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Housing associations may be better off selling their shared ownership stock to private investors so that they can concentrate on other forms of affordable housing, Savills has said.
In a paper released today, the real estate advisor claimed that demand for shared ownership could rocket 150% when Help to Buy ends in 2023.
The paper suggested that this could be the case if current demand for Help to Buy shifts to shared ownership, which it brands the “natural successor”.
Shared ownership has been criticised by some, while the public has remained confused about it as a tenure.
But Savills has noted that it has brought in £5.9bn of turnover for housing associations (HAs) since 2016.
While the paper – Spotlight: Shared Ownership – recognised that the tenure is “big money” for housing associations, it also pointed to the fact that the homes are “low yield” when it comes to rental income.
“To date, HAs have shown little interest in selling the retained equity in their shared ownership homes,” the paper said. “But the low-yield, low-risk nature of these income streams may be better suited to long-term income investors, such as pension funds, than HAs with development aspirations: especially if the vendor retains management of the scheme.”
A string of privately backed firms, including the world’s largest property investor Blackstone, have started investing in the affordable housing sector.
Others include Heylo, which operates in about 120 local authority areas, and real estate investment trust Residential Secure Income (ReSI).
In April ReSI agreed a £60m deal to buy 132 new build homes from Metropolitan Thames Valley, with plans to turn them into shared ownership homes.
Piers de Winton, a director in Savills’ residential capital markets team, said he believed that the deals are the “first of many such investments into this sector”.
He added: “This could drive opportunities for housing associations to unlock capital for more housing development, but does not negate the need for grant funding to help shelter the sector from increased exposure to fluctuations in the housing market.”
The paper also flagged that proposals announced in the 2018 Budget “pave the way” for private investors to fund the development of shared ownership homes and “retain the unsold equity… for the long term”.