Shared Ownership - a housing market fix?

Shared Ownership has given homes to around 180,000 families and it’s claimed that it offers a third way, an opportunity to house many more at a lower cost, another tenure that broadens the landlord offer. Some housing association websites go further and claim “It’s about getting your foot on the housing ladder. It’s a great alternative to renting and perfect if you can’t afford to buy a house outright.” Really? Whilst housing associations like selling them, the experiences of the occupiers can be quite different.

Higher entry costs, administrative charges, rents rising annually, plus the responsibility for all repairs can mean the worst of all worlds. Why do increasing numbers feel trapped in the tenure?

“It’s a step on the ladder”, yet Cambridge University found (2012) that over 12 years only 27,908 had staircased to 100%, and in many rural areas freehold ownership is expressly prohibited. They concluded that many shared owners simply cannot afford to buy their property in full, even on a gradual basis. They are deterred by associated costs, like valuation, and need better information about the process to understand the financial costs and potential gains. On top of this, research for the Council for Mortgage Lenders (October 2016) found that most existing lenders charge slightly higher interest rates on shared ownership mortgages to reflect the more onerous nature of lending to this sector and perceptions of higher risk.

“It’s perfect if you can’t afford a house outright”, but in April 2016 Savills reported that it really only makes financial sense in markets where affordability is most stretched and demand is highest - mainly in the South of England. Even then it is difficult to make shared ownership affordable to people in many of the highest value parts of London without selling very small initial shares and reducing the rent on the remainder below the standard 2.75%.

More worryingly, qualitative research in 2015 (Cowan et al) found that existing shared owners don’t know what they have bought in to. They often didn’t understand their lease and resented the level of service charge.

Do housing associations inform purchasers of the shared ownership possession judgment court Midland Heart v. Richardson in 2008? This case found that the failure of a leaseholder to pay the rent resulted in forfeiture and a loss of the increased equity.

Shared ownership is not a general answer for everyone, everywhere. It is not a fix to the broken housing market.

Ultimately, it comes down to choices in the application of scarce resources. We need to be careful what choices we promote.

Comments

Opinion: Labour won’t deliver 300,000 new homes

Following the debate about how many houses are needed in the UK, industry-expert Peter Brown directs our attention to a topic this argument could be overshadowing. The debate around how many new homes are needed misjudges the big issue – a new Labour government will struggle to increase housing completions for sale and for rent. Public services are failing, satisfaction rates are at record lows and waiting lists are soaring. Focusing on hospitals, schools and the courts, the IPPR claimed that public services won’t return to acceptable levels of quality until the 2030s and that the post-election government will inherit one of the most challenging contexts of any government since the Second World War. In October, at the Labour Party conference Keir Starmer’s pledged 1.5 million homes over the next parliament and conference was told that a Labour government will “deliver the biggest boost in affordable and social housing for a generation”. Yet despite a chronic housing shortage, a n

Slavery and the Origins of Social Housing

The horrific death of George Floyd in May 2020 and the subsequent Black Lives Matter movement shone a spotlight on systemic discrimination within organisations. Since then many have been examining their roots to identify whether they are founded on racism. Social housing has that same responsibility, and it may help us understand why racial discrimination persists in current activities and practices. The Transtlantic Slave Trade saw 12 - 12.5 million people transported from central and west Africa to the Americas where they were put to work growing crops such as sugar, cocoa, coffee, cotton and tobacco. As property, the people were considered merchandise or units of labour, and were sold at markets with other goods and services. These crops generated vast wealth for many traders in Europe, and from 1769 to 1853 Britain dominated. After the Slavery Abolition Act of 1833 the following decades saw slave trading gradually reduce. How could this atrocious period in our history be

Who is Gagging Tenants?

Khan is right - Tory voter ID plans gag the poorest. But it’s not just in London. Here's what we can do about it ' On New Years’ Eve, Sadiq Kahn warned that a new wave of hard right populism could see Susan Hall in London’s City Hall. And the new requirement for voter identification at the ballot box might accelerate this trend. He’s right, but it’s not just London that is affected. The voter identification requirements deliberately make it more difficult for those who traditionally support Labour, to vote. After the 2019 General Election, IPSOS estimated how voters voted. Their results came as no surprise, Labour had a 43 point lead among voters aged 18-24, but the biggest change was among 35-54 year olds, who saw a three point rise in the Conservatives’ vote share and 11 point fall for Labour. There was a gender gap, with the Conservatives ahead of Labour by 15 points among men, and by nine points among women. Among BME voters, Labour led the Conservatives by 64% to 20%,

How to issue a bond: nine tips for housing associations

Make time This path is so well trodden it is difficult to see over the sides of the trench. The legal documentation has developed over many years so there is virtually no opportunity to change it. In addition, investors need to know heir investment is secure and so satisfactory title must be demonstrated. Depending on the type of organisation and the quality of your records, this can be inordinately difficult. There is no shortcut, so start early. Do your homework The financial world is just that, a different world. Investors will know more about you than you do about them. Most are knowledgeable about housing associations and what they do not know, their in-house analysts will discover. Any credit rating (and Moody’s dominates the market) will be used to verify their analysis and may give comfort that their understanding is correct. And comfort gives confidence. Confidence can lead to a lower rate of interest – but don’t bank on it. Learn the language Coupons aren’t supermarket money-

Time catches up with Eric Pickles

Eric Pickles has been in the news again. He’s a busy man. Almost exactly a decade before his reappearance, I attended ‘Herefordshire 2020: A Vision for the County’, a half day conference in Hereford. It was a brave attempt to demonstrate how the private and public sectors could work together for a positive future. The star of the show was the Secretary of State for Communities and Local Government, who gave a bizarre and disturbing performance . The theme of Eric Pickles’ speech was that we need to get away from the central control of policy; we need to deregulate and stop the tick box mentality where there are regulations for everything. Make government officials with clipboards get a sense of perspective. On entering his department, he proudly told us, he gave his civil servants his three priorities; localism, localism and localism. “Localism will support growth and growth will support localism”. His confidence grew. To a Parish Councillor trying to achieve change he chided, “Stop

Strategic Planning

We are preparing our new corporate plan. With the end of the next Parliament likely to be in 2020, what is going to be different? What will have changed irrevocably; fundamental shifts that will transform how we view our world. With the Chancellor announcing that another £25bn of cuts is needed in the first two years after the election, there are four key trends that are evident. Public services are being dismembered. Assets are being transferred into the private sector rapidly and that is likely to be accelerated after the next election. At the end of 2013, 3,670 schools had become Academy schools. There are no national figures available, but the Local Authority accounts in the county where we work show that school buildings to the value of £40m have been transferred so far. In 2014, 56% of English secondary schools were academies. Primary schools, 11% and growing. In January 2014, it was estimated that 70% of contracts being awarded by the NHS were going to private companies. As

Homing in on the public sector

Published in The Guardian, 8th February 1995

Bonus Bonanza vs Benefit Squeeze: a Tale of Two Caps

October 2023 and the City of London sees the removal of the cap on bankers' bonuses - a few will now start to receive their Brexit Bonus. Yet this post-EU policy shift stands in stark contrast to the continued squeeze on low-income families through the Benefits Cap. While both measures involve limitations on income, they paint a worrying picture of a widening economic chasm. Proponents of the Bonus Cap lift cheer the return of London's financial clout. They argue that rainmakers deserve their golden parachutes, attracting talent and boosting the sector's competitiveness. But critics warn of a return to the casino culture that fuelled the 2008 financial crisis. Unfettered bonuses, they fear, could incentivise reckless risk-taking, leaving taxpayers on the hook for the next meltdown. Meanwhile, those on the breadline face a different kind of squeeze. The Benefits Cap, in place for a decade and applied to just under half a million households, has had a devastating effect .

Housing associations should freeze their rents now – or face tenant strikes

Housing association tenants are more likely to be suffering from social isolation, threats to employment and exposure to Covid-19 in poorly paid jobs. Few realise that they’re also facing a rent hike. This Monday, social landlords increased their rents by 2.7%. Little wonder that pressure is growing to suspend rent payments to ease financial pressures. In countries implementing a lockdown, those renting their home are becoming more vocal on the possibility of rent strikes. Pressure is mounting across the globe and there are demands in Boston and New York in the US, South Australia and Canada . In the UK, rent strikes are being discussed in numerous major cities, notably in Islington in the capital. In Cheltenham, estate agents shop windows have been graffitied with slogans such as “Can’t Pay? Don’t”. One area where there is a greater degree of influence over rents is in housing associations. Following nearly 50 years of subsidy, these are wealthy organisations. In England, their

Housing: creative solutions

Search This Blog