homeownership Archives

The UK is in the midst of a housing crisis that isn’t going away anytime soon, with the pandemic only exacerbating this problem and leaving people struggling financially. Whilst we are seeing strong levels of first time buyers get onto the property ladder, simultaneously nearly 1 in 5 (18.7%) of households are occupied by private renters, with a further 16.7% of households occupied by social renters.[1] This is a huge proportion of the population, and whilst we are working to increase access to homeownership, it’s important that those who are currently renting are not left behind.

At MTVH, it is part of our DNA to support people at all levels and provide a quality home. Whilst we offer a dedicated shared ownership through our SO Resi brand, we also support those who are renting. For example, in London we offer London Living Rent which is a form of ‘try before you buy’ and allows Londoners to rent whilst building up savings to buy a home.

But let’s start with shared ownership.

Shared ownership is needed in society, as it provides an affordable opportunity for people to have access to a stable, well-located home. My personal belief in shared ownership is firmly rooted in my own experience – it’s not only how my wife and I were able to buy our first home, but also how my parents were able to get onto the property ladder after moving to the UK in the 1960s. My story is not unique and so many of my colleagues at MTVH have similar anecdotes about how shared ownership has given them the security of homeownership, which we know helps to open other doors to improve overall quality of life.

Our dedicated shared ownership brand SO Resi recently published a research report in conjunction with Cambridge University that looked at the shared ownership market in 2020. Perhaps most significantly, our research showed that since 2015/16, the number of shared ownership completions per year has increased from just 4,084 to 17,021. But it’s important to understand why shared ownership is taking centre stage for young buyers.

A combination of staggering house price growth, increasingly high deposits and a lack of lower loan to value mortgage options has led to aspiring homeowners moving away from the open market and utilising government products such as shared ownership. Whilst the government’s new 95% mortgages may work to address some of these problems, for many people a five per cent deposit on the open market is still out of reach.

Our research also revealed data sets surrounding the proportion of those who staircase each year. There is a misconception that those in shared ownership homes will never staircase, but our research shows that on average between 2-3% of shared owners staircase to 100% ownership each year. Staircasing isn’t possible for all shared owners, but the flexibility of shared ownership means individuals can make the scheme work to suit them – whether that’s living with a 25% ownership or working to increase your shares over a period of time.

Shared ownership has been around for decades, and the government’s plans to amend the product simultaneously presents both opportunities and concerns. Many of those who took part in our research specifically raised concerns around changes that will allow buyers to purchase a minimum 10% share rather than the current minimum of 25%. Housing providers will also be responsible for repairs for 10 years, leading to an increased financial commitment from providers.

There is no denying that these changes are advantageous for the buyer, and will open the doors even wider to homeownership. However, those surveyed believe the shift in responsibility of repairs will reduce the supply of homes that they are able to build. If the level of affordable homes available drops, this will worsen our current housing crisis and plunge more people into difficult situations when it comes to finding a home.

We know that a good home and environment are key in ensuring that everyone has the chance to live well. But homeownership isn’t possible for everyone – and whilst shared ownership increases access, there are still those who rely long-term on renting, whether privately or through a social housing provider.

To solve the housing crisis, we need to offer solutions that deal with different challenges, which vary as people need homes to rent and to buy. Instead of pitting one tenure against another, we need to collaborate and support those who do depend on the rented sector. Rent prices are rising and this is leaving a generation of people locked in paying high rent prices with no possibility of saving, either for a house deposit or to improve their quality of life.

Long-term, we need some clarity on solving the housing crisis as simply launching temporary schemes isn’t enough anymore – we need real policies that tackle the problems faced by young people today to ensure they can continue to get onto the property ladder at an affordable price in their preferred area.

In the current economic climate, shared ownership demonstrates its importance by supporting people to grow and start their families, put down roots and enjoy the benefits of homeownership without having to find the astronomical deposits required to buy on the open market. Like any product, shared ownership isn’t perfect, nor is it the single solution to the housing crisis, but it is an incredibly important offering that bridges the gap between renting and full ownership.

Kush Rawal

Kush is the Director of Residential Investment at Metropolitan Thames Valley Housing

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[1] https://www.statista.com/statistics/286444/england-number-of-private-rented-households/

Glossy ads present a rosy picture of shared ownership. But some first-time buyers are discovering the reality doesn’t live up to the rhetoric. Why are shared owners demanding greater transparency from housing associations and the National Housing Federation? This article breaks down some home truths about shared ownership, and what one housing campaigner is doing about it.

Shared ownership isn’t shared and it isn’t ownership. It’s arguable to what degree it constitutes affordable housing. Yet housing associations market this complex tenure with the same degree of levity with which a company might sell, say, comic books or whoopee cushions. The National Housing Federation (Nat Fed) marketing campaign promotes shared ownership schemes with slogans including: ‘Painting every wall luminous green’ and ‘Cooking in your pants on Sundays’.

My younger self would have enjoyed the jocular tone of Nat Fed advertising. My older self thinks the campaign does home buyers a great dis-service by failing to live up to laudable claims of ‘myth busting’ and ‘explaining what shared ownership means’. Taking out a mortgage could be one of the most expensive decisions first-time buyers will ever make. And, if they get it wrong, the consequences can be catastrophic.

An advertorial published during Shared Ownership Week 2020 included a quote from first-time buyer, Laura: “I think a lot of people don’t understand it, they think there’s a catch. There isn’t.” And there’s the problem in a nutshell… It’s perhaps a moot point exactly what constitutes a ‘catch’ but there’s no shortage of possibilities.

For a start, shared owners are often surprised to discover they don’t ‘own’ their home in any meaningful sense. The ‘part buy, part rent’ slogan is widely used in promoting shared ownership. But legal experts suggest that such terminology is potentially misleading as it misrepresents the legal form of the tenure. One law firm, Walker Morris (in a 2017 article ‘Shared Ownership: Risks and Rewards for Lenders’) say: ‘It is incorrect, and therefore misleading and potentially an offence in contravention of the Consumer Protection from Unfair Trading Regulations (2008) for housing associations, landlords, developers or lenders to advertise or refer to shared ownership schemes as ‘part buy, part rent’, or indeed by using any other terminology or slogan which suggests that the customer purchases anything other than an assured tenancy leasehold interest at any time prior to the 100% staircasing stage’.

The Nat Fed campaign appears to confuse a marketing strategy (defining ‘it’s yours’ as ‘not sharing’) with the legal reality (it’s not ‘yours’ and there are therefore risks of forfeiture, possession, and loss of or reduction in equity).

Shared ownership isn’t even that good an investment. The Homes England model contract specified a minimum lease length of 99 years for flats up until 2016, and 125 years thereafter. Shared owners have been shocked to discover a need for expensive lease extensions with no benefit other than to maintain the market value of their home. And, of course, some simply can’t afford to do so, and find themselves in possession of a devaluing asset. The London Mayor recently addressed this issue by unveiling a plan to ensure all shared ownership homes built in the capital as part of the new Affordable Homes Programme are sold with a 999-year lease as standard. But this doesn’t address problems faced outside London and also by legacy owners, many stranded with an increasingly unsuitable and undesirable housing product.

It gets worse. Shared owners have no statutory right to lease extension unless they’ve staircased to 100%. I contacted Mike Shone, Homes England’s Monitoring and Reporting Manager, in 2019 to ask what percentage of shared owners achieve full staircasing. The response: ‘Unfortunately this is not something that is recorded by Homes England or the Regulator of Social Housing’. But Parliamentary Research briefing CBP-8828 reports: ‘The increasing costs of shared ownership have made it more challenging for households to progress to full ownership. Around 4,000 households staircased to 100% ownership in 2018/19, equivalent to 2.3% of all shared-equity homes owned by housing associations’.

What about much vaunted affordability claims? These appear reliant on comparison with private rental or open market purchases over a relatively short timescale. They don’t factor in whole life cycle costs such as lease extension; rents that increase annually regardless of whether average market rents are increasing, static, or even declining; and full 100% liability for service and management charges regardless of the % share purchased. (Fire safety remediation costs are too complex to go into here but are self-evidently a source of huge emotional and financial distress for affected shared owners).

Housing sector professionals appear to believe that lawyers should provide information on such issues. Wanda Goldvag, chair of the Leasehold Advisory Service (LEASE), interviewed on Radio 4’s consumer affairs programme You and Yours in January 2019 said: “lawyers have an absolute duty to explain complex clauses to people”.

But it’s hard to understand such reliance on lawyers. Research funded by the Leverhulme Trust (Exploring experiences of shared ownership, 2015) found that: ‘Modern conveyancing practice is not equipped to provide information to buyers about the specifics of shared ownership leases. […] That increases the onus on providers to provide relevant, simple and clear information to buyers’.

Shared ownership is pitched as the ‘affordable’ route into housing. Marketing rhetoric implies that ALL buyers benefit from shared ownership as a ‘step onto the housing ladder’. But this is over-simplistic and fails to recognise that the wider housing market creates both winners and losers.

Moreover, a rapidly rising property market will benefit buyers who interpret ‘a step onto the housing ladder’ as obtaining a first property as an investment generating a gain to help buy their next property, but will disadvantage buyers who interpret it as an opportunity to purchase their forever home in staircasing instalments (the original intention of the scheme per the 1979 Conservative election manifesto). And the converse is equally true.

Whilst risks and opportunities arising from property markets are clearly not restricted to first-time buyers purchasing shared ownership homes, this demographic is particularly vulnerable to financial difficulties and poor outcomes arising from inadequate information and advice.

Housing associations have a dilemma; too much transparency could compromise achievement of sales targets. It’s pragmatic to assume housing associations will continue to place emphasis on short-term benefits to shift units. And, unless there are fundamental changes to the shared ownership model, many shared owners will continue to discover that shared ownership isn’t anywhere near as affordable as those glossy ads suggest.

Could the shared ownership model be improved? Could it be made more affordable? To some degree perhaps… A sector-wide commitment to cease taking advantage of the 2019 Zucconi precedent (a discretionary change in the method for calculating leasehold extension premiums which creates a windfall for housing associations, but pushes lease extension even further out of reach for many shared owners) would help some. Widespread adoption of the London Mayor’s proposal for 999-year leases as standard would render lease extension costs obsolete (except for increasingly disadvantaged legacy owners, of course!).

But here’s the rub… housing associations’ overall funding model has historically depended in part on profits arising from shared ownership schemes (for example, the receipts from staircasing shares sold at current market value rather than original market value) to generate cross-subsidy for social rented homes. So the financial interests of individual shared owners are directly in conflict with the wider objectives of housing associations. Shared owners are discovering they are, in many respects, the benefactors of affordable housing rather than the recipients they thought they were. It’s complicated!

If I had to choose one key policy reform…? “To stop using the term affordable for housing that isn’t” (a phrase I’ve stolen from Tom Murtha). To stop using the term ‘shared’ for housing that isn’t. And to stop using the term ‘ownership’ for housing that isn’t. Though that may not happen anytime soon. First-time buyers, shared owners and leaseholders deserve better. Which is why I’ve created a Crowdfunder project to raise funds for an independent shared ownership website with comprehensive information, analysis, and signposting to sources of professional expertise and advice. The Crowdfunder ends at 2.52pm on 9th February 2021.

Click here: https://www.crowdfunder.co.uk/shared-ownership-resources

Sue Phillips

Sue Phillips is an accountant (ACCA) who spent much of her career working in the not-for-profit sector. She is now semi-retired. She says she never expected to become a housing campaigner!

She purchased her own flat via a shared ownership scheme in 1999, staircased to 100% in 2013, and completed a lease extension in 2020.

Her own experience of shared ownership led her to start campaigning in 2019, with a particular focus on greater transparency on potential long-term costs and risks of shared ownership. She campaigns under the moniker Shared Ownership Resources.

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