This case study is part of the LGA's Housing Advisers Programme which funds the provision of an independent adviser offering bespoke expert support to local authorities for a specific project working to deliver homes, reduce homelessness, or generate savings or revenues.
Across the borough of Doncaster property prices are relatively low which raises a particular problem for older households as the value of their existing home is often less than the cost of purchasing an older persons’ property, even within the borough itself. This creates a financial gap, which is also heightened by the limited range of housing options for older people in Doncaster - traditional extra care settings, sheltered housing and residential/nursing provision.
Unlike the common perception that older house owners are often asset rich (usually equity in their home) and income poor, Doncaster, in common with other areas, has many older people who have a reasonable income from their pensions but do not have sufficient capital assets to be able to purchase a property more suitable for their needs.
Older people’s accommodation is key mayoral priority and there is the aspiration to provide Doncaster residents with the best accommodation options available, via an enhanced offer of a range of products/models.
A fall in the number of babies being born, combined with better healthcare and increasing longevity, is fuelling a rapid ageing of the population and allowing older households to ‘rightsize’ into a property to better meet their needs frees up much needed family housing.
Therefore, Doncaster sought to introduce an innovative equity release-based funding scheme and loan products that would allow older people to be able to purchase a property more suited to their changing needs and circumstances and to bridge the gap between the value of their current home and the cost of a retirement home.
Project Aims and Objectives
Doncaster participated in the Housing Adviser’s Programme (HAP) in order to seek advice and obtain support for financial innovation in relation to the production of an equity-based product(s). The product was aimed at older people in lower-income households situated in areas of lower house prices, in order to bridge the potential financial gap between the value of the existing home and the more suitable accommodation to which the household aspires.
The Role of the LGA Housing Advisers
Initially, advisers spent time understanding the council’s ideas behind the part purchase/equity release product and the scale of the financial gaps impacting on older households in Doncaster. They then worked on developing the product requirements and its primary criteria. Interviews took place with representatives of residential mortgage lenders, trade bodies and other stakeholders including those operating in the equity release sector, in order to investigate how equity loans might be used to assist older households and assess whether:
- a market exists for an equity loan product of this type
- that market would be profitable to exploit
- whether residential mortgage lenders would be prepared to confront the risks and challenges associated with such a product.
The project developed a robust and clear set of products and supports requirements for introducing them alongside the lenders information pack. As a result, advisers could support Doncaster Council’s financial innovation objective in relation to the production of an equity-based product(s) aimed at older people.
Proposals and implementation plans were developed that were sufficiently robust, both legally and financially, that allowed further innovation and product development to take place. This continued development of services and products for all people across Doncaster supported the council’s wider aspirations in respect of the wider housing ‘offer’ to ensure all needs are adequately catered for across all forms of tenure.
From the outset it was envisaged that the new loan product would be shared with financial institutions, registered social landlords (RSLs) and Homes England/Ministry of Housing Communities and Local Government (MHCLG) to give the service a wider audience and initiate take-up elsewhere. It will also feed into the council wide Doncaster Growing Together initiative – Homes for All Board, Adults Social Care, housing association partners, private housing developers, Homes England/MHCLG and other key stakeholders.
Learning for Local Authorities
Since the project is to be able to develop a financial product that could be offered by national financial institutions, the learning from the approach could be of significant benefit nationally.
The project study and findings were to be shared with Doncaster’s local authority partners within South Yorkshire and the Sheffield City Region through existing forums.
In addition the benefits of consulting (sharing new ideas, understanding processes and methodologies etc.) and sharing findings with organisations such as Chartered Institute for Housing (CIH), Housing Quality Network (HQN), Northern Housing Consortium (NHC), Northern Area Housing (officer) Group (NAHG) should not be underestimated.