Equity share homes scheme

Report: 23
Date: 19 June 2001
By: Commissioner

Summary

The report proposes the commencement of a pilot scheme to sell flats owned by the MPA on an equity share basis to eligible staff of the MPS.

The Estates sub-group endorsed this paper in May 2001.

A. Recommendations

1. To note a pilot equity share scheme for the sale of up to 30 vacant flats from the MPA estate.
2. To consider Director of Property Services extending the partnership with the housing associations to manage the disposal of equity share properties.
3. To note the offer of the scheme to all MPS staff of constable rank or at grade 9 and below provided the applicants are first time buyers.
4. That Property Services Department, in conjunction with Personnel Department, prepare an appropriate process to prioritise applications in the event of schemes being over subscribed.

B. Supporting information

1. The MPS has been selling vacant surplus housing stock on the open market by private treaty and public auction. There is currently a bid with the DETR for funding to support a Starter Homes Initiative (SHI) for keyworkers which will support equity share purchases of property for staff. A survey of some staff resulted in over 500 responses expressing interest in buying a home through an assisted scheme.

2. Other initiatives include two housing association equity share schemes in Hackney which have been extended to MPS staff. There has been a good response to the initial publicity given in "The Job". There are 3 new build schemes and a refurbishment project where the developers have offered flats for MPS staff; all of these are at the planning stage.

3. The Property Services Department has considered other ways in which the MPA could support the recruitment and retention aims of the MPS to help us make the MPS 'a great place to work'.The need for affordable housing in London for MPS officers as key workers could be assisted through using some of the Authority's flats (the demand for suitable accommodation continues to be limited, generating a need to dispose of vacant quarters in order to control the vacancy level).

4. There is an obligation on the Authority to achieve best consideration when disposing of public assets, but there is no requirement that only a capital income should be achieved. A part buy, part rent disposal, in support of a residential strategy would also fulfil the requirement, provided it is based on open market value.

To manage the process for the SHI, a partnership has already been formed with four housing associations:

• Tower Homes
• Notting Hill Home Ownership
• Metropolitan Housing
• Boleyan & Forest Housing

The same companies could be used to manage this equity share scheme.If the SHI bid were successful, the two schemes would be available to staff on the basis of a "one stop shop".

6. As an example, the sale of a flat at an open market value of £150,000 based on a 50/50 share would proceed based on:

• 50 per cent purchase, providing a capital receipt of £75,000 - to be funded by a mortgage equalling 3 times income (i.e. based on £25,000 salary). In addition 50 per cent as rent at 3 per cent would generate an income of £2,250pa payable to MPA who retain part ownership - either directly or through a nominee company. For a single income household this would represent 45 per cent of net income committed to home provision.

7. Shares can be increased over years and if the occupier wishes to sell, this could be either to another MPS Officer on similar terms, or an outright sale with the proceedings being shared between the resident officer and the MPA.

8. It is proposed that the initiative be tested through a pilot scheme comprising 8 vacant flats in north London. Their values are at the upper end of the price range for staff of constable rank or civil staff at grade 9 or below. All are in blocks where sales have already taken place and we have already created management companies to deal with maintenance on a day-to-day basis. If successful it is suggested a further pilot scheme follows, based on, say, 25-30 units with a good spread across Greater London.

C. Financial implications

Full disposal of the initial 8 flats on the open market would realise £970,000 whereas the equity share is likely to achieve a £485,000 capital receipt and £14,530pa in rent.

30 flats sold at an average of £120,000 per unit would provide a capital receipt of £3.6m.On a 50/50 equity share scheme the receipt would be £1.8m with an annual income of £54,000pa (at 3 per cent).

The target of £25m for capital receipts in 2001/02 is still expected to be met if the pilot scheme is adopted.

D. Background papers

None.

E. Contact details

The author of this report is Trevor Lawrence , Director Property Services Department.

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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