. Strategic Resource Implications 3.1 Kick Start was funded from the Private Sector Renewal Support Grant (PSRSG) which was distributed to local authorities through a bidding process approved by the Government Office for the West Midlands. PSRSG was cut from 1 st April 2011 as part of the Government s Comprehensive Spending review. 3.2 There are now no public funding programmes to support specialist home loans for vulnerable households in the private sector. 3.3 Houseproud offers a range of commercial loans (including an equity release loan) to older or disabled homeowners with a guarantee of no repossession and the requirement that they be delivered by a local Home Improvement Agency. There is an annual fee for use of the Trust s services of 7, As the HIT are the only organisation currently offering this service and the contract valuation is less than 10,000 the Council s Procurement Rules allow the relevant Chief Officer to arrange the contract directly. No formal written competitive quotations are necessary. 3.5 It is recommended that the initial contract be for 12 months with scope to review and extend this after this period. 3.6 The Credit Union already offers unsecured loans of up to 2,000 to its members and many of these are used for home improvements. 3.7 There is currently a sum of 100,000 for 2011/12 and the same amount for 2012/13 in the approved capital programme to provide urgent repairs assistance for home owners. It is proposed that Houseproud fees will be met from this budget. 3.8 The costs to the local authority to administer Houseproud (and/or Credit Union loans) may be met from fees charged to any loans offered. Costs to the homeowner for setting up and entering into a loan agreement can be added to the overall loan sum and will be set out at the start of the process in accordance with CCA and FSA requirements. The Council could also agree to meet these costs in certain circumstances.

5 4. Legal and Statutory Implications 4.1 Under the Regulatory Reform (Housing Assistance) (England & Wales) Order 2002 Sandwell Metropolitan Borough Council has a legal duty to publish its policy for the provision of assistance to homeowners. 4.2 The Council adopted its policy on 9 July 2003 (Minute 90/03) applies and advertised its contents widely. The provision of specialist home improvement loans was a key element of that policy. 4.3 Under the Housing Act 2004 Sandwell Metropolitan Borough Council has a duty to identify, remedy or take enforcement action over any Category 1 Hazards as prescribed by the Housing Health and Safety Rating System. 5. Implications for the Council s Scorecard Priorities 5.1 Specialist home improvement loans for vulnerable households will contribute to the Council s priorities in the following ways:- Great People Improving Health They will specifically address issues around the health and social impacts of poor housing by tackling non decent homes occupied by vulnerable households and properties with Category One hazards under the Housing, Health and Safety Rating System. Older households in particular will be targeted with essential housing interventions addressing the underlying causes of inequality, health inequality and poverty and enabling people to remain living independently in their homes for longer. Great Place Safer Neighbourhoods They will provide more appropriate housing by tackling cold homes, disrepair impacting on people s health and security reducing people s fear of crime. Great Prospects Investing in Business, People and Jobs Procurement will specifically include for training opportunities for school leavers and long term unemployed people through Think Local Construction. All contracts will be procured using Find it in Sandwell with most contractors already based within the borough or its immediate vicinity. Providing decent, warm and affordable homes will help reduce ill health and contribute to a conducive environment in which to study helping to raise the attainment of the Borough s children.

6 6 Background Details 6.1 The Regulatory Reform (Housing Assistance) (England and Wales) Order 2002 (the RRO) removed much of the prescriptive legislation regarding the way local authorities provided assistance to home owners to help maintain, improve or adapt their homes. One of the approaches recommended was the provision of specialist home improvement loans, especially equity release loans. 6.2 Sandwell was one of the first authorities to adopt this approach within its policy for assistance and entered into contracts with ART Homes Ltd and Houseproud to deliver loans in the Borough. 6.3 In 2003 the Government announced the national Kick Start scheme to promote the use of innovative alternatives to grant aid and Sandwell, together with Birmingham, Coventry, Dudley, Solihull, Stoke Walsall and Wolverhampton supported by the Government Office for the West Midlands (GOWM) were successful in drawing down 6M for the first 2 years of the scheme. 6.4 The programme, known as the West Midlands Kick Start Partnership, subsequently grew to cover the whole of the West Midlands region and attracted funding from the Housing Market Renewal Area Pathfinders as well as Private Sector Renewal Support Grant. 6.5 A tender exercise to attract private finance in 2008 was however unsuccessful, primarily due to the collapse of the sub prime mortgage market and consequent loss of confidence in equity release products. 6.6 The programme therefore remained entirely reliant on public funding but retained the intention to go back to the market at a more beneficial time in the future. However, Government investment into private sector housing renewal ended with budget cuts made during the Comprehensive Spending Review CSR of March One direct result of this cut has been the announcement that the West Midlands Kick Start Partnership Kick Start will cease to exist by December When the scheme closes it is forecast that 350 Sandwell Homeowners will have borrowed in the region of 5million through Kick Start. The overwhelming majority of loans completed in Sandwell have been equity share loans.

7 6.9 The closure of Kick Start to all new cases since 1 September 2010 has meant that the Council s ability to offer financial assistance to those homeowners most in need is extremely limited It is therefore recommended that the Council works with organisations that can bring in private sector finance to private sector renewal. Two organisations have already been identified as potential partners and initial discussions taken place; the Home Improvement Trust and the 6 Towns Credit Union The Home Improvement Trust (HIT) operates a scheme named Houseproud through which homeowners aged 60 or over, or any household with a disabled person can apply for secured loans / mortgages HIT operates as a not for profit organisation but the Houseproud scheme is not subsidised. The loans/ mortgages are provided through a commercial lender and incur interest. The customer will have to pay the loan set up cost, currently in the region of 1, for an equity release loan. The Council can assist in this if it is able or it can be added to the overall loan The minimum loan available through Houseproud is 3, The maximum loan available is determined by the customer s ability to repay or in certain circumstances the equity they have available In order to operate Houseproud, Sandwell Metropolitan Borough Council will have to pay an annual subscription to HIT. This is currently 7,500 per annum If agreed then subject to agreeing a contract with HIT, Houseproud could become operational this financial year The 6 Towns Credit Union is a locally based organisation with its head office in West Bromwich. It currently offers its members small unsecured repayment loans. Discussions are ongoing with the credit union to develop a loan scheme for vulnerable homeowners who need to carry out essential repairs It is hoped that the credit union will be able to offer unsecured repayment between the value of 500 and 5, The interest charged on the loan would be at the normal credit union rate. The Credit Union is a not for profit ethical lender, however it does need to cover its operating costs. As at June 2011 the credit charges 26.4% APR on its loans.

8 6.18 The Council, though its Home improvement Agency would project manage the building work for both loans schemes and charge a fee for this service. The fee would be set at 10% of the contract sum. The fee, if necessary, could be rolled up into a loan. Customers will only be able to access the loans if they agree to use the Council s Home improvement Agency. Source Documents Housing Act 2004 Regulatory Reform (Housing Assistance) (England & Wales) Order 2002 ODPM Circular 05/03 Housing Renewal Sandwell Metropolitan Borough Council Policy for the Provision of Assistance to Homeowners The West Midlands Kick Start Partnership Executive Summary