DRAFT
Jersey Homebuy Housing – Supplementary Planning Guidance
Introduction
1. Following a sustained period of economic growth prior to the recession, house prices rose sharply. As a consequence, it has become increasingly difficult for households to access home-ownership. The average annual growth rate in house prices in Jersey since 1990 of 6.8% are greater than that of earnings (5.3%). More recently (2007), average house prices rose dramatically by as much as 18% over the previous year (2006). As the gap between house prices and average income has widened, the issue of affordability has become a major concern for a growing number of Jersey residents. Consequently, for many young Jersey people, the prospect of gaining a foothold on the property ladder has become remote. The last Housing Needs Survey (2007) confirmed that housing affordability was a major problem in Jersey and that it was not confined to the lowest incomes but affects many people on average and above-average salaries. These are people with incomes too high to be eligible for social rented accommodation, but unable to afford, even with a loan, the cheapest first time buyer home. They are stuck in the middle in an “intermediate housing market”. The survey indicated that of the 1655 households intending to leave the Island over the next five years, 40% identify their inability to afford to buy a property as the reason for wishing to leave.
2. Against this backdrop, the States Strategic Plan 2006 – 2011 set the objective of a ‘good standard of affordable accommodation for all’ and increased levels of home ownership in Jersey. For this to be achieved it was necessary to provide a suitable mechanism to deliver a wider range of affordable housing solutions. This was achieved by the introduction of a new form of affordable housing, which provides additional opportunities for those who cannot currently afford a home in the open market. In the local context we have called this “Jersey Homebuy housing”. This strategic priority has been carried forward into the current States Strategic Plan 2009 – 2016.
3. In July 2008, Policy H1 of the 2002 Island Plan was amended to allow the Minister to make provision for Jersey Homebuy housing on the remaining H2 housing sites when P74/2008 was approved by the States. It is not intended that the policy be applied retrospectively to sites that have already been developed.
4. A structure for Jersey Homebuy has been devised for nearly 2 years, effectively as a pilot project, during which time 46 homes have been acquired at less than the first time buyer value by qualifying purchasers, who benefited from the provision of a deferred payment, at La Providence, Bel Royal, St Lawrence. The success of the scheme described in proposition P74/2008 has been proven, although the effect of the recession has been to limit the availability of Homebuy properties because the reduced availability of developers’ funding. Nevertheless, the Minister has decided that the scheme should become permanent, and this supplementary guidance indicates how it will work in future. The current requirements of the scheme and the way in which it will work are listed in the Appendix to this report.
Jersey Homebuy Housing
5. Jersey Homebuy housing can be defined as follows:
Jersey Homebuy is housing where the purchaser buys the whole property, but initially pays only such part of the first time buyer housing value as may be determined by the Minister for Planning and Environment. The legal arrangements regulating the unpaid balance of the full value must be approved by the Minister and the property must remain in the first time buyer market in perpetuity. |
1.1.
6. It is important to define the policy aims of Jersey Homebuy in broad terms, as new models may become available during the lifetime of the new Island Plan. Unless or until other models come forward that achieve the aims of the Homebuy policy, the model that the Minister for Planning and Environment has adopted and is likely to follow in a planning obligation agreement is as set out in this guidance.
7. Under the Jersey Homebuy scheme, as used at La Providence, the purchaser buys the property outright but only pays a percentage of the total first time buyer market price at the time of purchase. What happens to the remaining (deferred) percentage will be regulated by arrangements approved by the Minister for Planning and Environment, as explained below, but is essentially a charge on the property that is redeemed on the first re-sale. In reality, it is anticipated that most owners of Jersey Homebuy properties will retain the property for a long period, given that their personal circumstances would need to change substantially to enable them to move to a property at full market value.
8. Where a site is designated for Category A housing, 55% of the units will be sold to first time buyers at the market rate. Of the 45% of units originally intended as social-rented homes, the Minister for Planning and Environment will determine the division between social rented housing and Jersey Homebuy housing, based on an assessment of needs at the time. The aim of the Homebuy policy is to make home ownership a possibility for those caught in the intermediate housing market. The price to be paid is a valuation matter having regard to the purchase of the property by an intermediate purchaser. However, in broad terms the difference in value between a traditional first time buyer and an intermediate first time buyer for a property, based on the La Providence pilot, is likely to be somewhere in the order of 35-42%.
9. Ensuring that Jersey Homebuy housing is made available only to those who need it and not to those who have the means to buy in the first time buyer market is fundamental to the success of the scheme. This requires means-testing. The Housing Department operates an existing means-testing system for access to States rental accommodation and in providing nominations to the Housing Trusts, and this process is being extended to provide a ‘Gateway’ to all forms of affordable housing, including social rented accommodation and Jersey Homebuy housing.
10. To qualify for Jersey Homebuy housing, prospective purchasers will need to satisfy the Minister for Housing that they genuinely cannot compete to purchase in the ‘open’ first time buyer market. Some bar in terms of maximum income is required, otherwise Jersey Homebuy homes might in practice be no more affordable than ordinary first time buyer housing. The Jersey Homebuy Model is set out at the end of this report.
11. In selling the Jersey Homebuy homes on a site, the not-for-profit body will be required to ensure that those units are only sold to those applicants who can demonstrate that they have been approved as eligible by the Minister for Housing.
12. The Minister will place a restriction on the occupation of the First Time Buyer dwellings until the developer transfers the designated Jersey Homebuy units to a recognised provider of affordable housing. This can be a public body, a Parish, the Housing Department, a Housing Trust or other approved organisation. There is a requirement that this be a Not-for-Profit Organisation (NPO), with the eventual profits from receipts of deferred payments to be reinvested in the provision of new affordable housing. This could be Jersey Homebuy housing or social rented housing, depending on the housing need at the time the deferred payments accrue. The likelihood is that the not-for-profit body will accumulate the capital it receives to be spent on new affordable housing developments.
Available Housing Sites
13. There are currently three remaining H2 sites which provide the opportunity for Jersey Homebuy housing in the short term:
(a) Site H2 (8) Fields 190, 191 and 192, La Rue de la Sergente, St Brelade – a planning application is currently being considered for 16 first-time buyer and 13 social rent dwellings.
(b) Site H2 (10) Field 873, St Lawrence – a planning brief was approved in 2003 for 8 first-time buyer and 6 social rented family dwellings, in accordance with the 2002 Island Plan and a planning application has yet to be submitted.
(c) Site H2 (2) Field 1218, St Helier – Final Phase
14. The Minister for Planning and Environment will require developers and/or affordable housing providers involved with the remaining Island Plan H2 sites to enter into a planning obligation to deliver a mix of first time buyer dwellings and social rented or Jersey Homebuy dwellings. In the case of Jersey Homebuy dwellings, the Minister for Planning and Environment will require the developer to transfer the units to a suitable not-for-profit body who will administer their sale under an appropriate Jersey Homebuy scheme, which is required to include the necessary legal safeguards for the purchasers.
15. The Jersey Homebuy scheme will also be used when the new island Plan is adopted in 2011 for sites designated under Draft Policy H1 and for those sites that will be required to provide a proportion of affordable housing as part of ‘market’ housing developments under Draft Policy H3.
16. First time buyer properties will be either unclassified first time buyer properties, for which there will be no deferred payment, or Jersey Homebuy properties, for which the “deferred payment” will, based on experience to date, be between 35% and 42%. There will be appropriate arrangements for the repayment in due course to the administering not-for-profit body of the balance of the purchase price for Jersey Homebuy properties.
17. The Minister for Housing will maintain a register of Jersey Homebuy prospective purchasers. Any first time buyer will be entitled to apply to the Minister for Housing to be entered on the register. Acceptance for the Jersey Homebuy scheme will be determined by the Minister for Housing having regard to the applicant’s financial resources.
18. The Minister for Planning and Environment will determine in respect of any of the sites to which this policy refers what proportion of the dwellings to be constructed on the site shall be:
(a) Unclassified first time buyer accommodation. Such accommodation will be able to be sold at full first time buyer price to any first time buyer, whether on the register or not;
(b) Intermediate first-time buyer accommodation, which will initially be available to a qualifying Jersey Homebuy purchaser; and
(c) Social rented housing.
19. This guidance will be reviewed or updated on a regular basis in the light of the results of the latest Housing Needs Survey.
Planning and Environment Department 9 September 2010
APPENDIX
The Jersey Homebuy Model
Eligibility
The Affordable Housing Gateway will function as follows:-
§ Applicants will apply to the Housing Department to establish eligibility for Homebuy.
§ There will be an application form which will focus in detail on household income.
§ Once all the information has been supplied a means test will be carried out using the declared income to confirm whether the applicant falls between the financial parameters (set currently at an annual income of between £40,000 and £60,000 per annum for a 3-bedroom house – lower income limits will apply for 1and 2 bedroom accommodation)). Where there is more than one applicant buying jointly, all incomes will be included in the assessment.
§ Where family units are to be sold, additional criteria may be applied regarding household composition, specifically in respect of children.
§ Those means tested as qualifying will be provided with a certificate of qualification which will be valid for 12 months. This certificate will have a caveat; in that, if during the period that the certificate is extant the applicant’s income increases beyond the £60,000 upper limit they must reapply and be reassessed.
§ After 12 months certificates will not be valid and applicants will have to reapply and be reassessed.
§ Applicants who hold a valid certificate will be eligible to purchase a Jersey Homebuy home and they will apply to do so direct to the not-for-profit organisation on a site by site basis. The Not-for-Profit Organisation (NPO) will have sole responsibility for allocating the Jersey Homebuy homes.
The Deferred Payment
The current range of “deferred payment” is equivalent to between 35% and 42% and will be determined by the Minister for Planning and Environment so as to ensure that homes are affordable taking into account the financial means of those qualifying through the Gateway.
Valuation
It is probable that large sites will be delivered in phases. Where this is the case the valuation process will be followed for each phase.
Option 1
In each phase a schedule of the full first time buyer offer prices shall be prepared by the developer and provided to the Minister for Housing.
On receipt of the schedule and within one month, it shall be open for the Minister for Housing to either:-
· Approve the prices as suggested; or
· Commission an independent valuation as to the proper first time buyer market price for the homes;
In the event that the Minister elects to commission an independent valuation, the developer will be notified of this intention and an alternative pricing schedule will be produced by a firm of suitably experienced Chartered Surveyors.
That pricing schedule will be prepared by a Chartered Surveyor M.R.I.C.S. or F.R.I.C.S. appointed by the Minister for Housing within 1 month of being commissioned by the Department.
The valuation shall be carried out in accordance with the Royal Institution of Chartered Surveyors’ (RICS) Valuation Standards 6th Edition (”Red Book”).
In arriving at a First Time Buyer price for each dwelling unit the valuer shall determine the amount reasonably expected to be realised on a sale in the First Time Buyer housing market for each dwelling unit on the development assuming:
1. a willing seller and a willing First Time Buyer transacting at arm’s length;
2. that vacant possession is to be given;
3. that the Dwelling Unit is in good and substantial repair and condition, and subject to a condition created in perpetuity that the Dwelling Unit should not be sold to or occupied by any person who was not a First Time Buyer
In determining the Jersey Homebuy Price Payable there shall be taken into account all factors that influence the calculation of the price (including, without limitation, the actual costs or estimated reasonable costs of acquiring any land, servitudes required for sight lines, access, drainage or other services to or from the said property, the actual costs or estimated reasonable costs of any construction work or payments in respect of access, drainage or other services to or from the said property which are to be outside the boundaries of the said property and the actual costs or estimated reasonable costs of complying with any agreement required or likely to be required by any Insular Parochial or other authority or by any service undertaking in respect of the said property or in respect of other property but relating directly or indirectly to the Development) Provided Always that in calculating the First Time Buyer Price Payable the effect on the First Time Buyer housing market of the fact that Development has been wholly or partly carried out shall also be disregarded If the average difference between the two sets of prices is less than or equal to 5% of the developers proposal then the lower of the two prices will be taken. If the difference in prices is, on average, greater than 10% of the developer’s proposal, a third set of prices will be jointly instructed from another firm of suitably experienced Chartered Surveyors (based on the same valuation basis as set out in the POA) and the sale prices for each of the units is then taken as being the mid-point between those which appear in the third set and the mid-point of those which appeared in the first two sets. The Parties then seek to agree on this set of figures (both acting reasonably) after which if they are still in dispute, the pricing is referred to arbitration.
The NPO will have no seed or operating capital and will not be in a position to recover valuation costs from the homebuyer, therefore in respect of each and every Jersey Homebuy home, the developer will bear all valuation costs, including all costs incurred by the NPO.
Option 2
Driving cost out of the process whether that be for the developer, the NPO or the Homebuyer must be a key objective of the scheme and an alternative valuation mechanism would help achieve this aim and would in particular have the attraction of significantly reducing the valuation costs for the developer.
In this case the developer would, within 3 months of the Homebuy homes being ready for completion, notify the Minister for Housing of the plot numbers on the site proposed for Jersey Homebuy. The Minister for Housing will within 1 month commission an independent valuation as to the proper first time buyer market price for those homes resulting in the production of a pricing schedule by a firm of suitably experienced Chartered Surveyors.
As with option 1 that , the pricing schedule will be prepared by a Chartered Surveyor, either M.R.I.C.S. or F.R.I.C.S.., appointed by the Minister for Housing, within 1 month of being commissioned by the Department.
The valuation shall be carried out in accordance with the Royal Institution of Chartered Surveyors’ (RICS) Valuation Standards 6th Edition (”Red Book”).
In arriving at a First Time Buyer price for each dwelling unit the valuer shall determine the amount reasonably expected to be realised on a sale in the First Time Buyer housing market for each dwelling unit on the development assuming:
1. a willing seller and a willing First Time Buyer transacting at arm’s length;
2. that vacant possession is to be given;
3. that the Dwelling Unit is in good and substantial repair and condition, and subject to a condition created in perpetuity that the Dwelling Unit should not be sold to or occupied by any person who was not a First Time Buyer
In determining the Jersey Homebuy Price Payable there shall be taken into account all factors that influence the calculation of the price (including, without limitation, the actual costs or estimated reasonable costs of acquiring any land, servitudes required for sight lines, access, drainage or other services to or from the said property, the actual costs or estimated reasonable costs of any construction work or payments in respect of access, drainage or other services to or from the said property which are to be outside the boundaries of the said property and the actual costs or estimated reasonable costs of complying with any agreement required or likely to be required by any Insular Parochial or other authority or by any service undertaking in respect of the said property or in respect of other property but relating directly or indirectly to the Development) provided always that in calculating the First Time Buyer Price Payable the effect on the First Time Buyer housing market of the fact that Development has been wholly or partly carried out shall also be disregarded.
The pricing schedule produced by the Chartered Surveyor on behalf of the Minister for Housing shall become the agreed first time buyer values for the Jersey Homebuy Homes.
Any Homebuy property which is not sold to an NPO within 3 months of agreement over the First Time Buyer value may be re-submitted for approval of re-pricing on the same basis as above.
Once the First Time buyer values are agreed then these values shall be reduced by the prevailing Jersey Homebuy percentage (presently 35% - 42%) to arrive at the price at which the developer will sell the homes to the NPO and at which the NPO will subsequently sell to the qualifying homebuyer. The ability of purchasers to acquire the properties, based on income multiplied by a factor of 4 or 5, will determine the price of the properties.
The NPO will acquire all of the Jersey Homebuy homes in the phase of the development at that agreed price and shall then sell them to qualifying purchasers at the same price at which it acquired them. No uplift is permitted. There shall be no allowance for the NPO to increase the onward sale price to the qualifying homebuyer to reflect or recover administrative or other costs.
The NPO will have no seed or operating capital and will not be in a position to recover valuation costs from the homebuyer, therefore in respect of each and every Jersey Homebuy home, the developer will bear all valuation costs, including all costs incurred by the Minister for Housing and the Housing Department.
Allocation Process
Applicants will be issued with a certificate, valid for 12 months from the date of issue, which they must provide to any Not for Profit Body (NPO) selling homes through Jersey Homebuy. It will be the NPO that then allocates the homes accordingly.
All NPO’s will conform to the following allocation process:-
Applicants will be given a specific deadline, in writing, by which time they must demonstrate that they qualify for a Jersey Homebuy home of the type available and that they hold the requisite and valid Homebuy certificate issued by the Minister for Housing
All qualifying applicants will then be given a number which will be entered into a draw, whereby an independent and impartial person (such as the Greffier of the States), will pull numbers from a hat in order to select those who will be offered a home. One draw for each available property will be made, following which a small number of reserves will be drawn. Those successful at the draw, will be given the choice of units available on the relevant site in the order that their number was drawn.
Appeal process
Applicants, who have received a certificate confirming their eligibility for the scheme, but wish to appeal having been unsuccessful in being allocated a property, are requested to do so in writing to the NPO, providing a detailed case as to the basis of their appeal.
Means of securing the deferred payment
The deferred payment provided to the qualifying purchaser of a Homebuy home is secured as a ‘2nd Charge’ against the property and is reflected in a bond, in favour of the NPO, which is registered with the Royal Court at the time that the sale takes place from the NPO to the purchaser.
This bond must be re-registered every 10 years and is repaid when the property is next conveyed. For the avoidance of doubt, conveyance covers all acts of alienation and includes freehold sale, gift and inheritance.
gov.je