Development - Housing Associations
Discussion
Looking at a development of 18 apartments, however, due to newish changes & the location of the build, it seems that I must offer 25% (4 apartments) to a housing association. Any developments over 15 plots must conform to this.
According the the council, it appears that they will offer £65k per apartment. They however have a market value of £125k+. Is this daylight robbery legal ?
It does say in the councils paperwork that the figures are 'benchmark' & subject to location & size. Still, £250k loss is a lot.
An alternative is to build 15 apartments, but surely that doesn't help housing problems in the area (which I am all for helping). Again, but 50% of market value ? If it were 75% I could live with it.
Are there any alternatives or anything else I should be aware of ?
According the the council, it appears that they will offer £65k per apartment. They however have a market value of £125k+. Is this daylight robbery legal ?
It does say in the councils paperwork that the figures are 'benchmark' & subject to location & size. Still, £250k loss is a lot.
An alternative is to build 15 apartments, but surely that doesn't help housing problems in the area (which I am all for helping). Again, but 50% of market value ? If it were 75% I could live with it.
Are there any alternatives or anything else I should be aware of ?
The price paid by housing associations is intended to be "at cost" so it is effectively a tax on the value of the land, there is no profit
Some of our clients are looking at an alternative approach. Generally the requirement is that 25% be "affordable housing" and this includes shared equity - you sell only 50% of the equity and retain the balance. The owner pays a mixture of rent and mortgage so you get some return - but not much
What you do get is the benefit of "staircasing" where the owners buy out more tranches of equity over time - usually in 10% slices. You still own the balance of the equity so you get paid for it when they buy it out or sell on
That way you get more money, it's just that you have to wait for it. If the market goes down so does the value of your share but if values go up you get a share in the profit
You are a little vulnerable to a buyer defaulting on the mortgage because the mortgage debt will always take precedence over the balance of the equity but the loan to value ratio would still be based on the equity being bought, not the full value. You would still get most of your money on sale
In principle there is no reason why the local authority should not agree to this as it has the same overall effect. All they will ask is that you agree to sell to the people they or the housing association nominate. As house buyers rather than tenants they tend to be key workers so you are dealing with people like teachers or nurses
It's worth considering and is certainly in the frame for some of our major clients
Some of our clients are looking at an alternative approach. Generally the requirement is that 25% be "affordable housing" and this includes shared equity - you sell only 50% of the equity and retain the balance. The owner pays a mixture of rent and mortgage so you get some return - but not much
What you do get is the benefit of "staircasing" where the owners buy out more tranches of equity over time - usually in 10% slices. You still own the balance of the equity so you get paid for it when they buy it out or sell on
That way you get more money, it's just that you have to wait for it. If the market goes down so does the value of your share but if values go up you get a share in the profit
You are a little vulnerable to a buyer defaulting on the mortgage because the mortgage debt will always take precedence over the balance of the equity but the loan to value ratio would still be based on the equity being bought, not the full value. You would still get most of your money on sale
In principle there is no reason why the local authority should not agree to this as it has the same overall effect. All they will ask is that you agree to sell to the people they or the housing association nominate. As house buyers rather than tenants they tend to be key workers so you are dealing with people like teachers or nurses
It's worth considering and is certainly in the frame for some of our major clients
thesilentpartner said:
Looking at a development of 18 apartments, however, due to newish changes & the location of the build, it seems that I must offer 25% (4 apartments) to a housing association. Any developments over 15 plots must conform to this.
According the the council, it appears that they will offer £65k per apartment. They however have a market value of £125k+. Is this daylight robbery legal ?
According the the council, it appears that they will offer £65k per apartment. They however have a market value of £125k+. Is this daylight robbery legal ?
Yep. Fraid so. Actually, 25% is quite a low percentage, these days. It normally runs from 30% up to 50% affordable in most Councils.
Make sure you know about any other Section 106 items, too. In addition to the affordable housing, they may well be expecting you to make contributions to subsidise everything from play areas for local toddlers through to burial facilities for local corpses, via healthcare, schools and public transport contributions in between.
thesilentpartner said:
Still, £250k loss is a lot.
Not quite a loss, more a reduction in revenue. We usually just about break even on affordable housing.
thesilentpartner said:
An alternative is to build 15 apartments, but surely that doesn't help housing problems in the area (which I am all for helping). Again, but 50% of market value ? If it were 75% I could live with it.
Correct. You can build fewer than the affodable threshold number (make sure that it kicks in at 16, and not '15 or more', though), but you will often find that the revenue per square foot falls off... it's up to you to do your sums to find out which is more cost effective; 13-14 market units with 4-5 affordable, or 15 slightly bigger market units and no affordable.
You're also quite right that affordable housing doesn't really help housing problems. Someone has to pay for it and ultimately that someone is going to be the purchasers of the open market housing. So the price of new houses for those people who have worked hard to be in a position to buy their own home is effectively increased because they are helping to pay for subsidised housing for scrotes.
thesilentpartner said:
Looking at a development of 18 apartments, however, due to newish changes & the location of the build, it seems that I must offer 25% (4 apartments) to a housing association. Any developments over 15 plots must conform to this.
According the the council, it appears that they will offer £65k per apartment. They however have a market value of £125k+. Is this daylight robbery legal ?
It does say in the councils paperwork that the figures are 'benchmark' & subject to location & size. Still, £250k loss is a lot.
An alternative is to build 15 apartments, but surely that doesn't help housing problems in the area (which I am all for helping). Again, but 50% of market value ? If it were 75% I could live with it.
Are there any alternatives or anything else I should be aware of ?
According the the council, it appears that they will offer £65k per apartment. They however have a market value of £125k+. Is this daylight robbery legal ?
It does say in the councils paperwork that the figures are 'benchmark' & subject to location & size. Still, £250k loss is a lot.
An alternative is to build 15 apartments, but surely that doesn't help housing problems in the area (which I am all for helping). Again, but 50% of market value ? If it were 75% I could live with it.
Are there any alternatives or anything else I should be aware of ?
The costs they will pay are at best Cost and not market value, also when you insure your house is that market or rebuild cost? The insurer is not going to give you 300k for the house when it only costs £100k to build.
Also if you do not agre then you will then be most likely to be refused planning permission. The council are following the Regional Planning guidence framework as stipulated by the government.
But another option would be to buy 4 flats in the area and sell these back to the council thuis meeting the conditions set out to you. This would then allow you to have all of your blck to be privately owned
So basically what you're saying I could do is sell 50% of an apartment for say £62,500 (half market value). The owner moves in & uses it as basically thier house, however, I would keep the remainder of the 50% & any increase in the property value that goes with that in the future.
So... if in 5 years time the property is then worth £200k, then both myself & the other 50% owner would each effectively own 100k each.
If the above is correct then I would be very interested in this approach, as its not my intention to sell all the properties anyway.
So... if in 5 years time the property is then worth £200k, then both myself & the other 50% owner would each effectively own 100k each.
If the above is correct then I would be very interested in this approach, as its not my intention to sell all the properties anyway.
Sam_68 said:
thesilentpartner said:
An alternative is to build 15 apartments, but surely that doesn't help housing problems in the area (which I am all for helping). Again, but 50% of market value ? If it were 75% I could live with it.
Correct. You can build fewer than the affodable threshold number (make sure that it kicks in at 16, and not '15 or more', though), but you will often find that the revenue per square foot falls off... it's up to you to do your sums to find out which is more cost effective; 13-14 market units with 4-5 affordable, or 15 slightly bigger market units and no affordable.
You're also quite right that affordable housing doesn't really help housing problems. Someone has to pay for it and ultimately that someone is going to be the purchasers of the open market housing. So the price of new houses for those people who have worked hard to be in a position to buy their own home is effectively increased because they are helping to pay for subsidised housing for scrotes.
The council will still try and sting you for 1 or 2 of the appartments, as you have tried to go under the Radar and avoid the Regional Planning guidance..
If i was the Development control Officer I would still try and get 2 of the appartments for social housing, if not i would refuse full planning permision. Or sting you with other items under section 106
Edited by stevieb on Monday 16th April 13:54
thesilentpartner said:
So basically what you're saying I could do is sell 50% of an apartment for say £62,500 (half market value). The owner moves in & uses it as basically thier house, however, I would keep the remainder of the 50% & any increase in the property value that goes with that in the future.
So... if in 5 years time the property is then worth £200k, then both myself & the other 50% owner would each effectively own 100k each.
If the above is correct then I would be very interested in this approach, as its not my intention to sell all the properties anyway.
So... if in 5 years time the property is then worth £200k, then both myself & the other 50% owner would each effectively own 100k each.
If the above is correct then I would be very interested in this approach, as its not my intention to sell all the properties anyway.
This approach you would need to setup a housing association type body to administer this independently of the developer.
administering the property in thisway you are stipulated to by the coucil again and that you must make avalible provision for the new owner to staircase there purchase on a yearly basis so in effect they could buy 100% of the flat off you within a 2 year period. or worse wait for the housing price bubble to burst and then buy the remainder of the 50% off you for less than the currnet market value.
But surely they make the rules, ie development of 15 or under don't need to provide an housing association dwellings. They can't then suddenly change the rules on you because you decide to avoid it.
As said in the original post, I'm not against the housing association or affordable housing, however, I am against losing a potention 250k in 9 months. I mean, I'm going pay tax on my earnings as well. It just seems they are taxing people with an initiative to now ridiculous levels.
As said in the original post, I'm not against the housing association or affordable housing, however, I am against losing a potention 250k in 9 months. I mean, I'm going pay tax on my earnings as well. It just seems they are taxing people with an initiative to now ridiculous levels.
stevieb said:
thesilentpartner said:
So basically what you're saying I could do is sell 50% of an apartment for say £62,500 (half market value). The owner moves in & uses it as basically thier house, however, I would keep the remainder of the 50% & any increase in the property value that goes with that in the future.
So... if in 5 years time the property is then worth £200k, then both myself & the other 50% owner would each effectively own 100k each.
If the above is correct then I would be very interested in this approach, as its not my intention to sell all the properties anyway.
So... if in 5 years time the property is then worth £200k, then both myself & the other 50% owner would each effectively own 100k each.
If the above is correct then I would be very interested in this approach, as its not my intention to sell all the properties anyway.
This approach you would need to setup a housing association type body to administer this independently of the developer.
administering the property in thisway you are stipulated to by the coucil again and that you must make avalible provision for the new owner to staircase there purchase on a yearly basis so in effect they could buy 100% of the flat off you within a 2 year period. or worse wait for the housing price bubble to burst and then buy the remainder of the 50% off you for less than the currnet market value.
Provided the local authority or a housing association have nomination rights there is no real reason why they would dictate terms other than the inclusion of staircasing rights. I doubt that you would be "dictated to" any more than that
The client I act for who is looking into this most keenly has no intention of setting up a housing association type organisation as it would ruin their plans for the extra income (which they are considering using to fund facilities for the residents) so it should be possible to manage a scheme without that requirement
The boundaries of how this would operate are still being worked out by the developers and planners but the crucial elements are only (i) nomination and (ii) staircasing. Everything else can be delivered by the developer as well as by a housing association
Yes, a buyer could wait for a slump and then buy you out but if you are only getting about 50% of the value anyway what have you got to lose? If the market slumps by 20% it is only 20% of your half (their's goes down in value as well) - net effect 10% drop overall so you are protected against the worst of the market
thesilentpartner said:
But surely they make the rules, ie development of 15 or under don't need to provide an housing association dwellings. They can't then suddenly change the rules on you because you decide to avoid it.
As said in the original post, I'm not against the housing association or affordable housing, however, I am against losing a potention 250k in 9 months. I mean, I'm going pay tax on my earnings as well. It just seems they are taxing people with an initiative to now ridiculous levels.
As said in the original post, I'm not against the housing association or affordable housing, however, I am against losing a potention 250k in 9 months. I mean, I'm going pay tax on my earnings as well. It just seems they are taxing people with an initiative to now ridiculous levels.
If you have already submitted plans for the appartments and they have said 4 apartments to be housing association or social housing then if you submit an ammended plan for 15 slightly larger appartments to avoid then they may pull you up on this and try and sting you.
All developers i have worked with for hosuing have been stipulated to that the deeds must have staircasing included within the schedule. Have you got a planning avisor working for you? as you are most likely to be above the threshhold for a Transport Appraisal.
In all honesty I am not going to reduce the scheme down to 15 as providing this 'affordable housing' does have some advantage:
1) Pre-sales (helps with the financial side of things)
2) Council may be more 'flexible' with our requirements if we are seem to be helping them
3) Figures still stack up better on 18 (with 4 'affordable' houses) than 15 (with no 'affordable' houses)
Still don't like giving away 250k profit though
1) Pre-sales (helps with the financial side of things)
2) Council may be more 'flexible' with our requirements if we are seem to be helping them
3) Figures still stack up better on 18 (with 4 'affordable' houses) than 15 (with no 'affordable' houses)
Still don't like giving away 250k profit though
Right..... after a bit more thinking
The cost of the land + build costs + any associated fees = £90,000 per apartment. This figure does not include ANY profit.
According to the housing association they are willing to pay circa £65,000 for each of the 4 no. apartments.
Can they, if I prove the above costs to them, make me sell then at a loss or do they have to at least pay me what it cost to build them ?
The cost of the land + build costs + any associated fees = £90,000 per apartment. This figure does not include ANY profit.
According to the housing association they are willing to pay circa £65,000 for each of the 4 no. apartments.
Can they, if I prove the above costs to them, make me sell then at a loss or do they have to at least pay me what it cost to build them ?
Edited by thesilentpartner on Monday 16th April 20:44
vex said:
There are thousands of HA's other than the council who I am sure would take them off your hands at cost.
Personally, I know the spec on HA properties are dumbed down, audio door entry rather than video, low grade kitchens and bathrooms etc but your never going to drop by 20K or so.
Personally, I know the spec on HA properties are dumbed down, audio door entry rather than video, low grade kitchens and bathrooms etc but your never going to drop by 20K or so.
I act act as a Project Manager/Employers Agent on the construction side for a couple of Housing Assocoations and suspect that the flats they build are significantly different in cost/spec to the ones you will build to sell.
Can you reduce the size and spec to reduce the losses? How about working with a Housing Assoication from this point onwards as they may well put up some money and will give good input on the spec they require?
Where are you btw?
Reducing the size is difficult due to the site constaints. Obviously the internals can be reduced in spec, but in all honesty we might save 5k each at the most.
The build is also to be in stone & therefore build costs are high in comparison to the normal type of housing association properties.
I'm speaking to a Housing Association now to see what can be done as if they make me stick to the figure set out then the development will be shelved in favour of two seperate blocks on each (done 12 months apart), avoiding the need to provide any housing for the HA.
The build is also to be in stone & therefore build costs are high in comparison to the normal type of housing association properties.
I'm speaking to a Housing Association now to see what can be done as if they make me stick to the figure set out then the development will be shelved in favour of two seperate blocks on each (done 12 months apart), avoiding the need to provide any housing for the HA.
stevieb said:
thesilentpartner said:
Looking at a development of 18 apartments, however, due to newish changes & the location of the build, it seems that I must offer 25% (4 apartments) to a housing association. Any developments over 15 plots must conform to this.
According the the council, it appears that they will offer £65k per apartment. They however have a market value of £125k+. Is this daylight robbery legal ?
It does say in the councils paperwork that the figures are 'benchmark' & subject to location & size. Still, £250k loss is a lot.
An alternative is to build 15 apartments, but surely that doesn't help housing problems in the area (which I am all for helping). Again, but 50% of market value ? If it were 75% I could live with it.
Are there any alternatives or anything else I should be aware of ?
According the the council, it appears that they will offer £65k per apartment. They however have a market value of £125k+. Is this daylight robbery legal ?
It does say in the councils paperwork that the figures are 'benchmark' & subject to location & size. Still, £250k loss is a lot.
An alternative is to build 15 apartments, but surely that doesn't help housing problems in the area (which I am all for helping). Again, but 50% of market value ? If it were 75% I could live with it.
Are there any alternatives or anything else I should be aware of ?
The costs they will pay are at best Cost and not market value, also when you insure your house is that market or rebuild cost? The insurer is not going to give you 300k for the house when it only costs £100k to build.
why would they? all buildings insurance policies I have ever written have been rebuild not market
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