Council to pilot 'Manchester Mortgage' scheme to tackle city's housing crisis

Published by Jon Land for 24dash.com in Housing and also in Local Government

Manchester City Council has announced pioneering plans to tackle the chronic shortage of affordable housing by launching a 'Manchester Mortgage' for first-time buyers.

The local authority has identified five sites in the city on which it aims to build nearly 250 homes for sale or rent through a pilot scheme.

As part of the plans, the council is seeking to create a mortgage guarantee scheme specifically for first-time buyers, which will underwrite up to 20 percent of the loan.

The Greater Manchester Pension Fund will pay for construction costs and, if successful, the programme could be rolled-out over 10 years.

According to the council, talks are currently underway with the Co-operative Bank and Manchester Building Society about the 'Manchester Mortgage' concept. If successful, it would mean homebuyers would be able to get a 95 percent mortgage on similar terms as a 75 percent one, without the need to put up a substantial deposit.

A report on the housing investment model reveals that Greater Manchester has seen a 76 percent recent reduction in housing completions in recent years, falling from 13,300 in 2007-08 to just over 3,000 in 2010-11.

"The number of sites under construction and contacts with developers indicates that this figure is not likely to increase significantly in the foreseeable future," the report adds.

Four sites owned by Manchester council and one by the Homes and Communities Agency have been identified for 244 new houses to be built under the pilot, which would see the local authority form a joint-venture with the pension fund for the scheme.

The council will invest the land, while the pension fund will pay for all construction costs. The plans for a Manchester mortgage would see the council team up with a High Street lender and underwrite up to a fifth of the loan for a fixed period of five years, which could rise to seven.

Councillor Paul Andrews, Manchester City Council's Executive Member for Neighbourhood Services, said: "Manchester's growing population and forecast economic growth in the city in future years mean we will continue to need more homes.

"But in the current economic climate, the levels of development being brought forward and the availability of mortgage finance are not keeping pace with the city's needs.

"That's why the council, working with Greater Manchester Pension Fund and the Homes and Communities Agency is looking to bring forward an innovative new model for investing in new housing which will help address this issue, and is also exploring the idea of supporting home-ownership through a mortgage guarantee scheme."