New restrictions introduced by Government on sale of affordable housing

New restrictions have been introduced on the sale of affordable housing which will "mean that a greater amount of profits will flow back to the Government".

A statement from the Ministry of Housing reads:

As previously announced by the Minister for Housing, changes that have been implemented to the terms of the underleases of the new affordable housing developments going forward will put an end to speculation for investment and undue profits on the subsequent sales of such housing and these will be curtailed with the introduction of strict conditions of resale.

The Government is committed to the continued provision of high quality affordable housing for residents of Gibraltar who are eligible to be on the Housing Scheme, with the intention of owner occupation and of these being homes for life, as opposed to anyone taking advantage of these affordable prices and purchasing them for investment purposes.

As such, and in order to provide these homes, there is a large element of public subsidy both in the land and in the construction. Taking Hassan Centenary Terraces and Bob Peliza Mews as examples, the development enjoys co-ownership opportunities for purchasers, the properties are being sold at cost with no developer’s profit and the prices do not take provision for the value of the land so as to ensure the lowest possible price.

Accordingly, and in recognition that Her Majesty’s Government of Gibraltar is undertaking this project to enable purchasers to acquire a home in which to live, it is important that speculation not be permitted.

The major changes that have been introduced in the new terms are as follows:

1. Resales will not be permitted within the first three years from the date of completion by the initial purchaser with the exception of genuine and compelling circumstances, and in which case HMGOG would be entitled to retain up to 75% of any profit made on such a sale.

2. After the three year period, where a property is owned on a 100% basis for a period of at least 2 years prior to a first resale, HMGOG is entitled to a share of the profit on a sliding scale from the date of completion. The earlier the period of resale, the higher the element of profit that is retained by the Government. Significantly, the scale will be increased to a period of 13 years where a 10% of the profit will be retained.

3. In cases where the property is owned on a co-ownership basis or where it has not been owned on a 100% basis for a period of at least two years prior to the first resale, HMGOG will allow the resale subject to the following conditions:
• HMGOG must agree the price;
• HMGOG has the first option to purchase the property at the proposed resale price; &
• HMGOG is entitled to a share of the resale profit on a sliding scale depending on
period since completion.

4. The payment of any percentage of profit will apply to the first resale by the initial purchaser.

5. Where the property is purchased on a co-ownership basis, subsequent purchasers who do not purchase 100%, will still have to purchase a percentage of HMGOG’s share up to the third resale.

6. Resales will be limited to those eligible to satisfy the provisions of the Housing Allocation Scheme.

7. Resale restrictions will continue to apply regardless of whether all or any of the remaining share held by HMGOG is subsequently purchased by a home owner.

8. There will be anti avoidance provisions to mitigate any avoidance of the profit sharing arrangements that are described above.

Minister for Housing, the Hon Samantha Sacramento MP, said: “We have seen how purchasers of affordable homes have in the past benefitted, at the expense of the tax payer,when these have been resold at much higher prices. These revised sale restrictions, effective immediately, are much
stricter than those found in the previous affordable housing estates, particularly with regard to the profit element, which those who are selling will be able to retain.

“It was fundamental,therefore,that these new restrictions be introduced to curb the abuse and the speculation which we have already witnessed.

“Importantly, these restrictions still permit resales, albeit limiting the profit which can be made on resale, and at each stage of the resale, particularly in the earlier years.

“The bottom line is that anyone who purchases these homes, and who should be doing so to live in them as opposed to having them purchased for investment, should not be in any way concerned about with these new restrictions. If people don’t want to buy on account of the of the resale restrictions, then they were not purchasing for the right reasons.

“We are of course mindful that some families may grow after the purchase of these properties.These homes are intended to be homes for life. We are already making provision for growth by allowing families the possibility of acquiring an extra bedroom so there will be no need to move away. However, in the event that even further space is required over the years, upgrading to a larger property in an affordable housing estate will be easier because the resale profit element of the latter will be controlled as there will be a lack of a profit margin by the vendor. Furthermore, these restrictions will mean that a greater amount of profits will flow back to HMGoG and this will in turn facilitate the development of further affordable homes such as Europort Avenue.

“These restrictions have not been applied to existing estates we built such as Beach View Terraces and Mons Calpe Mews as we relied on the previous underlease documents that had been used for other affordable homes.

“I very much welcome these provisions as they now protect the tax payer from people not to take advantage from owning an affordable home.

“This unconscionable practice has now been stopped in all the new affordable housing developments going forward.”

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