Looking back to the future

THERE’S nothing new under the sun, according to the Old Testament’s book of Ecclesiastes, but is last week’s proposal for a new affordable home-ownership model an improvement on past housing market interventions by the States?

Deputy Peter Roffey and his vice-president Deputy Lindsay de Sausmarez head the Employment & Social Security committee, which wants to allow eligible islanders to buy newly-built homes at 75% of their market value. The scheme has been developed in conjunction with the Guernsey Housing Association and resembles similar initiatives already in operation in Jersey and the UK. It’s a policy aimed at entry-level buyers with good jobs and good prospects but due to difficult market conditions nowhere to call a home of their own, a sector largely uncatered for in our government’s current affordable housing programme.

These were the type of vital people the States looked to help in the 1990s with Les Pecqueries near La Passee, St Sampson’s, and at the beginning of the new millennium with Les Casquets at Amherst, near Beau Sejour.

I was directly involved with Les Casquets from the beginning as Cooper Brouard was instructed as sole agent for the development. The rambling Victorian building that formerly occupied the States-owned site had once served as the island’s maternity hospital and later as police headquarters. This was razed and the site cleared and excavated to provide 19 two-bedroom and 11 one-bedroom purpose-built apartments over three floors in three adjoining blocks, linked by a paved courtyard with access to underground car parking.

The development was named Les Casquets after the reef and lighthouse off Alderney clearly seen from some of the uppermost apartments. I wrote last week about the need for some States-owned property to be redeveloped either by the States itself or in joint ventures with the local building industry, in the case of Les Casquets to provide affordable housing that paid for itself.

Working in conjunction with the contractor, Rihoy and Son, the States decided that the new apartments would be price capped to counter rapidly escalating prices in the local market at the time.

Analysis by the Housing Authority regularly divided the market into four sections, or quartiles. This was prior to the present and less informative median method of calculating a mix-adjusted average price of a local market house. Back in 2003 the highest price of the lowest quartile was £190,000, which determined the top price for the two-bedroom apartments.

This was more than 10% lower than their actual market value but if purchasers of those apartments decided to sell within five years, they had to offer their apartment back to the States using the same formula.

This gave purchasers the benefit of any market uplift during their ownership, but prevented them from taking disproportionate advantage of having purchased at a reduced figure, much the same as that presently proposed by E&SS. Consideration was also given to improvements carried out to the apartment and other justifiable expenses in calculating the ‘sell-back’ figure.

If the States declined, the apartment could then be sold to anyone within six months without price restriction. Six months because property prices at the time were increasing at such a rate to justify the restriction being reinforced and the figures reviewed that often.

Because of building costs, the one-bedroom units were competitively priced but not restricted in the same manner, nor were successive owners of the two-bedroom apartments implicated, but the restriction on those apartments remained in place for the first five years of the original buyer’s ownership.

Another stipulation required prospective purchasers to confirm they would be owner/occupiers in response to the wave of new landlords investing in buy-to-let properties, adding further competition in the housing market.

The public reaction was astounding. The Guernsey Press featured the site when development started and, within a short time, 127 applicants had asked to be added to a waiting list. Many of those people ultimately purchased alternative properties or decided not to proceed further, but the waiting list remained over-subscribed and the level of interest clearly reflected the demand.

Not that the 30 apartments at Les Casquets would alone solve the plight of first-time buyers, but using States-owned land and entering a joint venture with a local contractor was an original initiative at a time when the States was under pressure to respond to the growing housing crisis.

Not everyone thought so, however. People trying to sell properties in the same price range argued that they were being disadvantaged. Brand new and well-located good quality apartments offered at below the market value were tempting buyers who might otherwise consider their properties.

But the market demand was such that disgruntled owners were asked frankly if other primary reasons were preventing their properties from selling. The States openly hoped that setting a price cap on the larger apartments might put the brakes on accelerating prices.

It was not considered necessary to extend the buy-back clause beyond five years, something the current market conditions would benefit from, but neither was it required as the housing market adjusted itself within the allotted time. Above all, it demonstrated how using its own resources and by working with local industry professionals, the States does not have to depend wholly upon the GHA, already with £90.5m. of bank borrowing, or private developers who merely shrug off the flawed Island Development Plan’s GP11 rule, to provide affordable housing within budget that either pays for itself or represents a viable long-term investment with capital appreciation.