Council Scheme to purchase an empty, renovate and sell on

Hi all,

As the title suggests we're looking to pilot a scheme whereby we (the Council) purchase an empty property with the owner’s consent, project managed the renovation by our housing officers and then advertised and then sold at an affordable price to first time buyers registered on Tai Teg. This is a register we have in Gwynedd of people interested in homeownership who cannot currently afford to buy on the open market.

Has anyone done something similar? Any advice would be fantastic!

Thank you,

Elliw

Forums: 
miscellaneous issues

Hi Elliw

Haven't done anything similar but provided you are clear about roles and responsbilities at each stage, there doesn't seem to be anything unduly difficult about it. The main thing is that everyone involved is signed up to what you are trying to achieve, which cannot be taken for granted in my experience within local authorities!

Obviously, there can be risks and disputes around works, selecting properties to purchase and estimating the likely costs.

The legal powers are quite important too, and the flow of money through the council. I am not sure if by definition the house has to pass through your Housing Revenue Account. I find it useful to think in those legal/bureaucratic terms because they provide some sort of fixed points along the way.

Anyway, on my reading the purchase would be under Part II of the Housing Act 1985. Section 9 gives you the power to acquire. Note that although disposal is mentioned, this does not give you the power to dispose - it simply says you can acquire with the intention of disposing, which is exactly what you are talking about.

In order to dispose, and at less than best value which may be the case you are talking about (is it?), then I think you would be relying on the General Consent. Section 32 of the Act itself gives you the right to dispose of the land, but subject to general or specific consents by the Secretary of State.

The consent you would want I think would be in the General Housing Consents 2013 - Section 32....etc.

I think A.3.3.3 of Consent A then allows you to dispose of the dwelling at a discount that is not more than some "minimum discount" under Right to Buy (even though this is not Right to Buy).

I assume any funding would come from the General Fund not the HRA, which is where the finance might get a bit interesting, with money passing backwards and forwards, methinks.

Anyway, your legal and finance people will no doubt advise.

Darryl Lawrence has been doing something like this with shared ownership up in Rochdale and he may well have lots of useful info and experience.

Hi Elliw

I have worked on a different type of affordable home ownership scheme. Which facilitates affordable home ownership but without the Council having to purchase at market value and then selling on at an affordable price. We provided a shared-equity loan (mortgage) which then enabled the owner to be paying a mortgage to their primary lender at no more than 25% of their gross income (our test of affordability). E.g. we would loan anywhere between 10-50% of the purchase price. This would not be paid until there was a change in ownership e.g. owner sold property, owner passed away. At which time we would recover the proportion that we loaned. Owners also had the option to staircase out. We thought that this addressed any concerns about purchasing a property at market value, selling at an affordable value and then either a) the purchaser profiting by selling at a later date at market value or b) having a clause that the property is to be sold at affordable values in perpetuity and having to monitor that.

The owner was also free to appoint any contractor.

This scheme was popular and produced good results.

I know it doesn't answer your original question but it does address any concerns about the public profiting from pubilc finance

Sue

Sue Li

Compulsory Purchase and Enforcement Officer

Derby City Council