Tenure Shift the shared ownership challenge

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1 Tenure Shift the shared ownership challenge Delivering the programme CIH North West 26 th February (Liverpool) and 3 rd March (Manchester) savills.com

2 Agenda 1 Introduction demand and supply 2 Post-CSR Environment 3 What is holding back supply? 4 Competition 5 6 What more can be done to accelerate supply at LA and Government levels? What can be done to make intermediate products more viable in higher value areas?

3 Mortgage availability & transactions collapsed post credit crunch Source: HMRC, CML

4 The collapse in transactions is greatest in lower value price bands where the need is Source: HMRC

5 Consequences: rise of the private rented sector Source: CLG & Savills Research

6 Concentrations of Shared Ownership - mind the gaps Top 15 Milton Keynes 6.1% Hounslow 2.4% Tower Hamlets 2.4% Hackney 2.3% South Cams 2.1% Southwark 2.0% Reading 1.8% Rushmoor 1.8% Newham 1.8% Ealing 1.8% Oxford 1.7% Sevenoaks 1.7% Greenwich 1.6% H smith & Fulham 1.6% Lambeth 1.5%

7 Household Size

8 0-5k 5-10k 10-15k 15-20k 20-25k 25-30k 30-35k 35-40k 40-45k 45-50k 50-55k 55-60k 60-65k 65-70k 70-75k 75-80k 80-85k 85-90k 90-95k k k k k k k 200k+ Annual housing need/delivery Affordable housing 2014 supply profile Source: Savills More market Starter Homes? Shared ownership Social rent Affordable rent Market supply Household income

9 0-5k 5-10k 10-15k 15-20k 20-25k 25-30k 30-35k 35-40k 40-45k 45-50k 50-55k 55-60k 60-65k 65-70k 70-75k 75-80k 80-85k 85-90k 90-95k k k k k k k 200k+ Annual housing need/delivery Build more market housing? Source: Savills GAP (230 homes pa) More market Starter Homes? Shared ownership Social rent Affordable rent Market supply 0 Household income

10 0-5k 5-10k 10-15k 15-20k 20-25k 25-30k 30-35k 35-40k 40-45k 45-50k 50-55k 55-60k 60-65k 65-70k 70-75k 75-80k 80-85k 85-90k 90-95k k k k k k k 200k+ Annual housing need/delivery In some markets the gap will be larger Camden More market Starter Homes? Shared ownership Market supply Income profile GAP (1400 homes pa) Household income

11 0-5k 5-10k 10-15k 15-20k 20-25k 25-30k 30-35k 35-40k 40-45k 45-50k 50-55k 55-60k 60-65k 65-70k 70-75k 75-80k 80-85k 85-90k 90-95k k k k k k k 200k+ Annual housing need/delivery GAP In some markets the gap will be smaller Bradford (330 homes pa) Starter Homes? Shared ownership Market supply Household income

12 0-5k 5-10k 10-15k 15-20k 20-25k 25-30k 30-35k 35-40k 40-45k 45-50k 50-55k 55-60k 60-65k 65-70k 70-75k 75-80k 80-85k 85-90k 90-95k k k k k k k 200k+ Annual housing need / supply Liverpool Supply profile based on actual 2014 data Source: Savills Shared ownership Social rent Affordable rent Market supply Income profile Household income

13 0-5k 5-10k 10-15k 15-20k 20-25k 25-30k 30-35k 35-40k 40-45k 45-50k 50-55k 55-60k 60-65k 65-70k 70-75k 75-80k 80-85k 85-90k 90-95k k k k k k k 200k+ Annual housing need / supply Liverpool Swap discounted rent for starter homes Source: Savills Starter Homes? Shared ownership Market supply Income profile 0 Household income

14 0-5k 5-10k 10-15k 15-20k 20-25k 25-30k 30-35k 35-40k 40-45k 45-50k 50-55k 55-60k 60-65k 65-70k 70-75k 75-80k 80-85k 85-90k 90-95k k k k k k k 200k+ Annual housing need / supply Liverpool As above but deliver market homes to meet need Source: Savills More market Starter Homes? Shared ownership Market supply Income profile Household income

15 0-5k 5-10k 10-15k 15-20k 20-25k 25-30k 30-35k 35-40k 40-45k 45-50k 50-55k 55-60k 60-65k 65-70k 70-75k 75-80k 80-85k 85-90k 90-95k k k k k k k 200k+ Annual housing need / supply Manchester Supply profile based on actual 2014 data Source: Savills Shared ownership Social rent Affordable rent Market supply Income profile Household income

16 0-5k 5-10k 10-15k 15-20k 20-25k 25-30k 30-35k 35-40k 40-45k 45-50k 50-55k 55-60k 60-65k 65-70k 70-75k 75-80k 80-85k 85-90k 90-95k k k k k k k 200k+ Annual housing need / supply Manchester Swap discounted rent for starter homes Source: Savills Starter Homes? Shared ownership Market supply Income profile 0 Household income

17 0-5k 5-10k 10-15k 15-20k 20-25k 25-30k 30-35k 35-40k 40-45k 45-50k 50-55k 55-60k 60-65k 65-70k 70-75k 75-80k 80-85k 85-90k 90-95k k k k k k k 200k+ Annual housing need / supply Manchester As above but deliver market homes to meet need Source: Savills More market Starter Homes? Shared ownership Market supply Income profile Household income

18 Post-CSR Autumn Statement 2bn pa for affordable homes: - 135,000 shared ownership (doubling the stock/quadrupling output) 400m for 8,000 specialist homes (to add to the NHP) 200m for 10,000 Rent to Buy homes 2.3Bn for 60,000 of 200,000 Starter Homes Help to Buy Equity Loan - 200,000 Help to Buy ISA Right to Buy 700m grant to be shifted to ownership

19 Risks of cannibalisation Single site Low price market sale Market Sale with Equity Loan or Guarantee Starter Home Shared Ownership Purchaser behaviour? Incentive for developer control of marketing

20 What is holding back supply of SO? All the usual barriers to development Planning relaxation for Starter Homes May supplant affordable housing May still be some S106 affordable rent/so Land public land for 160,000 homes Rising construction costs Simple consumer offer Help to Buy Shared Ownership is SO! Councils not to set additional eligibility criteria Salary caps and value caps? Lower transaction costs Improved retail lending With direct relationship to landlord

21 Legal Measures De-regulation requires a careful trawl through successive pieces of legislation Lease amendments Clarity re Midland Heart case Mortgagee protection clause to be updated For non-rps Landlord & Tenant Act avoid step in rights and enfranchisement; RHP case Stamp duty treatment including tenants election

22 Further measures to accelerate supply Resolve the capital weighting issue with Prudential Regulation Authority/European Commission to enable higher LTV ratios Investing RtB receipts via RCGF? Conversion of social/affordable rent: - Recycling receipts Mixed tenure communities

23 Don t forget the market moves Source: Savills Research, Nationwide Late cycle price growth stretches affordability Prices fall 20% post credit crunch Short lived bounce Market stagnation Strong growth as economic recovery gathers pace Slowdown post implementation of MMR

24 Failure is not an option!

25 Thank you savills.com

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