Since the 1980s Britain’s been a nation in love with home ownership. The Right to Buy, introduced by Margaret Thatcher’s Government, allowed council tenants to buy their homes for the first time, at a reduced price, and 1,885,580 properties have been sold between 1980 and 2014.
Thirty years later, the market is very different, Today’s appetite for home ownership is as strong as ever, but increasingly hard to satisfy – here in Bath & North East Somerset, a buyer would need to earn over £70k to get a mortgage for the average-priced home.
Extending the Right to Buy scheme to Housing Association properties promises to offer tenants a route into home ownership, and the blogosphere’s awash with views on this from every angle. How it will affect the supply of affordable homes, and the viability of Housing Associations, is much-debated. However I’m not going to add to that here; instead, I’m giving a bit of the limelight to another home ownership scheme that’s also a product of the 1980s: Shared Ownership.
Shared Ownership has stood the test of time and, right now, it’s enjoying a quiet revival. Nationally, sales saw a 55% increase from 6,248 in 2009/10 to 9,735 in 2012/13. At Curo, Shared Ownership’s enabled us to build new homes for nearly 500 customers over the past decade.
So what makes Shared Ownership so popular with buyers and housing associations alike? Here are five reasons for its enduring appeal:
1 Buy what you can, when you can
With Shared Ownership the customer buys what they can, purchasing a share in the property (the clue’s in the name) - usually 40-50% but sometimes as little as 25% - with a mortgage. They pay a reduced rent on the remainder. They then have the option to purchase more shares, in most cases up to 100%, as and when they can afford it – known as ‘staircasing’.
2 Lower deposits bring the first rung within reach
Shared Ownership properties can be bought with deposits as low as 5% (compare that with the 10-20% typical of conventional sales). Furthermore, that deposit is only applied to the share being bought, making the deposit considerably lower than buying on the open market. As an example, to buy a £170k home a Shared Ownership buyer would need to raise a deposit of £4,250 – assuming a 5% deposit on a typical 50% share. Buying the same home conventionally would require £17,000 for a 10% deposit, and considerably more for 20% deposit.
3 Lower repayments
Shared Ownership schemes make the overall cost more manageable – in fact, often cheaper than renting in the private sector. One reason is that the rent paid on the share not owned is usually well below market levels. Across England the average monthly costs of Shared Ownership are £668, compared with £784 for private renting.
4 Prioritising people in housing need
Shared Ownership is designed for people who couldn’t otherwise afford to buy a home. Existing housing association or council tenants are given priority and only households with an income of less than £60k are eligible (although it’s higher in London). Some developments will have other local eligibility criteria – for example living or working locally.
5 Protecting affordable housing
When a shared owner wants to sell their shares and move on, the housing association is given several weeks to try to find a buyer who couldn’t otherwise afford a home on the open market. That’s important because, unlike Right to Buy, it gives us the chance to make these homes available for the next family who want their chance at home ownership.
Shared Ownership is the daddy of affordable home ownership products, and there are others, tied together under the Help to Buy badge. These include Help to Buy Equity Loan, Help to Buy Mortgage Guarantee and two new schemes: the Help to Buy ISA and Starter Homes.
We support choice, and want to work with government locally and nationally to support people’s aspirations of owning their own home. Shared Ownership is a product that can offer a real, sustainable alternative to renting or Right To Buy.