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.