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MAINTAINING HOUSES - PRESERVING HOMES: A REPORT ON RESPONSES TO THE CONSULTATION

CHAPTER FIVE FINANCING AND SUPPORTING REPAIR WORKS

ASSISTANCE TO PRIVATE OWNERS

5.1 In the past, assistance to private owners to meet obligations has been given almost exclusively in the form of grant. The Scottish Executive agrees with the Housing Improvement Task Force that a wider range of options should be considered, and the actual form of assistance determined by the local authority as part of its wider strategic responsibility, ensuring that public subsidy is targeted on those who need it most.

5.2 The new proposals will include a mandatory requirement for local authorities to offer assistance where a statutory notice has been served.

5.3 The Scottish Executive envisages a hierarchy of assistance which reflects different needs, including:

• General advice and guidance
• Practical assistance
• Loans
• Grants

5.4 The consultation paper sought respondents' views on five questions relating to providing assistance to private owners:

• Do you agree with the introduction of a range of types of assistance? (Paragraphs 64-66)
• Are the types of assistance proposed the right ones? (Paragraph 67)
• Do you agree with the proposals for amending the legislation on grants? (Paragraphs 68-71)
• With the exception of adaptations for disabled persons and fire precautions, should eligible works for financial assistance be limited to those relevant to the Tolerable and Scottish Housing Quality Standards? (Paragraph 70)
• Do you agree that subsidised loan should be available as an alternative to grant? (Paragraph 69)

INTRODUCING A RANGE OF TYPES OF ASSISTANCE

5.5 Just over three quarters of respondents (77%) agreed with the proposed introduction of a range of types of assistance for private owners. The level of agreement is particularly high among local authorities responding to the consultation (all twenty-three responding to this question agreed).

5.6 Some local authorities specifically welcomed the removal of the statutory requirement to pay grant and supported the range of types of assistance as a flexible way for local authorities to respond to the specific circumstances in their area.

5.7 Just over one in five respondents (21%) disagreed with the proposal. This was particularly high among groups representing older people or people with disabilities (ten of the fifteen respondents in this category disagreed).

5.8 A major concern voiced by these groups was the introduction of a loan system which, it was felt, may jeopardise householders' chances of receiving grant for making adaptations. The Disability Rights Commission commented:

"The DRC is concerned that, in practice, local authorities may seek to direct disabled people making a claim down the loans route, insisting that there are insufficient resources for grants. This could also act as a disincentive for individuals wishing to make adaptations."

5.9 This concern was echoed by many of the disability groups responding, including Ownership Options Scotland, which added:

"Where this system operates for adaptations in England local authorities often choose to plead poverty and only supply loans. These proposals also follow the introduction of means testing on grants a year ago, changes that were again designed for improvement and repair grants but apply to adaptation grants. The Scottish Executive's own research suggests this has led to disabled people being unable to afford to adapt their home."

5.10 The Disability Rights Commission argued that a clear distinction must be drawn between general improvements and repairs for all home owners and essential adaptations for disabled people to enable them to live independently in their own home:

"Grants for adaptations should be uncoupled from the Housing Improvement Grant scheme. Delays and unnecessary complexities in the grants process must be addressed."

5.11 Ownership Options Scotland concurred with this view:

"We want to see adaptations funding removed from the current proposals and thoroughly researched."

TYPES OF ASSISTANCE

5.12 The majority of respondents (82%) agreed that the proposed types of assistance to private owners were the right ones. However, local authorities in particular raised a wide range of issues with the proposals. The key points included:

• A recognition that in areas with low incomes and low equity, grant assistance will continue to play a major part in tackling poor housing conditions in the private sector. The proposal to allow local authorities to vary the grant percentage was welcomed and COSLA sought further clarification on the circumstances when this would be merited
• A concern that local authorities are not sufficiently experienced in the development and administration of different loan products, and that providing loans will be very resource intensive. There is a call from local authorities, as well as COSLA and the CIH Scotland, for further clarification and guidance on the practicalities of local authorities providing financial advice and operating loan schemes
• Linked to the point above, options should be explored with lenders and not for profit organisations with a view to supporting the involvement of socially aware finance organisations in providing loans
• The Scottish Executive should provide guidance in recognition of the difficulties a move from grants to loans may have on Muslim communities
• Delivering a wider range of assistance proposed in the consultation paper will require more support to householders from local authorities, with consequent staffing implications
• There is concern that the level of Private Sector Housing Grant may be reduced to inappropriate levels if mandatory grant awards are removed or the expectation that grant will only become a "tactic of last resort". The award of grant should be recognised as the main incentive in encouraging owners to make repairs. This was a view echoed by the Scottish Federation of Housing Associations (SFHA)
• There was some concern over the proposal that assistance should sit within a national framework to ensure consistency across Scotland. Some local authorities argued that the scheme of assistance should be prioritised at a local level in line with local housing strategy priorities and local housing market considerations. They should not be driven by a prescriptive national framework
• Highland Council, Glasgow City Council and the Royal Environmental Health Institute of Scotland disagreed with the proposal to abolish the power for local authorities to provide grants for the provision of houses by conversion.

5.13 The SFHA made a number of specific observations on the proposals for loans. It expects that the option to facilitate private loans will have a relatively low take up as the need to make any repayment can be difficult for people on low incomes. The SFHA also recommended that equity loans should be avoided. At times of high interest, a loan can double every four years. However, the option of expressing the amount to be repaid as a proportion of the value of the property on sale is worth exploring in areas where appropriate market conditions exist.

5.14 The CIH Scotland added that local authorities should be given a power to make the setting up of owners' associations and building reserve funds a condition of them providing financial assistance to owners.

5.15 The CML Scotland commented that it looked forward to working with the Scottish Executive in developing loan schemes to assist owners with repair and maintenance of their properties. It emphasised the requirement to pursue this through an overall Scottish framework rather than each local authority approaching lenders, which may result in thirty-two different schemes with small volumes going through each.

5.16 The RICS Scotland said it did not agree with the proposal to remove the prohibition on properties less than ten years old as it will not serve in the struggle against poor quality in construction. COSLA also queried why this would be removed if the NHBC warranty was still valid.

AMENDING THE LEGISLATION ON GRANTS

5.17 Almost all of those responding (87%) agreed with the proposals for amending the legislation on grants. Only 12% disagreed.

LIMITING FINANCIAL ASSISTANCE TO THE TOLERABLE STANDARD AND SHQS

5.18 Just over 70% of respondents agreed that, with the exception of adaptations for disabled people and fire precautions, eligible works for financial assistance should be limited to those relevant to the Tolerable Standard and the SHQS.

5.19 However, 29% of respondents disagreed. Highland Council, for example, said the proposal may limit the ability of the Council to fund more minor defects which, if unattended, will lead to greater levels of disrepair. It also felt this "narrow approach" may not allow the Council to fund conversions or bring back empty houses into the housing market to reduce housing pressure.

5.20 Renfrewshire Council added that:

"We would like some discretion for local authorities to deal with emerging local issues, especially those which are related to health and safety such as the removal of materials containing asbestos."

5.21 The RICS Scotland added that other works should be considered, for example where a notice has been served through other legislation such as the Building (Scotland) Act 2003.

5.22 The CML Scotland said the Scottish Executive should also consider making financial assistance available to those served with a notice because of disrepair which could become major, or who had been served with a maintenance order.

5.23 The RIAS suggested that any works that would bring a property to the current Building Standards Regulations should be considered for financial assistance.

5.24 The Property Managers Association Scotland disagreed with the proposal, arguing that financial assistance should be available where work is required in multi-occupied buildings in which an owner cannot or will not contribute financially.

SUBSIDISED LOAN AS AN ALTERNATIVE TO GRANT

5.25 The majority of respondents (80%) agreed that subsidised loans should be available as an alternative to grant, while 17% disagreed.

5.26 COSLA qualified its support by saying loans should only be available to those for whom the market is not an option. Some local authorities said subsidised loans should be available as part of a balanced strategy where the ability of local authorities to encourage owners to carry out works by offering grant rather than loan is maintained.

5.27 Comhairle Nan Eilean Siar said it was concerned that introducing a subsidised loan system as an alternative to grant will significantly increase the administration costs for private sector housing. It may also be inappropriate for rural authorities where the equity of property and household incomes are low. Entering into arrangements with private lenders to offer subsidised loans raised concerns about maintaining the Council's impartiality as well as the problem of a lack of suitable lenders. Clarification was necessary on the details of the scheme, but the principle of local authorities acting as a lender in these circumstances would be strongly resisted by the Council.

charging orders

5.28 Repair and improvement works are sometimes delayed because some owners do not have the funds to pay their share, even though some may have a reasonable amount of equity tied up in their houses which could finance these works.

5.29 The Scottish Executive is proposing that, when local authorities pay for repairs and improvements to privately-owned houses or lend the money to pay for them, they can recover the costs by using a charging order. This will effectively be a loan secured on the property.

5.30 It is proposed to make charging orders more flexible, so they can be combined with other assistance, increasing the options available to local authorities in assisting house owners. The Scottish Executive is proposing to amend the power to make a charging order to allow:

• Repayment on sale of the property without the need for the payment of an annuity and without the 30 year time limit. This will benefit the owners of houses who have low incomes, since they could delay making a repayment until the house is sold
• The order to be made with the agreement of the owner, as a first charge, to provide financial assistance where work is carried out by the owner on a property that is the subject of a statutory notice, or an order for the carrying out of works in a designated Housing Renewal Area or the local authority has stepped in to contribute on behalf of one owner to allow a scheme of communal repairs to go ahead. This would mean effectively funding such work by the release of equity in the property

5.31 The consultation paper sought respondents' views on two aspects of the proposals for charging orders:

• Do you think that charging orders will be an effective means of releasing capital for carrying out repairs and improvements? (Paragraphs 73-78)
• Has the Scottish Executive identified the circumstances in which it would be appropriate to use charging orders? (Paragraph 75)

EFFECTIVENESS OF CHARGING ORDERS

5.32 Most respondents (82%) agreed that charging orders will be an effective means of releasing capital for carrying out repairs and improvements. Only 15% disagreed.

5.33 Glasgow City Council commented that they have used charging orders for many years and, in spite of some difficulties, they are an essential part of the process of expenditure recovery:

"Their extension is welcomed and should prove an effective addition to the range of sources of finance and a useful way to overcome the problems posed by resistance by individual owners to projects already agreed by a majority of owners."

5.34 A contrary view was put forward by Argyll and Bute Council which did not see charging orders as an effective means of releasing capital for repairs and improvements:

"Charging orders should not be seen as a 'means of releasing capital' as the discharge of a charging order on sale of a house would merely reimburse authorities monies which they had already spent."

5.35 The CML Scotland opposed the use of charging orders. As they would automatically rank before a standard security, this may have serious implications for the security position of mortgage lenders:

"It seems wholly inequitable that the local authority can simply pay for repairs or grant a loan and effectively obtain a first ranking security over the property without any consultation or notice being given or consent required from the holder of a standard security."

5.36 The issue of existing first charges was identified by COSLA and some local authorities, and was also recognised by the Law Society of Scotland in its response:

"While charging orders are an effective means of collecting compulsory repair debts, any new legislation should take account of existing security legislation with the potential impact it may have on the ranking agreement of secured loans."

5.37 The Royal Environmental Health Institute of Scotland commented that charging orders are an effective means of releasing capital for repairs and improvements. However, from a debt recovery point of view, a ceiling could be introduced, as charging orders may not be cost-effective where small debts are involved.

CIRCUMSTANCES FOR USING CHARGING ORDERS

5.38 Most respondents (83%) agreed that the Scottish Executive has identified the circumstances in which it would be appropriate to use charging orders.

5.39 However, respondents raised a number of issues over their implementation:

• Will charging orders be available only to owners subject to an order or notice, or will they be available to any owner involved in a common repair?
• Prior to issuing a charging order, local authorities should make owners aware of the sources of advice and information on the range of financial assistance that could help them contribute their share of the common repair/improvement. In addition, local authorities need to be very clear as to the cost of repayments under charging orders
• The costs should only be deferred until the sale of the property where it can be shown that the owner does not have the capacity through income or savings to contribute to a common repair. Those owners who do have the capacity to contribute but refuse to do so should be required to make annual payments
• It should be clarified that a charging order does not require the agreement of the owner where it relates to work being carried out in default or to non-compliance with a repair notice
• Clarification is sought on the relationship between charging orders and the relative provisions in the Tenements Act.

SUMMARY OF KEY FINDINGS

5.40 Over three-quarters of respondents (77%) agreed with the range of types of assistance proposed for private owners. Some local authorities specifically welcomed the removal of the statutory requirement to pay grant and the flexibility the new proposal would provide to respond to the specific circumstances in their area.

5.41 However, just over one in five respondents (21%) disagreed with the proposal, with the level of disagreement particularly high among groups representing older people and people with disabilities. A major concern voiced by these groups was the introduction of a loan system which may jeopardise householders' chances of receiving grant for making adaptations. They argued that a clear distinction must be drawn between general improvements and repairs for all home owners and essential adaptations for disabled people to enable them to live independently in their own home. There was a call for adaptations funding to be removed from the current proposals.

5.42 Although most respondents (82%) agreed with the proposed types of assistance, local authorities in particular raised a wide range of issues. Central among these was the need to see grants remaining a major part of the approach for tackling disrepair in the private sector. There was also a concern about the practicalities of local authorities providing financial advice and operating loan schemes.

5.43 The consultation sought views on whether, apart from adaptations for disabled people and fire precautions, eligible works for financial assistance should be limited to those relevant to the Tolerable Standard and the SHQS. Just over 70% agreed with proposal, with 29% disagreeing. One of the concerns raised by local authorities was that this "narrow" approach may limit councils' ability to fund more minor defects which could lead to greater levels of disrepair if left unattended.

5.44 Just over 80% of respondents agreed that subsidised loan should be available as an alternative to grant. COSLA qualified their support by saying it should only be available to those for whom the market is not an option.

5.45 Most respondents (82%) agreed that charging orders will be an effective means of releasing capital for carrying out repairs and improvements. Only 15.2% disagreed.

5.46 The CML Scotland opposed the use of charging orders. As they would automatically rank before a standard security, this may have serious implications for the security position of mortgage lenders.

5.47 The majority of respondents (83%) agreed that the Scottish Executive has identified the circumstances in which it would be appropriate to use charging orders, although a number of points were raised over their implementation.

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