Manchester City Council, Executive February, Maine Road Development

MANCHESTER CITY COUNCIL

REPORT FOR RESOLUTION

COMMITTEE COMMUNITY REGENERATION OVERVIEW AND

SCRUTINY COMMITTEE

EXECUTIVE

DATE 7

FEBRUARY 2007

SUBJECT ELIGIBILITY CRITERIA FOR LOW COST HOME

OWNERSHIP WITHIN THE MAINE ROAD

DEVELOPMENT, MOSS SIDE

REPORT OF DEPUTY CHIEF EXECUTIVE (REGENERATION)

DIRECTOR OF HOUSING

___________________________________________________________________

PURPOSE OF REPORT

This report seeks to update Members on progress in respect of securing Low Cost Home

Ownership (LCHO) provision on the Maine Road development and delivering it through a fair

and transparent package of eligibility criteria for allocation. LCHO is a key requirement of the

original development brief and this report seeks endorsement of the mechanisms under

development for delivery.

RECOMMENDATIONS

Members are requested to:

1. Agree the eligibility criteria laid out in the report in relation to low cost home

ownership within the Maine Road site.

2. Authorise the Director of Housing to determine any disputes that may arise in

respect of allocations, and to amend the scheme as necessary in the future to take

account of new developments or reviews carried out.

3. Delegate approval of the revised definition of key workers in paragraph 5.5 to the

Director of Housing in consultation with the Executive Member for Housing.

FINANCIAL CONSEQUENCES FOR THE REVENUE BUDGET

None.

FINANCIAL CONSEQUENCES FOR THE CAPITAL BUDGET

There are no consequences for the Capital budget arising from this report. The low cost

home ownership provision within the site is expected to be fully funded by the Housing

Corporation and English Partnerships. In the unlikely event that this is not secured, there

will be no call on the Council’s Capital Programme and resources will be sought from

elsewhere.

CONTACT OFFICERS TELEPHONE EMAIL ADDRESS

Eamonn Boylan 234 3280 [email protected]

D McLaughlin 234 4380 [email protected]

S Todd 277 1880 [email protected]

R Flynn 234 4832 [email protected]

BACKGROUND DOCUMENTS

Central Manchester Strategic Regeneration Framework – 2006.

Executive reports dated May and November 2003, and February 2005

Development Brief for the Maine Road site.

WARDS AFFECTED

Moss Side

Rusholme

Fallowfield

IMPLICATIONS FOR: ANTI EQUAL ENVIRONMENT

POVERTY OPPORTUNITIES

Yes Yes No

EMPLOYMENT

OPPORTUNITIES

Yes

1 BACKGROUND

1.1 The demolition of the Maine Road football stadium and the subsequent development

site created presents an opportunity to make a dramatic impact on the housing

market and lifestyle offer available in Moss Side and surrounding area. There is now

a unique opportunity to diversify the housing choice in the area which is currently

dominated by 2 bedroom terraced properties (80%), many of which are in poor

condition. The Maine Road development will see the introduction of 3 and 4 bedroom

semi / detached houses with gardens and off-street parking and new apartment

blocks. Alongside new housing, the development of a new school and new health

facility will further increase the attractiveness of the area promoting a key plank of the

city’s Community Strategy through the creation of a Neighbourhood of Choice.

1.2 By providing local choice and improving desirability, the Maine Road development will

be a catalyst in Moss Side in terms of encouraging new people into the area and

supporting stable, economically active communities to flourish. In addition to

encouraging new residents into the area, the development will provide aspirational

choice for existing residents who are looking to move from their current home but stay

in the area.

1.3 Following a formal selection process, on 16

February 2005, Executive approved the

selection of Lowry Homes as the preferred developers for the Maine Road site.

Since that time, officers have been working with Lowry Homes and partners (including

Local Members, residents and Mosscare Housing) to realise the aspirations and

potential this development offers. In the current climate of rising house prices’

generally outstripping average salary rises, a key piece of work in developing the

Maine Road offer has been to develop a method whereby a proportion of the homes

can be offered for sale through a more affordable structure, enabling local people to

access homes on the development. The original brief required developers to build

this into their proposals and Lowry Homes have agreed that 60 of the 474 homes on

the site will be made available for Low Cost Home Ownership (LCHO). In advance of

a City-wide Affordability Policy, work has been ongoing to develop a Low Cost Home

Ownership model incorporating eligibility criteria that are accessible, fair and

transparent. This report aims to set out the proposed criteria for Executive approval.

2 GENERAL UPDATE ON PROGRESS

2.1 The overall development of the Maine Road site is expected to take five years and

will be over eight phases, beginning with family housing along Maine Road itself. In

December 2005, the Planning and Highways Committee were minded to approve

Lowry Homes’ application for the development, subject to planning conditions. The

planning application included a detailed application for phases 1 & 2 and an outline

application for phases 3 – 8.

2.2 Currently, remediation specialists Bilfinger Berger are on site addressing

contamination ‘hot-spots’ that are thought to remain from the time prior to the stadium

when the site was home to a brickworks. The remediation is being delivered through

a combined process of bio-remediation onsite and removing some contaminants to

landfill.

2.3 In addition to the physical development of the site, work is underway to negotiate

meaningful use of local labour and to provide local training opportunities during

construction. Negotiations are ongoing with the PCT to secure a new health facility

within the development and a bid to DfES has been successful to support a new

primary school on the site. Work is also on-going with local residents and local artists

to develop a comprehensive arts programme including an installation on the former

centre spot, education and participatory arts.

3. AFFORDABILITY ISSUES - CITY WIDE CONTEXT

3.1 The development of the Maine Road site has necessarily proceeded in advance of

wider work being done within the city and within the Manchester Salford Housing

Market Renewal Pathfinder (MSP) on housing affordability.

3.2 In July 2006, a consultant was commissioned to develop an Affordability Strategy for

both the City Council and MSP. Shortly after that, a further firm of consultants were

jointly commissioned to carry out a Housing Need and Demand Study for Salford City

Council, Manchester City Council and MSP. These two commissions are currently

ongoing, with expected outputs in the spring / summer 2007. The data from the Need

and Demand study is required in order to finalise the Affordability Strategy.

3.3 Affordable housing is defined by DCLG as including both social rented housing and

intermediate (low cost home ownership) housing. It is clear that the city faces a

growing problem of affordability generally, with the effects being experienced

differently in different neighbourhoods. It is likely that a strategy for the city will

propose an area specific approach. The key reasons for the increase in affordability

problems include:

• Reductions overall in social rented stock, partly through Right to Buy

• Significantly reduced turnover of social housing and increased numbers on the

Housing Register

• Increases in house prices significantly outpacing increases in average

earnings

3.4 The situation in the Moss Side and Rusholme area, where the median terraced house

price is now around £103,000, is that the house price to household income ratio is 4.7

(compared to 2.7 for Harpurhey and 6.0 for Chorlton). This demonstrates that the

area, whilst not experiencing the sharpest pressures has, against a nationally

recognised benchmark of 3 x household income, a problem with housing affordability,

a problem that is likely to increase.

3.5 Whilst it is the case across the city that there has been an overall reduction in the

numbers of social rented housing units, the tenure profile of the Moss Side and

Rusholme area shows social renting (which includes both Council owned and RSL

owned properties) to be over-represented at 54.8% (city average 39.4%, national

average 18.3%). In addition to this, the City’s Community Strategy incorporates a

commitment to increase owner occupation within the city to around 60% by 2015.

3.6 As outlined above, it is highly unlikely that the City Wide Affordability Strategy will be

adopted in advance of the first phase of homes on Maine Road being marketed and

hence it has been necessary to develop the model and the eligibility criteria ahead of

this work being completed. It is anticipated that once complete the Maine Road

scheme will, if necessary be aligned with the City-wide strategy for future phases of

development.

4 LOW COST HOME OWNERSHIP

4.1 The development brief for the Maine Road site stated that:

“An element of affordable housing…will be provided as part of the residential

mix. One possibility that bidders should particularly consider is a “shared

ownership” or “equity sharing” scheme, allowing first time buyers to move into

the housing market.”

As stated earlier, Lowry Homes have agreed to a total of 60 units (approximately

13%) of low cost home ownership being provided, and this is enshrined in the Heads

of Terms.

4.2 The Moss Side Project Board which oversees the development of Maine Road

elected, alongside Lowry Homes, to pursue national models of affordability to deliver

this target. In 2006, the Housing Corporation and English Partnerships announced

two new schemes to help support low cost home ownership. These are the Housing

Corporation’s HomeBuy scheme and English Partnerships’ First Time Buyers

Initiative. Each is described below:

4.3 Homebuy

Homebuy is aimed at giving people who have the aspirations for home ownership but

have insufficient income to purchase a property outright on the open market, the

opportunity to gain access onto the housing ladder through assisted purchase. The

scheme is overseen by the Housing Corporation and funding is allocated to a local

Registered Social Landlord or ‘Zone Agent’ to manage the programme. Homes are

sold on a shared ownership leasehold where the purchaser needs to raise a

mortgage for the share they are purchasing and they pay an affordable rent for the

remainder. Over time, purchasers can increase the proportion of equity they own in

the property. They must be able to raise a mortgage for at least 50% of the cost of the

home. Existing homeowners as well as first time buyers can access this scheme.

There are two types of Homebuy – New Build and Open Market. With New Build,

units are secured for a particular site where new homes are being built whilst Open

Market goes with the purchaser – so they can purchase a property anywhere in a

designated area.

Mosscare Housing, working with Great Places Housing Group (who have been

designated as the Homebuy Zone Agent for Greater Manchester), have secured an

initial allocation of 10 New-Build Homebuy units for the first phases of the Maine

Road development. This is targeted at six 3-bedroom homes and four 4-bedroom

homes. The amount of Housing Corporation funding is not fixed at the moment as it

is governed by the amount of equity each individual is able to afford when they are

assessed. Assuming maximum Housing Corporation contributions (ie. all sales at

50% equity), the maximum amount of public funding will be £740,000. It is hoped that

in future bidding rounds, further New Build Homebuy units can be secured whilst

there is also potential for Open Market Homebuy purchasers to choose a home on

Maine Road. To demonstrate how the scheme works, there are worked examples of a

Homebuy Scheme in Appendix 1.

4.4 First Time Buyers Initiative

The First Time Buyer Initiative (FTBI) aims to give more people the opportunity to own

their own home by increasing the supply of affordable housing for sale. The scheme

is overseen by English Partnerships and, again, a local Zone Agent takes

responsibility for managing the scheme. It is aimed at Key Workers and other eligible

groups (for example, as its name suggests those aiming to get their first step on the

property ladder) that have sufficient income to enter into the housing market but are

prevented by prevailing demand/supply conditions.

The FTBI is aimed at lower-middle income groups, typically with personal incomes of

around £25,000 per annum and the following broad criteria will be used to assess

eligibility:

• Not currently a home owner

• Has a stable income with growth prospects

• Currently living in private rented accommodation or temporary housing

• A Key Worker (aimed at 50% of the target group).

The FTBI is a shared equity product where the applicant purchases a minimum of

50%, the percentage the applicant buys equates to 3 or 3.5 times their income and

they cannot choose to buy a lower percentage. There is no rent to pay on the un-

owned equity for the first three years. In year four, the purchaser will pay a rent of 1%

on un-owned equity which will climb to 3% in year six. This is introduced in order to

encourage the purchaser into increasing the proportion of the equity they own, where

they choose to do so.

Unlike Homebuy, bids are made by developers and in this case, Lowry’s bid for 30

FTBI units has been prioritised by English Partnerships within their national

programme. These 30 units will be dispersed around the first four phases of the

Maine Road scheme which means that they will include houses and apartments. It is

proposed that 50% of these units (ie. 15 units) in line with EP’s national guidance be

targeted at Key Workers.

At the moment, and until the agreement is finalised between EP and Lowry, the

maximum amount of public subsidy is not defined. However, it would be reasonable

to assume that the maximum contribution may be similar per unit to Homebuy.

There is also a Zone Agent for delivery of the FTBI scheme which helpfully is the

same as that for Homebuy – Great Places Housing Group – and who have already

indicated that they will use Mosscare as their agent.

5 ELIGIBILITY CRITERIA

5.1 It will be important to develop a clear and transparent set of criteria for determining

the eligibility of and prioritising applications for the LCHO units. This process will be

helped by the fact that Mosscare will be administering both schemes and from the

perspective of applicants, there will be a single point of entry into LCHO. Mosscare

will develop a back-office system to assess each application based on individual

circumstances and route it to the most appropriate product. A points system will be

adopted to prioritise applicants based on the following:

5.2 Basic Eligibility Criteria

Each scheme will have its own set of fixed eligibility criteria (for example, with FTBI

that the applicant should not currently be a homeowner). Applicants will be screened

to ensure they meet these basic criteria before progressing onto more detailed

eligibility criteria. Following this, it is proposed they will follow one of two routes

depending upon whether they are a Key Worker or not. These are proposed below:

5.3 1. Non-Key Workers (up to 45 LCHO units)

(a) Local Priority - Applicants will be prioritised to ensure that local people are given

maximum opportunity to benefit from the development of Maine Road. The proposal

for prioritisation relates to local areas with boundaries already defined and recognised

by local people which reflect local housing conditions and need. The local areas have

been defined as:

I. Applicants who can demonstrate a valid local connection within the Moss Side

Renewal Area boundary,

II. Followed by applicants who can demonstrate a valid local connection within the

Moss Side and Rusholme Local Plan area,

III. Followed by applicants who can demonstrate a valid local connection within the

Manchester HMR area,

IV. Followed by applicants who can demonstrate a valid local connection within the

Manchester city boundary, and after that homes will be offered on the open

market.

Local Connection is recognised when:

• An applicant has been resident in the locally defined area (see above) for the last

2 years preceding their application and continues to reside in that area;

• An applicant has, at any time, been resident in that locally defined area for a

continuous period of 5 years;

• An applicant has a close family association by way of a spouse, parent, brother,

sister, child, grandparent or grandchild who has resided within the relevant

boundary for a minimum continuous period of 5 years;

• An applicant has a strong local connection by reason of permanent employment,

full time self-employment or have accepted an offer of permanent employment

within the relevant boundary.

5.4 (b) Housing Need – Applicants will then be prioritised on the basis of housing need.

Points will be allocated in a similar way to that used for allocating council/social

rented housing. Points will be awarded for:

• Overcrowding, or inappropriate sharing of accommodation

• Under-occupation

• Need for relocation eg as a result of clearance or other reasons

• Poor housing conditions

• Insecure accommodation (tenancy) or homelessness

• Medical needs and other social circumstances

• Length of time on the housing register

• Needing medical treatment or medical care from someone / a facility in the city

that the applicant can't obtain elsewhere

• Providing employment, or a local service, or being involved in voluntary work

within the community in that area

• Providing foster care for the City and needing to move to the area or to a bigger

property within the area in order to continue with this service

5.5 2. Key Workers (Up to 15 LCHO units)

Nationally, English Partnerships aim to ensure that 50% of their FTBi units are

purchased by key workers. DCLG have produced guidance on key workers based on

the issues faced in the South East in terms of affordability. The list includes NHS

staff, teachers, social workers and police officers amongst others. Although this

guidance is a useful starting point, English Partnerships do not expect that Local

Authorities adhere rigidly to it, but rather encourage Councils to identify who their key

workers are within their own local economic context.

In advance of the Manchester Affordable Housing Strategy, compelling evidence is

not available to definitively list key workers in Manchester. However, by taking a

steer from the City Region Development Plan (CRDP), it is possible to identify those

sectors likely to employ key workers. These are the growth industries that are

currently shaping the future of Manchester’s economy, in particular the knowledge-

based industries. Guidance from the consultants developing the Affordable Housing

Strategy is that it will be important not to define Key Workers too tightly and that it

would be useful to have discussions with key employers in the growth sectors to

define who their key workers / employees are. Following these discussions, it is

proposed that a tailored Manchester-specific list of Key Workers be developed for the

purposes of the Maine Road scheme in the first instance. Members are requested to

agree to delegate approval of the Key Workers list (in advance of a City Wide Key

Worker definition) to the Director of Housing in consultation with the Executive

Member for Housing.

5.6 Any eligibility for key worker status, regardless of profession or industry, will be

subject to a maximum salary cap based on average entry-level wages across the key

worker spectrum. It is proposed that this be a maximum household income of

£50,000 per annum.

5.7 It is, of course, entirely possible that some eligible Key Workers will also have a local

connection which will further boost the numbers of local people who can acquire a

home on the Maine Road site.

6. MANAGEMENT AND MARKETING OF LCHO

6.1 As already outlined, Mosscare will act as agent for the delivery of LCHO and will be a

one-stop-shop for the Maine Road site. Choosing the most appropriate LCHO

product for each eligible sale will be a decision taken by Mosscare in conjunction with

the Council where necessary, rather than the individual applicant. Mosscare will work

alongside Lowry Homes to ensure that marketing of LCHO is integrated into the wider

marketing of homes for sale.

6.2 In terms of marketing, at the beginning of each phase of housing, the City Council

along with Mosscare will agree with Lowry those units to be reserved for LCHO.

There will then be a marketing campaign (which sets out the eligibility criteria) inviting

applications for the LCHO units available in that phase. It is proposed that this will be

for a period of four weeks. Upon closure of this period, Mosscare will then apply the

eligibility criteria and prioritise applicants for the relevant phase. It is suggested that

this process is applied with each phase of homes to be released rather than keeping

people on a waiting list as peoples’ circumstances often change. Targeted marketing

will be proposed in key sectors such as the hospital and the Universities to target Key

Workers.

7 CONCLUSIONS:

7.1 It is expected that the LCHO model proposed will support aspirations to ensure that,

over the next five years, the Maine Road development will become home to a

community of diverse, socio-economic groups who are fundamental to the growth and

prosperity of the city.

7.2 Officers are of the view that the criteria presented above meet a range of objectives,

including providing opportunity for local residents to access new housing choice,

creating mixed income communities and strengthening the local economy. Members

are asked to consider them, and if minded to so, to approve their adoption.

7.3 The development of these proposals, as indicated above, necessarily precedes work

being undertaken to develop wider city-wide affordable housing. They are therefore

presented as interim proposals to enable development of the first phases of the site to

proceed. They will be subsequently reviewed and amended as necessary in light of

any city wide policies adopted, and members are asked to delegate authority to

amend them subsequently as necessary.

8 IMPLICATIONS FOR KEY COUNCIL POLICIES:

8.1 Anti Poverty:

Low cost housing will assist a proportion of local residents on lower incomes to

access new housing opportunities, and will assist in easing pressure on housing

waiting lists.

8.2 Equal Opportunities:

Low cost housing through the schemes outlined above is available to all sections of

the community and through the points system will help some of those in greatest

housing need. It may also assist BME families in need of larger accommodation who

might not otherwise be able to afford it.

8.3 Environment:

The redevelopment of the Maine Road site will assist hugely in improving the local

environment, including the provision of quality open space within the site.

8.4 Employment:

Allocating FTBI housing to those who qualify as Key Workers and to those

establishing new businesses in the area will benefit the local economy and assist in

providing local employment.

Appendix 1 – Worked Examples of Homebuy and FTBI

Buying a house on Maine Road

Expected Maine Road property prices

2 bed apartment - £90k

3 bed house - £130k

4 bed House - £150k

Example 2 bed Apartment

Value £90,000

50% Equity Purchase

Purchase 50% - £45,000

Based on 3 times multiplier family income needed - £15,000

Estimated mortgage at 6% over 25 yrs - £293 per month

Rent on remaining 50% - £112.50 per month

75% Equity Purchase

Purchase 75% - £67,500

Based on 3 times multiplier family income needed - £22,500

Estimated mortgage at 6% over 25 yrs - £440 per month

Rent on remaining 25% - £56.25 per month

Example 3 bed house

Value £130,000

50% Equity Purchase

Purchase 50% - £65,000

Based on 3 times multiplier family income needed - £21,600

Estimated mortgage at 6% over 25 yrs - £424 per month

Rent on remaining 50% - £162.50 per month

75% Equity Purchase

Purchase 75% - £97,500

Based on 3 times multiplier family income needed - £32,500

Estimated mortgage at 6% over 25 yrs - £636 per month

Rent on remaining 25% - £81.25 per month

Example 4 bed house

Value £150,000

50% Equity Purchase

Purchase 50% - £75,000

Based on 3 times multiplier family income needed - £25,000

Estimated mortgage at 6% over 25 yrs - £489 per month

Rent on remaining 50% - £187.50 per month

75% Equity Purchase

Purchase 75% - £112,500

Based on 3 times multipler family income needed - £37,500

Estimated mortgage at 6% over 25 yrs - £734 per month

Rent on remaining 25% - £93.75 per month