lets share brochure june 16 final scrolling
TRANSCRIPT
Welcome to Let’s Share
Let’s Share brings the affordability benefits of shared ownership to Local Authorities and Housing Associations looking to deliver
new rented affordable housing.
Buying a share with the right to sub-let a whole property as rented affordable housing means that today’s limited capital budgets can deliver up to 4 times as many rented affordable
homes as the traditional model.
Using the housing regulator’s standard form lease, Let’s Share gives Local Authorities and Housing Associations part ownership
in new units of rented affordable housing at much reduced capital investment levels.
Where rented stock is lost, Let’s Share can deliver better than one-for-one replacement using disposal receipts.
With the ability to acquire street properties, Let’s Share can speed up the replacement of rented properties and reduce
temporary housing budgets.
Let’s Share from heylo
Let’s Share is only available from heylo - a private property company joint venture between a leading Local Authority, an
FCA-regulated investment manager, and a team of affordable housing specialists.
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Deliver 4 rented affordable homes for the price of 1
Solve the volume delivery challenge in high value areas
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Let’s Share New Build - much increased delivery of new rented affordable housing
Deliver 4 rented affordable homes for the price of 1
For new build development, Let’s Share allows Local Authorities (LAs) and Housing Associations (HAs) to deliver new rented affordable housing at much reduced capital investment levels. The action of buying a 25% share but having the right to sub-let a property as rented affordable housing means that today’s limited capital budgets can deliver 4 times as many homes as the traditional development model.
How does it work on new build delivery?
• heylo signs a contract with the developer to acquire the properties at practical completion and signs a Let’s Share agreement with the LA or HA to sell 25% shares in the properties at the point they are acquired by heylo.
• Both heylo and the LA or HA acquire their property interests at 60% of OMV.
• The LA or HA owns 25% of the property and pays rent on the unpurchased share starting at 2.75% (increasing annually in line with RPI plus 0.75%).
Using Let’s Share in new build delivery means that a capital investment of just 15% of OMV value will allow LAs and HAs to deliver new build rented stock - delivering up to 4 times more.
The purchasing LA or HA can specify design and fit requirements in the Let’s Share contract and these will be ‘mirrored’ in the contract with the Developer, provided that these requirements would not impede the sale of the properties as shared ownership to consumers in the future.
Like the second-hand solution the Let’s Share lease follows the standard form and the LA or HA will be given a blanket consent to sub-let the property to tenants with freedom to determine their own lettings (including rent levels and letting terms) subject to any related Section 106 requirements, such as rent caps or nominations.
In the future if there is a need to raise funds then the LA or HA can sell their share (realising the capital investment, the discount to OMV of the initial share purchase and any house price inflation) whilst maintaining affordable housing delivery in the form of normal consumer shared ownership.
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“making capital go 4 times further in the delivery of rented properties...solving the volume delivery challenge in high value areas”
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Let’s Share New Build - in action...
Single property new build delivery example
If the OMV of a Section 106 rented property being developed is £125,000 then using Let’s Share the LA or HA will require a captial investment of just £18,750 to obtain a property for rent.
Each year the LA or HA will also need to meet the cost of:
• the initial rent on the property under the Let’s Share shared ownership lease (which is 2.75% x 75% x £125,000 = £2,578.13 - increasing by RPI plus 0.75% annually)
• the annual management and maintenance costs per property (typically estimated at £2,400 but clearly expected to be much less in early years due to the property being new build)
• the cost of capital for the share acquired (assuming a 5% cost this would be £18,750 x 5% = £937.50)
This means the delivery of a £125,000 property as rented affordable housing for a capital investment of just £18,750 and if rented to a tenant for more than £113.76 per week the achievement of an operating surplus.
The propsect of free delivery... it’s not magic... just maths
Given each 25% share has an embedded 40% planning subsidy, if a large volume of properties is created to address an immediate housing need but in the future some of these shares are sold, then over time the embedded subsidy, with or without any house price inflation, will eventually repay the original investment and remaining properties will be FREE.
Here’s how it would work:
The LA or HA uses Let’s Share to invest £3m of capital to develop 100 new build Section 106 properties with individual OMVs of £200,000.
For the first 5 years it rents all 100 properties at or around the Local Housing Allowance to ‘break even’.
After 5 years it starts to sell its 25% shares in 3 properties every year (hopefully to the sitting tenants or to people on Shared Ownership waiting lists).
Each property sale, excluding any house price inflation, releases the original £30,000 of investment plus the plannining gain of £20,000 - meaning each year these 3 sales reduce the original investment by £150,000.
After 20 years 60 properties have been converted to customer shared ownership, all of the £3m investment is repaid AND there are still 40 properties left to rent as affordable housing.
Let’s Share Second-Hand - immediate replacement of lost capacity
Re-invest disposal receipts immediately and replace lost rented affordable housing where there is no immediate opportunity to develop new build capacity
Available on second-hand properties across the country, Let’s Share allows LAs and HAs to buy a share of any existing home and then sub-let that property to a tenant at affordable levels - reducing the amount of capital investment required, increasing the availability of properties for rent and reducing the pressure on temporary housing budgets.
How does it work on second-hand properties?
• LAs and HAs subsidise a 20% discount on the value of the property to be acquired, to make it affordable for rent, and acquire a 10% share based on the full Open Market Value (OMV).
• This subsidy is embedded in the landlord’s share to make the shared ownership lease rental payments affordable and is recycled or returned to the LA or HA should the property ‘staircase’ to 100%.
• The LA or HA owns10% of the property and pays rent on the unpurchased share starting at 3.65% (increasing annually in line with RPI plus 0.75%).
Using Let’s Share on second-hand properties means that a capital investment of just 30% of OMV will allow LAs and HAs to immediately replace lost rented stock.
The 125 year Let’s Share lease follows the housing regulator’s standard form and contains all of the rights and obligations, including the right to staircase. However, unlike consumer shared ownership, the LA or HA shared owner will be given a blanket consent to sub-let the property to tenants with complete freedom to determine their own lettings (including rent levels and letting terms).
Plus, if in the future there is a need to raise funds, the LA or HA can sell their share (realising the capital investment and any house price inflation) whilst maintaining affordable housing delivery in the form of normal consumer shared ownership.
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“better than 1 for 1 replacement of Right To Buy and higher value property disposals”
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Let’s Share Second-Hand - in action...
A LA or HA has £1.8m of capital to invest in affordable rented delivery, however, there are currently no immediate opportunities for new build development (and local temporary housing budgets are under increasing pressure...)
If second-hand 3 bedroom homes in the area have OMVs of £200,000, the LA or HA could invest just £60,000 per property, 30% of OMV, and deliver 30 properties for rented affordable housing.
Key steps...
• The LA or HA identifies the second-hand properties it wishes to acquire and has them professionally valued (to establish OMV).
• The LA or HA then agrees to provide a subsidy equivalent to 20% of OMV and acquire a 10% share (for 10% of OMV), heylo agrees to acquire the property and grant a shared ownership lease as well as the agreement for sub-letting.
• At completion heylo simultaneously acquires the property and grants the shared ownership lease (selling the LA or HA a 10% share).
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