The Truth About Shared Ownership
The updated national model for shared ownership in England underlines the role that shared ownership will play in the government’s £11.5bn Affordable Homes Programme.
Right now, there are just 157,000 shared-ownership homes in England, which works out at less than 1% of all households. But the government wants to significantly increase this, with a target of providing an additional 180,000 affordable homes over the next five years, almost half of which will be under this tenure.
Shared ownership has been around for more than 40 years, so clearly some renovation was overdue. The government’s updated model is an important step in levelling the playing field with open-market property ownership, and the fixes are relatively simple.
Changes include ultra-long lease terms of at least 990 years, a new 10-year period during which the landlord will contribute towards the cost of certain home repairs not met by warranties, and updated staircasing provisions making it easier and cheaper for shared owners to buy more of their home.
But the government needs to be more ambitious and it needs active landlords to change consumer perception of the product and provide this affordable home ownership offer at scale.
Myth 1: Shared ownership costs are too high
The government has acknowledged that shared ownership needs to be “fairer, more affordable, and more consumer-friendly”, following recent criticism from existing shared homeowners. This criticism reached fever pitch towards the end of last year, following reports of outrageous annual service charge increases, unfair lease terms as well as prohibitive conditions stifling owners’ ability to sell.
But while the critics pointed their finger at shared ownership, complaints mostly concerned substandard build quality, excessive service charges or the fallout from fire safety issues. Sadly, the truth is that these are issues that many regular homeowners also have to suffer – particularly among those owning leasehold flats.
Myth 2: Owners have fewer rights
Much of the criticism of shared ownership is centred on the belief that owning a lower percentage means having fewer rights – while still carrying all of the risks – compared to open-market leaseholders.
The new model recognises this concern and seeks to address the issues that have allowed this perception to grow. It’s hard to see why these improvements could not also be applied to existing shared-ownership arrangements. Here’s where existing landlords could step up and do the right thing.
Choosing to fix current shared ownership leases would make a massive difference to the lives of thousands of existing shared homeowners who feel future homeowners are being taken care of, while their own difficulties are being ignored. It would also significantly improve the public perception of the shared-ownership tenure.
Myth 3: The tenure has failed at home ownership
Another common misconception is that shared ownership as a tenure has failed because most homeowners never “staircase” their property to achieve 100% ownership. Again, the truth is a little different.
Every time a shared-ownership home is “staircased” to 100% and bought outright, another unit of affordable housing is lost to the private sector forever. If the long-term goal is to encourage more lower-income earners to step on to the housing ladder, we can’t afford the shares of these properties to be taken out of circulation.
Let’s not forget why shared ownership is so important to first-time buyers in the UK. Given the choice, the majority of private renters would prefer to be homeowners, and for many first-time buyers shared ownership remains their best option.
Instead of focusing on this misconception of shared ownership failure, we should encourage people to “resell” their shares to help others get on and move up the housing ladder. Promoting more shared-ownership units in settled, balanced communities would not only ensure the continued supply of affordable first homes for lower-income earners, but would also allow more homeowners to move up the property ladder using shared ownership as their families grow.
Myth 4: Reform is complete
If the government is serious about encouraging greater numbers of people into shared ownership, the next logical step is to significantly expand it to good-quality family houses with market-standard warranties, no fire safety headaches and absolutely no disproportionate service charges.
A shared-ownership programme on a similar scale to the outgoing Help To Buy Equity Loan scheme would not only offer better value to the public purse but also would significantly increase the supply of new family homes, enhance communities, and give more people the tenure security and potential for long-term wealth creation that home ownership can provide.
Nick McAlpine-Lee is head of shared ownership at QSix.
As featured in EG on 22nd April 2021 The truth about shared ownership | EG News (egi.co.uk)