This item was published during the term of a previous administration that ended in April 2007
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Homestake shared equity scheme
20/09/2005
A new scheme, unique in the UK, to help thousands of people in Scotland on low incomes to buy their own home was launched today.
Homestake is aimed at first-time buyers and others whose life circumstances may have changed so that they are denied the opportunity to buy.
More than 500 people have already expressed initial interest in the scheme which will be run by Communities Scotland, the Executive's regeneration and housing agency.
The scheme offers people a majority share in a property that they will own. Typically, this share will be between 60 and 80 per cent at the start with the remainder held by a local housing association. Most Homestake owners will have the option later to increase their stake and own their home outright.
In Edinburgh and the Lothians, where there are particular pressures on the housing market, a pilot version of the scheme will operate on the open market. It will also be run by Communities Scotland and three registered social landlords - Castle Rock, Edinvar and the Link Group.
Communities Minister Malcolm Chisholm said:
"Renting a home is as valid a choice as home ownership. But we must respond to the aspirations of many to own a home of their own.
"Homestake will particularly help first-time buyers and people on low incomes who are unable to pay the full price of a property. It will enable homebuyers to own a majority stake in a new property and, unlike existing home ownership schemes, will not involve paying rent over and above that.
"This is a uniquely Scottish solution tailored for the distinct and different needs of communities across Scotland.
"It will help more people to stay in their own communities where affordable homes are beyond those on low-incomes and allow many to continue to contribute to the local economy.
"I am delighted at the response and support so far and look forward to its full implementation when we will see many more Scots getting the keys to a home they can call their own."
The Executive is expanding the availability of affordable housing - £1,200 million over the next three years to provide 21,500 homes. Nearly 5000 of these (including Homestake) will be low cost homes for sale which represents an 80 per cent expansion in this area.
Linda Ewart, policy and practice director for the Scottish Federation of Housing Associations, said:
"In pressured areas, Homestake will be useful in securing home ownership for those unable to fully enter this tenure by way of their own income.
"The SFHA has been involved in the development of this initiative from the start, as it offers housing associations a useful and additional tool that complements their provision of good quality rented housing, in their delivery of a strategy to increase the provision of affordable housing and securing sustainable balanced communities."
Kennedy Foster of the Council of Mortgage Lenders (CML) in Scotland said:
"Homestake is a positive step for the housing market in Scotland. Home ownership brings both personal and social benefits and the scheme will go some way to meeting the aspirations of a greater number of first time buyers.
"The ability which homeowners will have within Homestake to increase their share of the equity by 'staircasing up' is particularly welcome. Within CML Scotland we are keen to see a more flexible approach offered to home ownership and this represents one element in this."
To be considered for the Edinburgh and Lothian's open market pilot, single applicants should normally have an income of no more than £19,700, and larger households should have a maximum income of £25,100. Homestake owners will pay for their share of a property - normally between 60 and 80 per cent - and legal and survey fees, and the housing association will fund the remaining share.
Ewan Fraser, chief executive of Dunedin Canmore Housing Association, added:
"Dunedin Canmore welcomes any new initiative to increase the availability of affordable housing in Edinburgh and the surrounding areas. This pilot should seen as just one way of increasing the choice that people on lower incomes have to enter the housing market. We will be working hard to make it a success."
Work has already started on Homestake properties around Scotland, with the first homes available for people to move in during the latter half of 2006. By 2006/07 around 1,000 new Homestake properties are expected to be built every year.
It is estimated that around £30 million a year will be invested through housing associations into Homestake homes by this time.
Homestake aims to:
- enable registered social landlords to develop new properties for sale on a shared equity basis and to purchase properties at an appropriate discount from private developers for onward sale to shared equity purchasers
- pilot support to low-income households who wish to purchase property for sale on the open market in Edinburgh and the Lothians
- help existing owner occupiers whose homes are scheduled for demolition to access a new home for ownership on a shared equity basis
The key features of Homestake are:
- individuals will generally require to take an equity stake of between 60% and 80% of the market value of a property. With the agreement of the grant provider however, the minimum equity stake can be reduced to as low as 51%. This is likely to apply where a housing market is particularly pressured, or where people with particular housing needs have identifiable additional housing costs
- there is no minimum percentage equity stake that an existing owner occupier whose home is scheduled for demolition must take in a property. They will be expected to invest, as a minimum, the value of their existing property in an equity stake of the new property
- the maximum initial equity stake that any Homestake owner can take will be 80% of the market value of a Homestake property
- with the exception of existing owner occupiers whose homes are scheduled for demolition, individuals purchasing a Homestake property will be means tested in order to establish eligibility
- the majority of Homestake funding will be directed towards increasing the supply of affordable housing in and around pressured housing markets. There is a recognised need however for flexibility in developing local responses to local housing markets. As a result, Homestake could also be an option in other areas where there is an identifiable local need
- a Homestake owner will be responsible for their own legal and valuation costs. Unlike the current shared ownership scheme, they will have full title to the property and they will not make an occupancy payment to the RSL
- a Homestake owner will be expected to occupy the property as their only residence and they will be responsible for insuring the property and keeping it in a good and habitable state of repair. A Homestake owner will be responsible for all maintenance, repair and insurance costs and not just a percentage
- in the majority of cases, the Homestake owner should have the option of increasing their equity stake after the initial purchase to 100%. In certain circumstances however, such as in areas where there is a constrained supply of affordable housing and limited scope for this supply to be increased, the RSL could be allowed to retain a 20% equity stake in the property, known as a 'golden share'. Retention of a 20% equity stake could also be appropriate for adapted properties, as this would help retain these properties in areas where they might otherwise be lost to the market
- a Homestake owner must wait a minimum period of two years after the initial purchase before they can increase their equity stake in a property to 80% (or beyond and up to 100% if there is no golden share). Any subsequent equity stake increase can only take place if there is no golden share and should be at least one year after the date of the initial increase. This must take the Homestake owner to 100%
- the Homestake owner can increase their equity stake regardless of whether the open market value of their property has increased or decreased
- there will be no means testing of owners following the initial purchase. It will not be possible for a Homestake owner to decrease their equity stake in a property
The Homestake scheme will be formally reviewed within the first five years of its operation.