Agenda item

Context:

To scrutinise the changes to the criteria and terms and conditions of the delivery of the Welsh Government’s Private Sector Housing Loan schemes.

Key Issues:

Welsh Government has provided local authorities in Wales with mixed funding to improve the standard of housing and help return empty properties back in to use in the private sector. This has taken the form of two types of funding streams: grant funding of £604,749.00, with the launch of the Houses into Homes scheme and a repayable loan funding stream of £620,855.69, known as the Home Improvement Loan Scheme. Both schemes are recyclable and offer loans to applicants on an interest free basis with a fee charged to the applicant for the administration process.

The Houses into Homes funding stream grant is offered to the Council in perpetuity so long as it is being utilised and recycled as loans to applicants. The Home Improvement Loan funding scheme in contrast has to be re-paid to Welsh Government by 2030.       If the funding repayable is less than the award (from loan default) then Welsh Government will share 50% of the shortfall to a maximum amount of 2.5% of the funding awarded.

On the 25th March 2015, Individual Cabinet Member approval was acquired for the Council’s participation in the Welsh Government Home Improvement Loan Scheme.

Local authorities have found varying degrees of success in delivering both schemes.  It is thought that the criteria of both schemes was too rigid and not flexible enough to respond to local factors that probably contributed to their being unsuccessful in a number of local authority areas. To address this the Welsh Government has proposed changes to the criteria and terms and conditions.

The following summarises the main changes to the schemes:

·         Removal of the 50/50 funding allocation criteria between both Houses into Homes and Home Improvement Loan schemes to allow each Authority to spend the loan funding according to demand in their areas.

·         There is an expectation that the loans are prioritised towards bringing back into use empty properties and providing loans to applicants considered to be more ‘risky’, that is, they would fail affordability assessments.

·         The introduction of three distinct loan schemes

-           Owner/Occupier Loans.

-           Property Appreciation Loans - available to those applicants   considered ‘risky’.

-     Landlord Loan (to be marketed in Monmouthshire as Landlord / Property Developer Loans

·         Administration Fees – These are allowed under the new criteria but are capped depending on the loan scheme.  For the Owner Occupier and the Property Appreciation Loans any shortfall between the cap and the actual costs associated with administering the loan application can be recouped from the Grant Funding Stream. The total fee and recouped shortfall will not exceed the actual costs.

-       Owner / Occupier Loans: Monmouthshire will charge 50% of the total cost for administering the application to the client with the remaining shortfall costs up to £500 being funded out of the grant funding stream.

-       Property Appreciation Loans: The fee chargeable to the applicant will be capped at £250 the remaining shortfall costs up to £250 being funded out of the grant funding stream.

-       Landlord / Property Developer Loans: A one off fee can be charged and will be capped as no greater than the market rate of APR for loans of the same amount and term.

OPTIONS APPRAISAL:

·         Option 1: Not to approve the changes would mean the Council would not be able to access these funding streams and in the absence of alternative methods of funding, many owner occupiers and empty property owners will not be able to improve the sub-standard condition of their properties.

·         Option 2:  The recommended option.  Approving the changes will allow the Council to maximise the options available to improve the quality of the private sector housing and help bring back into use empty properties within the County.

Member Scrutiny:

·         Loans distributed equated to, on average, £10,000 across Wales. This is an indicative figure based on anecdotal evidence.  Therefore, around 60 homes across Monmouthshire could be brought back into use over the five year loan period, based on these figures.

·         The £10,000 is an average borrowing figure.  For empty properties, owners can borrow up to £25,000.

·         With regard to flats above empty shops, loans are also being targeted towards developers encouraging them to purchase and develop them. Up to £150,000 can be borrowed in these circumstances.

·         Press releases and letter drops to landowners of empty properties are undertaken twice a year advertising the loans on offer.

·         Information will also be available on the County Council’s website in due course.

·         All loans available are interest free with an administration fee attached. There is an eligibility criteria that has to be adhered to around affordability of the applicant, i.e., around the current value of the property, how much the applicant would like to borrow and then establishing what the forecasted rise in its appreciation might be over the length of the loan.

·         The identification of empty properties in Monmouthshire is now available via GIS.  A targeted approach can be undertaken to identify where the more affordable properties are which could eventually be offered up for sale or for rental purposes.

·         The take up of loans to develop empty homes is currently low.  This could be because owners are risk averse and / or that there is a charge involved.  For those people who live in homes that require home improvements in Monmouthshire, there is a similar issue regarding the lack of take up in respect of the loans available.

·         The empty property loan will not increase. The applicant will pay back what they have borrowed.

·         A property Appreciation Loan (PAL) will incur an element of appreciation.

·         Regional working regarding this matter has been undertaken previously with the five South East Wales Local Authorities and all five authorities tended to operate in a similar way.  Working with local authorities outside of the five South East Wales local Authorities could be looked at.

·         A representative from Powys County Council informed the Committee that the Authority holds business breakfast meetings in which plumbers, electricians, builders and homeowners are invited to attend, as these groups are likely to know which houses require work.  Leaflets have also been left in solicitors’ offices.