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City council invests £5m in bringing 50 homes back into use

The city council is to invest £5 million buying properties in Nottingham, so they can be rented out again as social housing.

It is hoped the scheme will help alleviate the current demand for social housing in the city, and could see around 50 houses all over the city brought back into public ownership.

Already, in the first tranche of the project, £2.85 million has been spent on buying 30 properties.

Now, after the Conservative Government lifted a long-opposed borrowing cap for buying social housing, Nottingham City Council has taken advantage and approved plans for the £5 million scheme.

The houses the city council buy will be former council houses which have been bought by tenants under right-to-buy.

Currently, people who live in council-owned housing have the right to buy their house from the council.

But if the private tenants later sell that property, the council is offered the first right of refusal to buy that house back.

The £5 million will be used to take up that offer, and then make any necessary improvements, in order to rent out the houses.

It will add to more than 500 new-build houses which the city council has built in the last five years with housing association Nottingham City Homes.

Councillor Jon Collins is the leader of the city council and represents the St Ann’s ward for Labour.

He said: “We had already begun buying homes in this way, spending £2.85m on over 30 properties to bring them back into our housing stock – and the lifting of the borrowing cap allows us to continue with the second phase of this programme.

“With an ever-growing waiting list and the increasing problem of homelessness, we’re looking at every way possible to increase the number of affordable homes in the city. We have a legal duty to accommodate homeless people.

“We want to make sure we’re not housing these people in bed and breakfast because it’s four times more expensive than a normal rented house. Keeping people in bed and breakfast is incredibly expensive and it’s damaging to families and children.

“Buying houses in this way allows us to provide better accommodation much more quickly and cost-effectively than building from scratch, but having said that, we have completed 500 new homes in the last five years in partnership with Nottingham City Homes.

“Our Building a Better Nottingham programme is the biggest council house building programme for a generation, introducing new, high-quality homes in areas of high demand.”

“We also work alongside all social housing providers to enable more affordable homes to be built all over the city, and require developers of larger schemes to include affordable homes.”

Source: West Bridgford Wire

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Low-risk investment in social housing

There is a very interesting article by James Johnsen published on the civil society website which gives a great insight into investment in social housing and how it may fit into the future property market. This is an area of the market which is often dismissed as a low margin but the fact that these assets are backed by housing associations/local authorities, with rents guaranteed, offers an interesting opportunity.

HOUSING SHORTAGE

It is common knowledge that the UK has a rising population and a new build housing deficit in the region of 200,000 units per year. This should come as no surprise when you learn that in 2009 the UK government, under Gordon Brown, injected £11.4 billion into the cost of building new homes in the UK. Fast forward to 2015 and under David Cameron’s coalition government this investment had fallen to £5.3 billion. There is an argument to suggest we are not comparing like for like because of the change in economic environment but it does give an example of the reduced investment in the new build housing sector. To perhaps put this into better perspective, this has fallen from 0.7% of GDP to 0.2%.

REDUCED INVESTMENT AND INCREASED HOUSING BENEFIT

One thing very striking about this particular subject is the fact that over the last 20 years, up to the 2015/16 tax year, housing benefit payments in the UK have increased by 50% having reached £25.1 billion. When you compare the reduced investment in new builds against the increase in housing benefit it becomes obvious that there would have been better returns, both financially and socially in the long term, at least sustaining new build financial support. We are now in a situation where rents continue to rise, the cost of property is often out of the reach of new buyers and so demand for rental property continues. A stereotypical vicious circle!

LAND BANKING

Despite political “pressure” we have yet to see any real meaningful regulations introduced with regards to underutilised land banks. There has been talk of additional taxes, compulsory purchases and other “solutions” but so far nothing has been written in stone. We know that the U.K.’s largest housebuilding companies own significant land banks. These non-income producing assets are an investment for the future so perhaps it is a little unfair to criticise companies who plan for the future and build up their land banks? Or should there be more of a balance?

INVESTING IN SOCIAL HOUSING

Over the last couple of years we have seen a number of social housing real estate investment trusts raising money on the stock market. They have been acquiring assets where rent is guaranteed by the local authority and linked to inflation. This ensures that the vast majority of social housing in the UK, now standing at around 4.1 million units, is affordable with a mix of tenant/government assistance. In theory these property should not be at the beck and call of the often volatile private rental market and therefore offer a relatively low-risk long-term income stream.

While the philosophy of ethical investment is perhaps not as strong today as it was 20 years ago, the ability to lock in long-term low-risk rental income streams and offer some assistance to the U.K.’s housing market troubles does have its attractions.

Source: Property Forum

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Home ownership and property development delays

At a time when UK home ownership is under severe pressure it may surprise many to learn that there are 420,000 properties with planning permission which have yet to be built. This is a 16% increase from the previous year and begs the question, if demand is there, why are property developers not building homes?

UK HOME OWNERSHIP

A report by the Institute for Fiscal Studies has found an alarming fall in the number of young middle income adults who owned their home in 2016. Overall it is fallen from two thirds in the 1990s down to just 25% in 2016. We also know that house prices over the last 20 years have increased seven times faster than the average income of the middle 20% of households in the UK (with after-tax income of between £22,200 and £30,600).

In a perfect example of the problems facing the UK housing market we also know that just 25% of those born in the late 80s owned their own home by the age of 27. This compares to 33% for those born five years earlier and 43% for those born in the 1970s. We have seen falls of more than 10% in home ownership in every area/nation of the UK, since the 1990s, with the south-east hit particularly hard, falling from 64% homeownership down to just 32%. The simple fact is that relative incomes are much lower relative to house prices and this situation is unlikely to change in the short to medium term.

WHY ARE THERE SO MANY UNDEVELOPED HOMES?

A report by the Local Government Association has cast a very disturbing light on the property market and especially those homes which have been granted planning permission. As we touched on above, there are now 420,000 properties in the UK which have planning permission but have yet to be built. This is a 16% increase from last year and when you bear in mind the UK is falling short each year to the tune of around 50,000 newbuilds, surely this is a problem which can be addressed fairly quickly?

There is some debate as to why homes with planning permission have yet to be built and while the official statistics show that it takes on average 40 months from planning permission to completion, 8 months longer than 2013/14 this is not the whole picture. We know for a fact that building regulations have tightened over the years, developers may have outline planning permission for certain properties but when it comes to the detail it can prove excruciatingly slow where the local authorities are involved. However, it would seem that ministers have something of a radical proposal in mind!

USE IT OR LOSE IT

There is some debate as to whether the introduction of a “use it or lose it” rule for property development might focus the minds of developers. The idea is that property with planning permission would need to be completed within a predetermined time scale otherwise planning permission would be withdrawn. It is unclear at this moment in time but there may also be some kind of penalty under the proposed regulations when reapplying for planning permission which had lapsed.

Over the years we know that property developers up and down the country have land banked sites as a means of securing their long-term future projects. The idea that they should be forced to build properties on these land banks within a predetermined period of time is controversial. Where will this all end? Would it attack the integrity of the free market? There are many questions to be answered but forcing developers to build properties may curry favour with the public but could decimate the UK investment market.

Source: Property Forum