The Evaluation of Low Cost Initiative for First Time Buyers (LIFT)

1. INTRODUCTION

About This Report

1.1 This report sets out the findings of an evaluation of the Scottish Government's Low Cost Initiative for First Time Buyers ( LIFT) schemes. The aim of LIFT is to help people on low to moderate incomes to buy a home, where this is sustainable for them. The Scottish Government commissioned ODS Consulting to undertake this evaluation in 2010.

Evaluation Scope

1.2 This evaluation assesses four of the five LIFT schemes:

• Shared ownership was first introduced in Scotland in 1983. RSLs can build or buy new homes for shared ownership, with a grant from the Scottish Government. The RSL markets the properties to priority purchasers who would otherwise be unable to afford to buy a home. The household can acquire an equity stake (of generally 25, 50 or 75 per cent). The purchaser pays their mortgage costs and a reduced rental charge depending on their equity stake to the RSL.
• GRO grant for owner occupation was introduced in Scotland in 1990 ¹. The Scottish Government (or local authority in the case of Glasgow and Edinburgh) provides GRO grants to private developers, housing trusts or non-registered housing associations, with the aim of providing low cost owner occupied housing. The aim is to allow developers to build property to stimulate the private housing market, create mixed communities or address local shortages in supply. There are three main types of GRO funded project:
  • projects to diversify the tenure of neighbourhoods;
  • projects to regenerate older urban communities; and
  • projects to provide affordable housing for owner occupation in pressured market areas, often rural communities.
• The New Supply Shared Equity ( NSSE) scheme (originally known as Homestake) was launched in September 2005. It was rebranded as part of LIFT in October 2007. It allows RSLs to build or buy new homes for sale on a shared equity basis. This means that purchasers can (generally) buy a majority stake of the equity, depending on their income. The remaining equity is held by the Scottish Government. The purchaser owns the property outright, but the interests of the Scottish Government are secured by a mortgage (or standard security) on the property. There are three types of NSSE scheme:
  • RSLs build new properties for sale on a shared equity basis;
  • RSLs purchase properties from private developers (at an appropriate discount) for onward shared equity sale; and
  • RSLs develop new properties for sale on a shared equity basis to existing owners whose homes are scheduled for demolition.
• The Open Market Shared Equity Pilot ( OMSEP) was originally set up in September 2005, covering Edinburgh and the Lothians. It ran as a pilot in these areas for over two years, and was then expanded to cover further areas in January 2008 and then the whole of Scotland in March 2009. The scheme operates on the same principles as the New Supply Shared Equity scheme. It allows eligible purchasers to acquire a property on the open market rather than through an RSL's newly built properties.

The scheme is administered locally by five RSLs ² - each with responsibility for certain parts of Scotland. Scottish Ministers hold the equity stake, but the RSLs enter into an agreement to enable them to act for Scottish Ministers. Owners then enter into an agreement with Scottish Ministers.

1.3 The review focuses on the operation of these schemes from 2005/06 to 2009/10. A detailed description of these schemes is included as Appendix 1.

1.4 The review does not include Rural Home Ownership Grants which were evaluated in 2006 ³. Nor does it consider the New Supply Shared Equity with Developers trial launched in 2010.

Evaluation Aims

1.5 This evaluation focuses on the outcomes achieved by the LIFT schemes. It looks specifically at six key areas:

• Meeting people's needs - are the schemes helping to meet needs?
• Allowing for mobility - are people able to move on when they need to?
• Affordability - are the schemes affordable for households?
• Additionality - what does LIFT add that would not otherwise have happened?
• Mixed communities - are the schemes contributing to creating and maintaining strong, sustainable, mixed communities?
• Value for money - do the schemes offer value for the public purse?

Methodology

1.6 A detailed note on our evaluation methodology is included as Appendix 2. The evaluation involved a mix of qualitative and quantitative research, including:

• Data analysis - We reviewed data collected by the Scottish Government. We found gaps in the availability of quantitative data in some areas which we have highlighted where relevant. We reviewed data including:
  • the database of sales logs with information collected from NSSE and OMSEP purchasers;
  • information held on the Scottish Government's Resource System ( TRS), providing details of schemes approved, including costs and subsidy levels;
  • a survey of RSLs conducted by the Scottish Government in April 2010 to establish the number and profile of shared ownership properties they own; and
  • survey information historically collected by GRO developers from house purchasers and collated as GRORE ( GRO Recording system).
• Interviews with purchasers - We undertook telephone interviews with 151 individuals who had purchased properties through one of the LIFT schemes. The sample was stratified by LIFT scheme, location and date purchased and included 58 NSSE purchasers, 64 OMSEP purchasers, 22 shared ownership purchasers and seven GRO purchasers. In view of the relatively low numbers of shared ownership and GRO purchasers, some caution is required in drawing conclusions from qualitative data.
• Stakeholder consultation - We held a consultation event with Scottish Government staff and undertook consultations with a range of other stakeholders, building on consultations already undertaken by the Scottish Government.

LIFT Characteristics

1.7 Between 2005/06 and 2009/10, a total of 7,268 properties were provided through LIFT. Almost half (44%) were OMSEP properties, a third NSSE, and smaller proportions GRO (12%) and shared ownership (11%). A third of the programme was delivered in 2009/10, largely due to an increase in the OMSEP programme as it was rolled out across Scotland.

1.8 The prevalence of LIFT schemes varies across Scotland. OMSEP was initially piloted in Edinburgh and the Lothians, so over two-thirds of purchases are in these areas. Since the roll out across Scotland, Glasgow, Highland and Aberdeen have also seen relatively high numbers of OMSEP purchases.

1.9 NSSE has been largely used in Highland, Edinburgh and Glasgow, with over half of purchases in these areas. GRO is most commonly used in west central Scotland, with a third of schemes in Glasgow. In addition, nearly a third of schemes have been developed in pressured market areas.

1.10 One third of shared ownership properties are in Glasgow, with significant use in Edinburgh and Perth and Kinross. Over half of shared ownership properties are houses, while flats are the predominant house type in the other schemes.

1.11 A detailed note on programme characteristics is included as Appendix 3.