The Real Estate Loan and Equity Release Schemes

Transcription

1 Housing Assistance Policy (Loans) 1

2 1.0 Introduction Background Research into the potential demand for equity release / loan schemes The loan scheme Eligibility for grant / loan The loan procedure Appeals Process...7 2

3 1.0 Introduction 1.1. The Regulatory Reform Order (Housing Assistance) (England and Wales) 2002 gave Local Authorities the power to give assistance to persons directly, or via a third party such as Home Improvement Agency, specialist financial intermediary or other special purpose vehicle. Assistance can be given to pay for any fees, charges and the assisted works In 2004 the Council s Private Sector Renewal Strategy identified the need to introduce a loan scheme or equity release to ensure owner occupiers, who had built up equity in the property but did not have a high income, were also enabled to undertake renovation to their properties leaving the grants available for those unable to pay. In particular this funding should be aimed at older people who have equity in their property but are cash poor. This scheme was to be developed by the Home Improvement Agency but due to staffing difficulties and lack of resources this work has not taken place The Council accepts that it is the responsibility of homeowners to maintain their own property but accepts that some homeowners, particularly elderly or vulnerable people, do not necessarily have the necessary resources to keep their homes in good repair. However with increasing pressure on our resources the long term sustainability of the grant regime is not clear and it is important that we consider alternatives such as loans or equity release The Council has a Housing Assistance Policy covering all aspects of our policy in relation to assistance in private sector and this should be used in conjunction with this policy. This policy covers a number of related grants including the Staying Put grant which assists home owners with undertaking low cost but serious repair works. 2.0 Background 2.1. The Council current Housing Assistance Policy offers Renewal Grants to homeowners who have a category one hazard, under the Housing, Health and Safety Rating System (HHSRS) (Housing Act 2004). This is up to a maximum of 15,000 subject to a test of resources and a points system (on the basis of need). Increasingly there are less and less people taking up this grant as the costs of the works required exceed the level of grant and no other funding sources can be identified In 2004 the Council commissioned a House Condition Survey which identified the following: 5.4% of all dwellings have a category one hazard (2200 properties) the highest % are located in the central part of the city (8.7% of stock) excessive cold and damp/mould growth are the largest issue for category one hazard the total cost of repair work is an estimated 9.4 million 3

4 2.3. In 2001 the Government introduced the concept of decent homes, and set challenging targets in both the public and private sector to reduce the number of non-decent homes by In the private sector this means reducing the proportion of vulnerable households living in non-decent homes and that by % of vulnerable household s homes are decent. The decency standard covers category one hazards but also lacking modern facilities (kitchens and bathrooms) and having poor thermal comfort which is a particular issue in certain parts of the city In Worcester the House Condition Survey identified that; 6500 dwellings are occupied by vulnerable households in the private sector of these, 1000 are not decent (15%) therefore the 70% target has already been met in Worcester (85% of vulnerable households live in decent housing) the highest rate of non-decency in owner occupiers homes was where households had an income of 10,000 p.a or less In 2006/07 and for the following year the Region have awarded the Council a sum of money to assist us with improving conditions in the private sector, particular targeted at improving decency for vulnerable households in the private sector. From this funding we have set aside a proportion to assist with decent homes minor works in the private rented and owner occupation sectors. In addition to this 60,000 has been set aside to use for a loan or equity release scheme and we have agreed (provisionally) to assisting 5 home owners with the cost of renovation works by March 2008 with the Government Office of West Midlands The region has also identified the need to develop equity release schemes and recognised that small authorities are usually unable to develop this type of funding vehicle on their own. It is therefore encouraging consortiums of local authorities to work with the KickStart programme to develop equity release in their area. With this in mind, through the Local Area Agreement, a project is underway to develop equity release schemes in the County but this is unlikely to commence prior to October Research into the potential demand for equity release / loan schemes 3.1. In 2007 the Home Improvement Agency was tasked with undertaking some research of residents to establish whether there would be support for either an equity release or loan scheme. There was a response rate of 13.26% which is statistically robust but was not a large number in itself In terms of the outcome of the research 50% of people asked would consider applying for a loan but this increased to 66% if the Local Authority were involved in the scheme. 4

5 3.3. Of the 50% who initially said they would not be interested in a loan scheme, 25% of these said they wouldn t undertake the work if they had to pay for it themselves The loan scheme 4.1. As a partial replacement to the current renewal grant, and to also increase the maximum entitlement to cover more substantial works, it is proposed that the Council offer a maximum grant of 10,000 to those eligible for assistance (the existing qualifying criteria would remain) and (subject to the Council being satisfied that there is sufficient equity in the property) a loan of up to 10,000 on top of this, or to applicants who are not eligible for the grant This loan would be placed as a charge (mortgage) on the property for the remaining period of ownership by the client (who applies for the loan) or not more than 25 years, whichever is the sooner, with the addition of interest that is payable at the point the original loan is to be repaid. The interest rate is to be charged at a percentage of XX above the Bank of England base rate. The loan would therefore be repayable even if the person remains in the property but transfers ownership to a relative etc The scheme should be reviewed after an initial period of 12 months, from its introduction in January The first review may take place sooner as Foundations (the National Co-ordinating body for Home Improvement Agencies) are due to publish a good practise guide on loans and equity release during The loans will be offered in accordance with the hierarchy of assistance as detailed below: The level of client s own savings that is reasonably available Access to sources of charitable or other funding (e.g. SSAFA / British legion and occupation based charities) A further mortgage in addition to any existing mortgage Subject to the level of funding available from the previous sources: i) if the client still requires a balance that is more than the maximum level of the loan ( 10,000) then the client will be advised to seek independent financial advice on equity release or conventional loan options, or perhaps alternative accommodation ii) if the client requires a balance that is less than the maximum loan available then the client will be supported in applying for the loan 4.5. The procedures adopted to administer the scheme will be identical to those in the current Housing Assistance Policy The work to be carried out to the standards determined by the Property Standards Officer. 5

6 4.7. It is proposed to prioritise the loan applicants by using the same system for prioritising applicants for renewal grants e.g. a points system that concentrates our activities on the elderly and vulnerable in the greatest of need Where applications fall outside the agreed criteria they should be referred to the Principal Strategic Housing Officer or Housing Services Manager who will use their discretion in determining approval in situations such as; i) cases of exceptional hardship ii) where ownership cannot be proven due to the length of time the occupier has occupied the property iii) where delayed enquiries would be detrimental to the health of the occupier It is critical that all repayments of the loan are ring fenced to the private sector housing capital budget (either for use as further grants or loans) for the ongoing sustainability of the scheme It may be necessary to add further sums of money in the short to medium term to keep the scheme running subject to the availability of resources The availability of both the grant and the loan will be restricted to one every three years per property and per person and the scope of the initial work must render the property free from Category One defects. 5.0 Eligibility for grant / loan 5.1. The grant and loan is only available to residents living within the city boundaries, people over 18 and owner occupiers who have occupied their property for a period of more than 3 years. Properties less than ten years old will not be considered other than in exceptional circumstances Priority will be given to those on means tested benefits first and those scoring highly on the points system. For owner occupiers priority will be given to those with a high level category one hazard and again the points system will be utilised Each application will be considered on its own merits but consideration will be given to; Is the proposal economically viable considering the Council s resources? Does the proposal fit with the strategic aims of the Council? Are any other assistance or options available? 6

7 5.4. If the Council should, at any time, be unsatisfied with the status of any application it shall use it s discretion to cease or refuse assistance The Council will refuse to undertake any works where they are expected to be covered by household buildings insurance. 6.0 The loan procedure 6.1. For more details about the loan and grant procedure please also see the Housing Assistance Policy and individual procedures The Council will determine all grant applications within 6 months and where insufficient information is provided within this timescale, the grant will be refused The applicant will be required to produce information and evidence as required for the purposes of assessing eligibility and priority for assistance. This will include: i) Proof of ownership ii) All co-owners must join in the application regarding the work iii) Proof of occupation iv) Details of the required works, including any surveys or reports from specialists v) Financial information from all relevant persons including proof of benefits vi) Detailed costing of works and quotations from contractors (min of three) vii) If required permission under any act of parliament or statutory instrument e.g. Planning Permission, Party Wall etc. Act and Building Regulation Approval All work shall be undertaken in accordance with current Health and Safety regulations and all contractors must be mindful of equal opportunities and customer care issues. The work must be undertaken within 6 months of approval and should be to the manufacturers recommendations and best practise. 7.0 Appeals Process 7.1. Any person, having made a proper application to the Council for assistance, may appeal within 30 days against a decision to refuse the application Stage One The appeal shall first be considered by a Senior Officer who shall notify the appellant of the outcome within 30 days of receipt of the appeal. The following decisions may be given; 7

8 i) Uphold the appeal ii) Vary the assistance iii) Refuse the appeal 7.3. Stage Two If the appellant is unhappy with the outcome from Stage One the issue may be heard by an independent senior officer and the decisions made as in Stage One. 8