Affordable housing doesn’t work

Local homes for local people, key worker policies, Section 106 agreements. Do they work or do they create more problems than they solve?

Related blog Housing in West Cornwall, an opinion

…instead of being able to sell with perhaps a little profit or, at least a small loss; they are now almost certain to face repossession and subsequent credit blacklisting.

There has been a lot of debate in the media recently about ‘affordable housing’. But what is it? For many, it is trumpeted as the greatest thing since sliced bread; allowing local people or, people who are not so well off, to live in or move to, an area they could otherwise not afford. A helping hand in the dog eat dog world of the housing market. A laudable aim.  But is it that simple?

My solution is that local authorities could lend deposit monies to first time buyers with the same percentage stake being retained in the property by the council.

Politics aside, the first question that must be addressed is that of why we are building affordable housing. Is it a) to ensure that everyone who wishes to can own their own property or, b) to provide housing for people who could otherwise not afford to buy?

If it is a) then we need to ask whether we can afford to do this as a country and, also, whether this is ethically sound. Why do we want everyone to own their own home? Home ownership is not the right choice for many for a variety of reasons in any case.

So, is it b)? giving a helping hand to those who wish to buy (or have been convinced by peer, social & media pressure that it is a good thing) but cannot afford market prices? Leaving aside the ethical and moral issues this, then, begs the immediate question as to how do we decide who receives the helping hand and why. And with that question there is the accompanying unsaid statement and moral issue about who doesn’t receive help and why.

This means that the children of many ‘local’ families, my own included, have little, if any, chance of buying their own home near to where they were born or wish to work.

Whilst it is certainly not unique to the Duchy; in Cornwall, we have a terribly low median salary and very high median property prices. This means that the children of many ‘local’ families, my own included, have little, if any, chance of buying their own home near to where they were born or wish to work. The result is that many live at home, rent or move away. There are knock on effects too. Emergency services such as fire-fighters etc. need to live within a certain distance of their work but this is often impossible. This has led many across Cornwall and other areas (parts of London and other cities as well) to suggest that we have a ‘key worker’ policy for property. But what, exactly, is a ‘key worker’?

A growing number of lenders are now refusing to lend on 106 agreement homes – making onward sale very difficult and further affecting values for the owners

Is a fire-fighter, more important than, say, a shoe salesperson? Is a nurse not a key worker along with a refuse collector? Is a local business owner who provides employment for local people to be denied an ‘affordable home’ simply because everyone assumes that, as a business, she she is automatically wealthy (an odd but pervasive assumption that often defies reason and reality)? Some would argue strongly that people who work in the media, politics or arts are key workers for the important role they play in our democracy and spiritual well-being. In fact, in my opinion, everyone who works for a living and pays taxes is a key worker; no matter which way you value their job. So can you really make homes available for key workers if you can’t fairly define what one really is?

…in my opinion, everyone who works for a living and pays taxes is a key worker; no matter which way you value their job.

So let’s move away from the tricky subject of key workers and try another angle that is often tried: local homes for local people. Again, we then have the problem of defining just what is local. Is it to be by mere accident of birth/ a demonstrable lineage within an area for a set number of generations? Or, perhaps in Cornwall and Wales at least, it could also be by genetics?

Being born locally: now is this to be physically born in the town itself (a home-birth) or, to parents who lived in the town at the time of birth and, what if you were born in the town but moved away as a child; do you still qualify? All sorts of problems there so; maybe a demonstrable lineage from an area is better? Well, that immediately creates problems for those whose families have actually married outside of the local gene pool at some point in the recent past so that idea falls at the first fence.

Genetics it is then! But even here in Cornwall, where the remnants of the oldest tribes to inhabit Britain reside, the Celts, we also have a problem. For thousands of years, the Cornish have been  miners, seafarers and metal-traders and, like most sailors and traders, they haven’t always played at home, ahem. Consequently, proud ‘Cornish’ families bear the now anglicised names of Breton fishermen, survivors from the Spanish Armada and miners from all over the world. And, no doubt, scratch deep enough, and there will be genetic evidence linking many of long historical descent to the pre-historic traders from the Mediterranean who traded tin, silver and gold with our distant forebears. So that’s out too… unless you bring in a ‘racial purity’ clause of course. Anyone feel comfortable with that?

Leaving aside the minefield of whether we should and can build affordable housing and who we actually give the golden ticket too, what happens to those people who have been given one of these cheaper than average houses? Often, such properties are sold with a great deal of red tape tied in with them, often as what is called a ‘Section 106 Agreement. Sadly, in my experience, these golden ticket holders soon find themselves trapped in a home they cannot sell and are usually forbidden from letting out; that no longer suits their growing family or personal circumstances. Cornwall Council 106 page

Sadly, in many years of dealing with these properties, I have seen these same people who were supposed to have been helped by this well-intentioned piece of meddling with the laws of market forces; suffering real hardship and distress as a result:

  • Couples who need more space for a new baby, unable to sell at a price that enables them to trade up without moving out of the area; stress, just when they don’t need it.
  • Families who are splitting up, tied to a property that they can’t sell at a price that allows each side to move swiftly on with their lives – causing more tension and stress at an already emotionally charged time.
  • Home-owners who, having lost the relatively low paid job they did have, now unable to sell as no buyers meet the buying criteria {update – A growing number of lenders are now refusing to lend on 106 agreement homes due to the restriction clauses making onward sale difficult and further affecting values for the owners}. Consequently, instead of being able to sell with perhaps a little profit or, at least a small loss; they are now almost certain to face repossession and subsequent credit blacklisting. Much as the champions of affordable housing might hope; market forces have the final word.

Affordable housing is, as I have said above, a highly laudable ideal if you believe that everyone should be encouraged to own their own homes. Making it work effectively has, so far, proved to be counter-productive in almost every case I have encountered. Is state/ local authority owned social housing due for a return perhaps?

My solution is that local authorities could lend deposit monies to first time buyers with the same percentage stake being retained in the property by the council. The stake would have to be repaid within a twenty five year period or, on the sale or transfer of the property. At that point, the stake would be repaid plus interest at a set rate above the base rate or, at 25% of the area average house price* increase over the period since purchase – whichever is the greater figure. This would provide an excellent start for first-time buyers without onerous re-sale restrictions and, would be an ethically and financially sound investment vehicle for councils.

What do you think? Share your views below

Chris Wood

I welcome feedback so please feel free to leave constructive criticisms or ask questions below. If you could also take a second to rate my blog and pass it on to others who you think may find it interesting that would be great. Thanks.

Chris Wood of PDQ Estates Ltd

PDQ Estate Agents website

About Chris Wood: Chris is an estate agent with over 25 years of property experience. His business, PDQ Estates Ltd is based in Penzance and Helston, West Cornwall. He has worked with all sizes and types of businesses from single office independents to the management team and board of RBS and Tesco. A former President Elect of the NAEA and board member of NFoPP until he resigned in 2009, Chris has always championed the highest professional standards forestate agents in the UK. No stranger to the media, he has appeared on various programs including BBC, News 24, ITV, independent and BBC radio and is a regular contributor to trade journals, local and national Newspapers. Chris is on KloutLinkedIn Ecademy Facebook and Twitter Married to Amanda, they live in Penzance with their children who are slowly flying the nest, along with their three spaniels. In his spare time; Chris likes to keep fit and is a long-standing member of the Territorial Army. In 2010 he mobilised for a tour of duty in Afghanistan with 1 Rifles as part of 3 Commando Brigade.

*using HM Land Registry Data

5 thoughts on “Affordable housing doesn’t work

  1. Lots of complicated and intertwining issues! I really don’t agree with the idea of using genetics to work out eligibility, at all. Personally as a Cornish nationalist and member of Mebyon Kernow I don’t know anybody thinking along these lines. The present system worked out by connection to parishes for part rent/ part buy and equity loans works fine in my opinion. It is a lot more realistic and less discriminatory than a genetic or any Cornish only option.

    There are a number of schemes around in west Cornwall but my problem (as i blogged about)with the systems was not how they worked but the geographical spread of affordable housing (no schemes in Penzance or Newlyn) and the lack of numbers.
    The real nub of the problem in Cornwall is second homes they take up houses for part time use, which increases demand and house prices. This rise in prices has caused local sales to drop which has also caused more demand on rentals and their price to rise. Stemming the tide of 2nd home purchases would solve a great deal

  2. Hi Rob, the genetics was a little tongue in cheek but was used to highlight a point that is made by some; ie’ what is ‘local’. Sadly, I have to disagree with you on the parish system as I have a great deal of experience on this matter over the years. I know of several instances where locals have been prevented from buying locally by an anomaly in the wording of the clause, more where the system has been abused and many, many more where, once successful, the same system that helped them buy has then trapped them in what can be a difficult property to sell.

    My main point is that I believe that we need more homes to rent, rather than buy for those who cannot afford market prices. Trying to create a two tier housing market just doesn’t work (although I am now aware of such a system on the channel islands, however, that is a little like comparing apples with pears).
    Chris

  3. Ok I bow to your experience on the parish matter, do you think it was a particular problem of that system? or would that problem transfer to other systems and definitions of local?

    As for renting I am not sure whether people would be happy renting rather than buying. Personally what pushes me towards wanting to buy is stability and being able to paint walls something other than white/ cream! Also it’s a bit beguiling to think that the money I pay in rent is paying someone else’s mortgage and then some extra ‘beer tokens’ on top…

  4. My views are based on the facts as I have experienced them rather than how I might like things to be but, I feel that we cannot have a two tier system in the housing market; it simply doesn’t work. As soon as you try and define local, you hit problems. Surely a fairer system, would be to define by social need (allied with appropriate social responsibility); that however, immediately creates its own problems of massive population influx’s into desirable areas. There is no magic bullet.

    As I mentioned on your blog; perhaps a better way to move forward might be for councils to use a proportion of any money they may have for building, as seed money for social lending as deposits. E.g. Either the Council could be the lender for the whole amount (very risky and not without controversy) or, the council lends a needy couple, say, 10% of the purchase price of a home as a deposit, allowing them to secure a ‘normal mortgage’ with a high street lender. The council would retain a 10% equity share in the property with a set time period over which the loan would have to be repaid. Dependent on the market at the time, the council could be repaid its straight 10% share (with interest being made on the capitol appreciation of the property value to be used to help the next buyers) or, in times of price deflation, the 10% plus BOE base rate could be repaid ensuring that the council does not lose money.

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