Innovation Exchange

Part Exchange Plus (Px Plus)

Introduction

Key activities

Benefits and impacts

Learning

South Lanarkshire Council’s innovative PX Plus purchase scheme links the purchase of good quality RTB property with private developer part exchange sales incentives for new build.  The scheme provides the dual benefit of returning high demand RTB homes to the Council’s rented stock with minimal levels of grant subsidy, while at the same time facilitating the new build sales.

 

 

Theme: Housing and Regeneration

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The Council set criteria for priority house types, sizes and areas, based on analysis of housing need and demand in our pressured areas.  The scheme was advertised inviting expressions of interest from all developers who had acquired ex RTB stock as part of their part exchange sales incentives.  Developers offer eligible properties to the Council at a discount for a “fast tracked” sale.

 

The process is resource efficient as it can be delivered through the existing processes for property purchase and part exchange sales initiatives providing clear benefits to both public and private partners.  Its simplicity means it can be implemented with immediate effect and deliver quick outcomes in terms of meeting housing need and providing support to the housing construction sector.

As well as returning a high demand property to the Council’s stock, a key objective of the scheme was to help increase sales of private sector new build to support the housing construction sector.

 

Since its introduction the outputs have included:

  • 58 ex RTB returned to Council stock at a total cost of £3.7m
  • Average cost per unit £63,793
  • 58 applicants off the waiting list
  • 58 new build homes sold

 

Purchasing suitable RTB properties at the “quick sale” discount provides cost benefits in terms of public subsidy requirement, as well as easing developer’s cash flows and increasing part exchange sales capacity.

 

Wider benefits include prevention of empty homes through reduced numbers of part exchange properties remaining empty on the open market, a key focus for the Scottish Government in making best use of existing supply.

The scheme works in market conditions where there is a reasonable step up between the market value of ex RTB property and new build sales prices.  This is very much dependant on local housing market conditions and the type of new build housing development.

 

Void re-let costs were higher than first anticipated however, the higher repair cost was generally offset by lower purchase costs as the condition of the ex RTB property was reflected in the market value.

 

As the housing market conditions improve, the discount for fast track sale achieved may not be sustainable.  However, with the aid of Scottish Government grant funding for buybacks, the scheme still provides a very cost effective way of increasing supply of affordable rented housing in pressured areas.

 

More recently, the availability of Help to Buy has impacted on the uptake of the initiative.

 

While South Lanarkshire limited the scheme to ex RTB properties, in some areas it may be appropriate to extend the scheme to non ex RTB property types where there is a need.

 

Contact details:

To find out more about this case study, please contact:

 

Lori Darroch

Regeneration and Development Manager

South Lanarkshire Council

01698 454588

Case study added to site: June 2016

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