How might a shared ownership national model affect social housing providers?
Before calling the general election, the government sought views on a national model for shared ownership that would make it easier for residents to increase their ownership share in their home.
Under the Right to Shared Ownership scheme, the initial stake for a shared ownership home would be reduced from 25% to 10%, and owners will be able to buy a share of their home in 1% increments. The lower numbers will make shared ownership more affordable for those on lower incomes.
While at first glance it would seem a useful way to help more people onto the property ladder, social housing providers have expressed concerns of the impact it could have on their ability to finance new homes.
Following on from the Conservatives’ triumph at the general election and the consultation now closed, what can we expect to see from this new approach to shared ownership?
Recap: How does shared ownership work?
Typically, shared ownership enables buyers to purchase a share of a home, the “initial stake” we mentioned above. Purchasers secure and pay a mortgage on the part that they own, and additionally a below-market-value rent on the remainder to the housing association, along with any service charge and ground rent.
They then have the option to buy more shares in their home over time, a process known as staircasing. The greater the share a tenant buys in their home, the less rent they pay to their housing association.
Shared ownership has become a popular tenure choice, and with good reason. A recent study by Leeds Building Society revealed that people buying a home in London through shared ownership could save more than £40,000 in just two years compared to renting. While London is often an extreme example, it follows that the model could be similarly attractive elsewhere.
What are the housing associations’ concerns?
Housing associations already use shared ownership within a mix of tenure options that can include social rent, affordable rent, private rent and outright ownership. Their main concern is that if future funding, particularly via Homes England’s strategic partnerships, is subject to the new Right to Shared Ownership being implemented, its very popularity may eat into their dependable stream of income through rent.
In turn, that could affect their ability to borrow and put some institutional investment – attracted by regular returns from long-term rents – at risk.
Representing social housing providers, the National Housing Federation is broadly in favour of the proposals, noting that shared ownership schemes are complex but nevertheless represent an attractive means for lower-income people and families to get onto the property ladder.
Prior to the general election being called, the government pledged to work with housing associations on a voluntary basis to determine what offer can be made to those in existing housing association properties, so that the new Right to Shared Ownership is extended as widely as possible.
This approach could work alongside the Government’s intention to extend geographically the housing association Right to Buy pilot, currently bring run in the Midlands.
With the smoke from the election still clearing, no clear indication has been given on timescales for implementation, nor how important adoption of the new Right to Shared Ownership model will be to secure Homes England funding. No doubt housing associations included in future Homes England strategic partnerships will be looking at the small print very carefully.
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