Designated Protected Areas – Updated HCA Guidance Note

16 February, 2017

The Homes and Communities Agency has issued an updated Guidance Note on Designated Protected Areas (DPAs). It does not mark any change in Government policy on DPAs but is a useful reminder. In this note, we mention the main points but please also see the Guidance Note

Background

Sections 300-302 of the Housing and Regeneration Act 2008 came into force on 7 September 2009 to address concerns over the early enfranchisement, and thus disappearance into the private sector, of shared ownership housing stock constructed under grant funded schemes.

Shared ownership schemes allow purchasers to buy an initial share in a home of at least 25% and pay discounted rent on the remaining sum.  A lease is granted upon initial purchase and leaseholders can subsequently buy further equity shares (a process known as staircasing) until the property is owned outright.

Shared ownership scheme policy can be different in areas where affordable housing is hard to replace, particularly rural areas.  Such areas can be identified as Designated Protected Areas (DPAs) under the Housing (Right to Enfranchise) (Designated Protected Areas) (England) Order 2009. DPAs made under this Order make it less likely that shared ownership homes in England will be lost to the private sector.

Designated Protected Areas for Shared Ownership Homes- New Government Explanatory Note issued 9 January 2017  

In order to combat the loss of homes out of shared ownership schemes, landlords within DPAs are either required to cap equitable ownership of homes at 80% or require the homes to be sold back to them once full ownership is reached through the insertion of a clause within the lease.  If the landlord is unable to buy back the property, an alternative registered provider may be nominated, or the owner will be able to sell the property on the open market after a certain period of time has passed (usually 6 months).  There is also the further possibility that the Homes and Communities Agency will positively consider the provision of funding to help re-purchase the house if the landlord cannot source such funds.

Conclusion

Where shared ownership schemes fall within Designated Protected Areas, developers need to make sure that their shared ownership leases contain the right provisions to make them DPA standard and they need to be aware of their on-going DPA obligations.

Please bear in mind that local planning authorities in DPAs do have the right to waive the DPA restrictions for new developments in certain circumstances – and the fact that the scheme might not be viable if the DPA restrictions apply to it is an important factor.