It has emerged that a number of Developers have registered their own Housing Associations at Companies House to prevent the sale of parts of their development sites to existing Housing Associations. Hopkins Homes, who develop a number of sites in East Anglia are cited as being one such Developer.
Due to the increasing demand and requirement under a Section 106 Agreement (an agreement entered into with the local authority by the developer to determine the logistics and infrastructure at a development site) to provide affordable housing, Developers have set up ‘for-profit’ housing associations to enable its Housing Association to collect directly from the rent received by affordable housing tenants.
In a typical shared ownership property, the tenant who has purchased a share in that property will pay what is known as ‘Specified Rent’ to the relevant Housing Association for the share that they have retained. For example, if a first-time buyer purchases a 35% share in a new property, they will pay a rent to the Housing Association on the remaining 65% share. Following this, if the tenant chooses, they are able to ‘staircase’ their interest to 100% by acquiring a greater percentage share of the property.
Developers have seen this as a way to boost their income by way of rental payments directly to them rather than a capital payment by a Housing Association to the Developer to purchase part of their site.
It has been reported by Inside Housing that these steps have taken place due to a difficulty by Developers in obtaining a good deal for themselves with existing Housing Associations. This is linked to a reduction in funding for existing Housing Associations which has reduced the initial offer value made by Housing Associations.
Attwells provide expert legal advice regarding property development, for more information please call Tanya on 01473 229857.