Shared ownership has its benefits, but it is not the panacea for the country’s housing crisis.
Home ownership is becoming an ever-distant dream. Nowhere is this seen more acutely than in London where exorbitant house prices mean exorbitant private rents are often considered the only viable option. So those with the opportunity to get on the property ladder through the somewhat elusive shared ownership route are the lucky ones, right?
Well let us explore that further.
You can get a shared ownership home through a housing association. You buy a share of your home (between 25% – soon to be lowered to 10% – and 75%) and pay rent to the housing association on the rest.
Northern Ireland and Scotland set their own criteria, but elsewhere in the UK you can buy a home under this scheme if your household earns £80,000 a year or less (capped at £90,000 in London) and are either a first-time buyer, someone who used to own a home but can’t afford to buy one now, or are an existing shared owner.
It is true, there certainly are benefits to this arrangement. Shared owners have more stability than those renting. They are not so much at the mercy of a landlord who could evict them almost immediately under section 60. Greater permanency is met with greater control. Shared owners can paint a wall or put up a shelf without first seeking permission from a reluctant landlord.
Then there is the cost. Shared ownership can form a happy medium for those wishing to leave the private rented sector but who cannot yet meet the stratospheric costs of full ownership. This is again particularly true in London where the average house price is more than double that of the national average.
But just because this can be the more affordable option, it does not automatically mean it’s affordable by anyone’s definition. Which is where we begin to uncover the flaws of this scheme.
In London, shared ownership is increasingly expensive. An investigation by the London Assembly Housing Committee found that the incomes of new shared owners, and the deposits they must put down to buy their share, are generally higher than those of the average earner.
Affordability is called further into question when you compare what a share in a London property will get you with what you could afford in a part of the country with lower house prices. For example, a 30% share on a two-bed flat in Wandsworth could get you full ownership of a four-bed semi-detached in Wigan.
The purse strings must be loosened again when service chargers are factored in. Service charge estimates given to prospective shared owners often increase following completion. Residents can be presented with service charge statements a chartered accountant would have trouble understanding.
Any credit can soon turn out to be a false credit because the managing company has forgotten to charge for building insurance and service charge bills can increase each year because the faulty lift requires additional maintenance.
This is all compounded by the expense shared owners must take on to extend their lease, problems with poor maintenance of properties, and the difficulties in staircasing to full ownership. Moreover, residents continually report that Housing Associations are unresponsive to their queries and concerns.
With so many pitfalls, we might ask why shared ownership is considered the preferred option for many people. There will always be the lure of home ownership, but there is more to it than that.
Most shared owners are first-time buyers. Many have no experience of buying property, nor the financial and administrative burdens of shared ownership. The Assembly’s Housing Committee found that many reported not knowing what exactly they were getting into.
For those who have already undergone that process, some say the model still is not working for them, that they had not been given enough information when buying and that they’re now lumbered with spiralling costs.
So, what is to be done? Well, the positive news is that the scheme is not beyond repair. With the right political will, there are actions we can take today to make it work for those already in shared ownership, as well as prospective shared owners.
A requirement on housing associations to report on service charges and maintenance costs for every block of shared ownership homes is an essential first step, because the biggest hindrances to making these fairer are the lack of transparency and scrutiny.
This should be met with a requirement on housing associations to set out for prospective buyers, in one clear document, an accurate description of what shared ownership entails – and costs – in reality. Clear guidance should also be provided on routes for redress for those who feel they do not receive a decent enough service for the amount they fork out in service charges.
To understand the value of shared ownership in helping first-time buyers successfully get a foot on – and then move up – the property ladder, housing associations should be required to publish annually the types of tenure those that sell their shared ownership property are moving into, alongside staircasing sales.
Given the call upon affordable housing resource that shared ownership necessitates, this is the very least we should expect from those organisations who benefit. And on a similar note, the Government should reverse their decision to make it easier for shared ownership properties to be sold on the open market and work instead to ensure they remain affordable housing stock.
Labour’s role is, and always will be, to level the playing field. Shared ownership is a good place to start to explore how that might look under a future Labour government. Overhauling the scheme to make it more accessible to the many is one option.
But of course, there is always the alternative of moving away from this type of model in favour of more affordable housing options accessible to those on lower and middle incomes.
Sadiq Khan’s action in delivering record levels of affordable housing, driving up council house building in the capital and implementing the London Living Rent are shining examples of what can be achieved when Labour is at the helm. Now, just imagine what could be achieved under a Labour Government.