Flexible tenure scheme could cut repossessions in some housing associations
Figures out this week have shown a 65% increase in house repossessions since 2005 but a new paper from the Joseph Rowntree Foundation (JRF) shows some of these might have been prevented. Flexible tenure gives those in shared ownership schemes the chance to decrease, or increase, the share in the property they own if their personal finances change. Examples of how this is working are featured in the paper, which is based on case studies within the Joseph Rowntree Housing Trust (JRHT).
Shared ownership schemes can offer an affordable option for those looking to get a foot on the property ladder. Flexible tenure gives occupiers the right to 'staircase up' by buying more shares in their property if they can afford it. If individuals find their mortgage repayments are at risk due to financial difficulties, then the JRHT has discretion to enable owners to 'staircase down' and reduce their share. Flexible tenure is also a useful option where, for example, an older person might need to release equity to pay for care or major repairs.
Flexible tenure can be operated by all housing associations in line with guidance from the Housing Corporation. It also received a high level recommendation from the Inquiry into Low Cost Home Ownership in 2002 but has not been widely taken up by housing associations.
Jacquie Dale, Deputy Director of Housing and Community Services at JRHT, said, "Flexible tenure can prevent the trauma and upheaval of repossession by allowing people to remain in their homes, even where financial situations have taken a downturn. Where a family might have previously been faced with the prospect of repossession, they may now be in a viable position to continue as homeowners, or to switch from shared ownership to full rent. This also contributes towards maintaining more stable communities."
The JRF paper emerges as the Department for Constitutional Affairs and the Council for Mortgage Lenders (CML) release their quarterly and half-yearly repossession figures. The CML figures show how house repossessions went from 10,310 at the end of 2005 to 17,000 by the end of 2006 – an increase of 65% in one year.
With a stock of a little over 400 shared ownership units, the Joseph Rowntree Housing Trust has dealt with 117 cases of "staircasing up" and 84 cases of "staircasing down" since 1986. Receipts from "staircasing up" have brought in £2.6 million; while re-investment through "staircasing down" has accounted for £2.4 million; thus it has been broadly neutral in terms of financial outlay.
"With personal indebtedness up by more than 50% over the last decade, flexible tenure is a possible way forward to prevent the misery of repossession and debt facing affected families. Rather than use proceeds from those who buy more shares in their property to cross-subsidise other housing, the JRHT has recycled these receipts back into the scheme to cover the costs of those who need to sell shares back. With the growing trend of rising repossessions, this is an option that housing associations should adopt more widely," concluded JRF Director Julia Unwin.
