How true to the twentieth century those ancient words proved to be when, some months ago, the term ‘sustainable community’ was introduced into my vocabulary.
This local authority scheme is, in essence, a very noble and admirable concept designed to make new housing available to local first-time buyers at reasonable prices. The authority, in tandem with a developer, was making 10 new properties available in my area under the scheme at £86,000, each compared with an equivalent open market value of around £130,000. The formula for establishing the selling price is three times the average salary for those living in the postcode area in which they were to be built. Even the restriction concerning the buyer being ‘local’ was very broad and generous in its scope. When I was approached by an estate agent to organise the mortgages under the ‘sustainable community’ arrangement, I was delighted to undertake the task because affordable housing for first-time buyers is something I feel strongly about.
Everything seemed to be perfect until I approached mainstream lenders with the proposition of possibly taking on the entire scheme en bloc. The only potential objection was in the ‘small print’. A covenant was to be encompassed within the purchase agreement that had the basic elements:
The property could only be re-sold to a ‘local’ person;
The property could only be re-sold for three times the salary for that area;
These elements were to remain in place in perpetuity;
When the mortgage lenders read the word ‘covenant’ they immediately broke out in allergy spots and dismissed the business as ‘not suitable under their lending criteria’.
Intransigence was evident with lenders both large and small. I understand how restrictive this covenant was and could sympathise with their dilemma, but none of the companies were prepared to talk about ‘tweaking’ the covenant in consultation with the local authority in order to make the scheme more user-friendly for the lenders, and at the same time preserve the spirit of ‘sustainable community’. Stalemate. The situation has subsequently been resolved by other means.
With the advent of many government-backed schemes like this, there are issues that urgently need addressing, both by lenders and the local authorities so intermediaries can make any similar scheme fly. At the heart of it should be consultation between parties and a willingness to yield. This should all take place before the scheme is rolled out. Who, though, could initiate such consultation? Where is Solomon when you need him?
Mel Duckfield
Mel Duckfield Financial Services
