The case for shared ownership is still strong
Kush Rawal considers the role that shared ownership can continue to play in a changing policy landscape, as the government introduces First Homes
The case for shared ownership is still strong, says @kushrawal1“Middle-income buyers, caught between extortionate London rents and the impossibility of saving up the necessary huge deposit to buy on the open market, are finally starting to realise that housing associations are here to help them too,” says @kushrawal1Camden Council recently decided that it won’t seek development of First Homes in the borough, and will instead require developers to provide a mix of social rent, London Affordable Rent and intermediate rent. The council’s rejection of the scheme, which gives first-time buyers a 30-50% reduction on the normal asking price, was based, it says, on the brutal reality that even with such a generous discount, most people needing homes in the borough would still be unable to buy.
“Housing intervention schemes come and go. Help to Buy is almost over, and who remembers the Starter Homes scheme, which in 2015 promised 200,000 new affordable homes? Shared ownership, on the other hand, is a reliable format that has been around since the 1980s and is here to stay”
Where councils reject First Homes, they should instead look to the most tried and tested way of helping lower-income households onto the housing ladder: shared ownership. Housing intervention schemes come and go. Help to Buy is almost over, and who remembers the Starter Homes scheme, which in 2015 promised 200,000 new affordable homes? Shared ownership, on the other hand, is a reliable format that has been around since the 1980s and is here to stay.
Yet, while the need for social rent continues to grow, given a choice, 80% of renters would prefer to buy. There is something permanent and reassuring about knowing that you own something, and in the troubled times we are living in, the human need to put down secure roots is stronger than ever.
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While shared-ownership buyers must still pay rent on part of their home, and are subject to the same restrictions and responsibilities as any other leaseholder, the tenure offers a sense of security that most forms of private renting can never match. I think of it as a way of bridging the gap between renting and an open-market purchase and, for many people, it really can lead to full homeownership.
“Middle-income buyers, caught between extortionate London rents and the impossibility of saving up the necessary huge deposit to buy on the open market, are finally starting to realise that housing associations are here to help them too”
In a metropolis such as London, where house prices are eye-wateringly high, the flexibility of shared ownership means they can make the scheme work to suit them – whether that’s living with their initial 25% share over the longer term that builds up equity for the future, or staircasing to increase shares over a period of time.
London property prices present a real difficulty. The Office for National Statistics recently revealed that the average London house price now stands at £507,000, which is three-quarters higher than the national average of £288,000, and well beyond the £420,000 limit for the First Homes scheme. Throw in rising interest rates, the war in Ukraine and the soaring cost of living, and would-be buyers, especially younger people, will find it even harder to buy a home, even with a well-paying job.
Middle-income buyers, caught between extortionate London rents and the impossibility of saving up the necessary huge deposit to buy on the open market, are finally starting to realise that housing associations are here to help them too.
In 2021, the average deposit for a first-time buyer in the UK was £52,935 – but in London this amount was more than double. By comparison, the average deposit paid by a SO Resi buyer in London is £27,000.
Crucially, shared ownership is available to buyers with a range of incomes. At SO Resi, the average national income of those buying a shared-ownership home through us is £36,000, demonstrating that shared ownership can help a much bigger pool of people than any past or current market-intervention schemes.
While affordable rental housing has a significant part to play, shared ownership is important as a tenure in that it truly reflects the government’s desire for levelling up. Across society, homeownership is a priority, and achieving a step towards that by using shared ownership gives people confidence in their future.
Shared ownership has had its challenges. But, as we collaborate with all operators in the property sector – public, private, commercial and residential – the product is evolving, and government changes to the shared-ownership model will almost certainly lead to a positive outcome for homebuyers.
Recent changes to the scheme, including increasing lease terms to 990 years and providing 10 years’ support with repairs and maintenance, are making it even more appealing. Renters don’t want to spend another decade saving for a deposit and would rather start their homeowning journey now.
For Londoners, in particular, shared ownership provides an option beyond a life in the rented sector. This, I believe, is important if we truly want to address the housing crisis in a holistic way, and something I’d love to discuss further with all stakeholders.
Kush Rawal is director of residential development at Metropolitan Thames Valley
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