a home of one’s own: shared equity housing ... wpi shared...the preference expressed by most women...

A HOME OF ONE’S OWN: SHARED EQUITY HOUSING FOR OLDER

SINGLE WOMEN

STAGE 1 - SUMMARY REPORT Chris Black, Black Ink Writing & Consulting

December 2015

Women’s Property Initiatives gratefully acknowledges the generous support of The Ian Potter Foundation and the Victorian Women’s Benevolent Trust, which has enabled this project to be undertaken.

WPI SHARED EQUITY HOUSING PROJECT – SUMMARY REPORT 1

SHARED EQUITY HOUSING FOR OLDER SINGLE WOMEN

INTRODUCTION This project was established to research and develop a shared equity model of home ownership, specifically geared to the needs of lower income women over the age of 55 years. Funding was received from the Ian Potter Foundation and Victorian Women’s Trust to undertake the project in two stages:

- the first being an investigation of existing and previous shared equity housing schemes, a demographic analysis of need amongst the cohort group in Victoria and qualitative interviews with women who would be possible participants in such a scheme;

- the second being a detailed design phase of options to achieve the policy goals of the project, and refine the scheme with input from key stakeholders.

The research report represents the completion of Stage One of the project and comprises:

Part I – a literature review of Australian and international studies on shared equity housing, the housing needs of older single women, and a review of key shared equity schemes which may have potential applicability in Victoria for this cohort.

Part II – a detailed report of the 8 qualitative interviews

conducted for this project, including: the research methodology; views of the women involved about home ownership, private rental and shared equity as a concept; their feedback on specific elements of shared equity schemes that currently exist; and discussion about their interest and capacity to participate in such a scheme if it were to be offered;

2 WPI SHARED EQUITY HOUSING PROJECT – SUMMARY REPORT


Part III – presentation of demographic data on older single women in LGAs across metropolitan Melbourne and Regional Victoria, drawn from Australian Bureau of Statistics custom tables, as well as data about women within the target age groups in private rental with assets of $100,000 to $300,000.

Part IV - a discussion and analysis of evidence collected throughout the project, including the strong support for such a product to be developed and delivered, a proposed matrix for the parameters to be included, and some of the key considerations that should be taken into account for the scheme for the particular cohort of older, single women.

The following represents Part IV of the full report, which also includes recommendations for the next steps to be taken in pursuing a Shared Equity Housing Project for lower income older single women currently living precariously in private rental.

PART IV – DISCUSSION AND NEXT STEPS The following discussion represents some of the key issues that have arisen throughout the project, and that require specific consideration in the next stage of designing a new shared equity housing product by WPI for women in the target cohort.

1 Shared Ownership – a desirable product This project has identified that shared equity housing has been successfully implemented in a range of housing markets internationally to meet the needs of particular segments of the population. While no schemes currently operating in Australia are aimed at the over 55s target group (of single women or couples), there are a number of international examples that could be further investigated (see Section 7.3 of the literature review). Therefore, WPI will need to design its own shared equity product to fit this specific group and the specific market conditions that exist in Victoria.



The interviews identified a strong interest from those within the proposed cohort for a shared ownership type of scheme (as opposed to a community equity or ‘transitional’ individual equity product), and a real appetite for such a product to be developed by a community organisation such as WPI. Many interviewees mentioned the psychological importance of being an equity partner (most importantly, removing the feeling of vulnerability that came from housing insecurity and renting), as well as the financial benefits of seeing their money invested in a sound way rather than spending it all on rent. Most women also indicated that they would be keen to assist in testing or reviewing a potential product with the aim of purchasing property in the short to medium term – the consistent view was that the quicker something was made available, the quicker they could move on from situations of insecurity and the perceived perils of the private rental market.

2 The importance of ‘equity’ and collaboration An important finding from the interviews was that while most women indicated a very strong interest in shared equity housing as their one and only means of escaping the private rental market and entering home ownership, they were also not prepared to enter such a scheme ‘at any cost’. In contrast to some of the views expressed by participants in other low-deposit low-interest loan schemes, the women involved in this project saw the prospect of shared ownership as a significant personal investment – often one that would take up not only their entire asset base, but also potentially some or most of their superannuation savings as well. This meant for several of them that they were weighing up the value of shared equity housing and the security of tenure it offered with other possible investment vehicles. When the issue of a less than equal share of capital gains revenue was raised, or the possibility that they might be responsible for all fixed costs for the housing (rather than it being shared with the housing provider), this became a serious point of contention for some women. For new home purchasers with no previous experience of being ‘burnt’ in the property market or having received inequitable asset shares from a



divorce settlement, such issues may not be of primary consideration when entering or participating in such a scheme. But for a group of women who have experienced inequity and disadvantage at various stages of their life – either from relationship partners or institutional partners – the concept of ‘equity’ and the way in which their equity share is treated was observed as being significant. WPI should be mindful that any product labelled as ‘shared equity’ or partnership would need to ensure that the financial interests and investments of the individuals involved are taken into consideration, and that there is a collaborative and participatory approach taken in the design and implementation stages. As one woman commented at interview:

“The fact is that the community housing organisation has more power than the resident – and if WPI want to be involved in something like this they need to make sure that they are doing the right thing by the women involved. Particularly as women have been ripped off all their lives – there should be real attention paid to making sure women are not ripped off in this scheme”.

This issue of ‘equity’ was raised several times in relation to the division of fixed costs throughout the life of the agreement, and the way in which this would affect how capital gains were shared between the parties at resale. The importance of having a scheme that truly operates as a partnership, recognising the shared interests of all involved, was also articulated by a number of women in terms of their wanting to be involved in developing the solutions to what was recognised as a unique product – not just being passive participants or recipients. As another woman said:

“There’s always the possibility that something might go off track in a scheme like this – you never what’s going to happen in future – so I accept that things might end up differently to how we have all planned, but hopefully I’ve got enough common sense and WPI has the right interests at heart to make sure those things can be resolved….I don’t think it’s something to fear, but something for us to work through together”.



The development of a statement of shared values and principles could assist both parties to understand both their common and individual purpose and role.

3 Financial viability Clearly, the most critical factor in developing and offering a new scheme is ensuring its financial viability and sustainability for all parties involved. The formal evaluation of the WA Government’s ‘Shared Start’ loan identified measurable financial benefits for all parties (AHURI and PriceWaterhouseCoopers 2014), and the longevity of various schemes overseas would indicate that they have managed to achieve ongoing financial viability, albeit with government subsidies in most cases. However, for WPI and the potential participants in this new product the issue of designing a financially viable vehicle for delivering on the policy goals remains an unknown until further costings and economic analysis is undertaken. The vast majority of schemes reviewed internationally receive some form of government subsidy or start-up funding, with the Older Persons Shared Ownership Scheme in the UK being particularly generous in ceasing rental payments once participants had achieved 75% equity in their residence. The preference expressed by most women for a minimum 30% equity buy-in was also an expression of their ‘maximum’ equity buy-in. While there is the potential for attracting women with higher up front contributions to the scheme, the economic reality for most women in this cohort would be that WPI as the equity partner would be responsible for taking on the majority financial risk for each property. For the women involved in interviews for this project, most also indicated that their key concern was around the ability to meet the ongoing fixed costs of the property alongside any regular payment to WPI as a ‘rental’ or other payment. All were highly aware of the limitations of living on a low-moderate or fixed income, and recognised that housing security is tied directly to being able to cover housing and other living costs. The financial



design of this scheme needs to remain acutely mindful of the financial stresses of older women who are already struggling to meet the costs of living, and the additional psychological stresses this causes alongside the physical and emotional realities of ageing. For this reason, it is proposed below that WPI consider a scheme that allows for sharing of the ongoing fixed costs of the property – both in recognition of the strong call from those interviewed for this to be the case, but also in recognition that schemes that traditionally pass this full responsibility onto the resident are for those in very different circumstances (young families, sometimes dual incomes, and those with a long-term view of home ownership). In general, the women were clear that the ‘bottom line’ of their ability to participate in the scheme would be around their financial capacity, but also their capacity to take on the additional emotional burden of becoming responsible for the maintenance and other ongoing costs of such a large asset.

4 Proposed criteria for a new scheme Based on the findings of the literature and the perspectives of the women interviewed for this project, it is proposed that the following criteria be considered as the basis for any new shared equity housing scheme by WPI: Policy goal To develop a shared equity housing product for older single women to enable them to enter the private housing market in partnership with a community housing organisation. The product to provide:

o Housing security o Housing affordability o Reasonable standard of living o Clarity of roles, rights and responsibilities of each partner

Target population

Single women over the age of 55 years.

Low-moderate income ($25-75k per annum)



Asset tests to establish capacity to contribute a minimum deposit of $100,000 to property purchase (or min. 30% of purchase price, whichever is the lower amount)

Housing stock WPI to determine key criteria to guide choice of property (such as age of property, number of rooms, building materials, minimum standards, distance to public transport and other key services). WPI will undertake an assessment/valuation of the property to determine suitability of the stock garnered either by purchase on the open market or new build. Financing WPI to source finance for its share in the property from government/private sector/philanthropic organisations. Participant must demonstrate financial capacity to:

contribute required initial capital investment

pay for fixed housing costs and other costs of living

maintain ongoing payments to WPI for use of their share of the property (it is proposed that payments to WPI be capped, for example at 30% of income for those on low income)

Provider WPI to be the provider of the scheme. WPI could work in conjunction with other partners – this will be determined based on financing arrangements. Legal and regulatory frameworks WPI to engage with other jurisdictions currently offering schemes to assist in exploring appropriate frameworks within which such a scheme could operate. Eventually an agreed framework may need to be negotiated and approved through the Victorian Government (and possibly the Office of the Housing Registrar). Stewardship/Management WPI will manage the ongoing operations of the scheme.



Processes should be put in place to engage with potential participants to ensure ongoing consultation and collaboration around policy settings and program guidelines. Rights and responsibilities

Rights and responsibilities must be clearly set out including the risk factors for each partner (information from existing schemes reviewed for this project should be collected to identify good practice in documenting ‘rights and responsibilities’ for schemes with similar policy goals).

WPI to develop a dispute resolution process for handling and addressing complaints from participants – the legal framework for the scheme will also determine how rights and responsibilities are ultimately arbitrated.

Minimum buy-in requirements WPI should aim to establish a minimum capital investment from participants of say 30% of the purchase price of the property, up to a maximum of 70%. Further analysis in conjunction with potential financial partners will determine the ultimate financial viability of the minimum and maximum capital investment required. Opportunity for full ownership

The scheme should allow the opportunity for participants to ‘staircase up’ to full ownership of the property over time.

Financial modelling should be developed to determine the specific tranches in which additional share purchases could be made, and the guidelines around how the arrangement will be terminated once full ownership is achieved.

Consideration should also be given to including a ‘sell-down’ or reverse equity component to the scheme in the cases where participants experience unforeseen financial hardship.



Rental payment or ongoing contribution

The ongoing payment (termed a ‘rental payment’ in some schemes) from the individual to the ‘provider’ equity partner will need to be determined based on the upfront contribution, and in consideration of the individual’s ongoing income. The purpose of this payment and what it covers would also need to be clearly spelt out to avoid confusion about ongoing rights/responsibilities for property maintenance and repair.

Ongoing costs, repairs and maintenance

WPI should fully document at the outset of the agreement what is considered to be:

o ongoing repairs and maintenance of each property o major repairs and/or cyclical maintenance.

WPI should establish guidelines for determining the process for sharing costs of major repairs and improvements, including their treatment as additional equity in the property.

Resale conditions

To maintain security for residents, resale timing should be determined by the resident, not the equity partner (on the condition that all terms of the agreement are being met).

Resale should occur on the open market, with both parties to agree on a selling agent and terms of sale.

WPI should not seek to put additional resale conditions on the property, unless these are negotiated as part of an individual agreement.

Capital gains capture

WPI should aim as far as possible to ensure scheme participants receive an equal split of capital gains in line with the equity share of each participant.

Where there are additional shares of the capital gain to be captured by WPI, this should be clearly documented and explained in the initial program information.



The way in which capital gains arrangements are affected by additional equity share, improvements to the property by either party, and other individually negotiated arrangements should be documented and their treatment clearly communicated to residents.

The final design of any shared equity scheme will need to take into account a balancing of the risks and rewards associated with each of these parameters, and all those involved recognise that there has to be a win-win for all parties from the arrangement. While WPI has clearly identified a need, and women from the target group have clearly indicated their support for such a product, the ultimate test will be in persuading other stakeholders - such as governments, philanthropic bodies with shared interests, and financial institutions - of the benefits of being involved in such a scheme to make it work.

5 Next steps The way forward for this project will be determined by WPI, its project supporters and any other stakeholders who wish to get involved in the scheme design. However, based on the evidence compiled to date, the following is a proposed ‘next steps’ plan:

- WPI to undertake financial modelling of various options based on criteria outlined above, to determine the viability of various options;

- initiate contact with key financial institutions offering shared equity products in other jurisdictions to discuss the financial mechanisms used, in preparation for discussions with financial institutions that may back such a scheme by WPI in Victoria (IMB Building Society in the ACT and Bendigo and Adelaide Bank in Tasmania, as well as Chief Financial Officers in the relevant organisations in SA and WA.



Once a preferred scheme (or schemes) have been determined based on the outcomes of these two key steps, it is recommended that WPI:

- seek detailed program documentation (and any internal evaluations that have been completed) for the schemes identified in Section 7.3 of the literature as being worthy of further investigation;

- engage with representatives from the various stakeholder groups (including women from the interview process), to be involved in the ongoing discussions about the product design;

- develop draft program/product guidelines for presentation to various stakeholders to engage further discussion and feedback in refining the product;

- develop a package of materials for presentation to the Minister for Housing, Minister for Ageing, Treasurer and other key Parliamentarians to engage them in the discussion about housing solutions for older single women within the community;

- develop alliances with relevant peak body organisations in the women’s, housing, ageing, disability and community services sector to promote the concept of shared equity for this cohort and promote the outcomes of this study.



ABOUT THE ORGANISATION Women’s Property Initiatives (WPI), formerly Victorian Women’s Housing Association (VWHA) was established in 1996 to develop innovative mechanisms that provide a range of housing options for disadvantaged women and their children to address and prevent homelessness. WPI is a non-government, not-for-profit entity. It is women specific. It is a Registered Housing Provider with a proud and award-winning record for Leading Practice in the Community Housing Sector. Connections with local government and community agencies ensure tenants are supported in their housing and are able to form links in their local community. WPI is committed to creating more affordable housing, as it is the foundation for building a better life.

WPI’S MISSION To build a secure future for women and children in need by developing and providing good quality, long-term, affordable rental housing.

Contact Details Jeanette Large, CEO Women’s Property Initiatives L3/14 Collins Street, Melbourne Telephone: 03 9664 7800 Email: [email protected]

a home of one’s own: shared equity housing ... wpi shared...the preference expressed by most women...

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