Affordable housing and negative equity

From looking at the details of affordable housing , it is very simple .

If the market value rises above the stated market value , when you sell the council get the clawback percentage of the profits.

If the market value of the AH falls below the stated market value but above the price paid , when you sell your home you shall only get the price paid.

If the market value falls below the ammount paid , when you sell your house , nothing is owed to the council , but you shall suffer a loss.

Scenario 4?

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Is this not rock solid? Did nobody see this before?

So basically the clawback gets eaten away as the value of the property comes down...

Nice!

Surely this will have to change given the state of the crisis?
Why should some people not only get a house at €100,000 below market value but in addition be sheltered from the negative equity that everyone else is facing.
Wouldn't be surprised to see the whole AH scheme shut down in the next budget. If you can't afford a house then rent! It's what they do everywhere else in the world.

I choose to buy an affordable house for this very reason, I got a house for 200K council said its value was 300K so a 33% clawback,

When you sell an affordable house before the end of claw back period you must first pay the bank, the remainder of the mortgage, and then the councils % of the sale (clawback) lyour allowed an allowance for the money you invested in the property i.e. fixtures and fittings.

so in my case I imagine the house is only worth the 200k I paid for it 2 years ago.

I owe 180K on mortgage so if i sold tomorrow I would owe bank

180K and council [200K - 20K(F&F) = 180K * 33%] 60K

So I would loose €80K the 20K I put into the F&F and the €60k claw back.

Its a 100% affordable housing estate and I think they set the market value too high, the clawback was not written into my contract so I guess one could negotiate.

i think that's incorrect.

if you bought for €200 and it's now only worth €200 then you owe the council nothing!

I am still confused!
I purchased my house at 200,000 in 2005, market value was 275,000, therefore a 27.27% clawback applies. I am not sure on the current valuation but lets say it is 250,000 and I sold at that price then I am liable to pay back 68,175 to the council plus the outstanding mortgage. My deposit of €15,000 and mortgage payments so far will be offset against this. However, if it sells at 220,00 then the clawback will be 59,994 and I will owe them 37,000 plus the outstanding mortgage? What about if the market value goes down to 205,000 then I will have to pay 55,000 plus the outstanding mortgage. I can't see how this is protection? The council told me that the % clawback remains the same unless the market value goes below 200,000. I don't get it at all.

vixter said:

I am still confused!
The council told me that the % clawback remains the same unless the market value goes below 200,000. I don't get it at all.

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Hmmm, that's weird. Find out who the head of the affordable housing dept is and ring them, better still write to them. Legislation says that if the market value at time of resale falls below the market value at the time you purchased then the clawback would be reduced. You should only owe the council anything over €200,000 eg: if you sell for 215,000 you would owe them 15k. Perhaps the person on the phone didn't know their stuff - they sometimes don't.

We're yet to see many examples of how it works in reality, but certainly this is what we were told when buying.

Hi,

check out this site..it explains it in scenario 4.



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I would have thought that negative equity was a real concern.. and will place huge burdens on councils as they lose out first.

If discounts of only 25% were applied then a market drop of >25% would put those people into negative equity... They are of course sheltered by the amount of the discount they first received, it is obviously far worse for people who purchased at the full un-discounted rate.

It seems we could be in for market drops of anywhere from 25% upwards, maybe 50% to 60% in some places.