By Colin Wiles, housing consultant.
The big story from the publication of the affordable homes programme last week was the boost for shared ownership.
The government says the £11.5bn programme will fund up to 180,000 homes by 2026, with half going to affordable and social rent and half to various ownership schemes. This is “the highest single funding commitment to affordable housing in a decade” says the MHCLG press release. Well, up to a point. It depends, of course, how you define affordable housing.
There appears to be no detail on how much social rent will be funded – and, as we all know, affordable rent is not very affordable in many parts of the country. As usual the programme reflects the government’s obsession with homeownership (something I wrote about in December) with the new model for shared ownership being the stand-out policy change.
This will cut the initial purchase share from 25% to 10% and allow staircasing by 1% increments instead of the current 10%. It will also require providers, rather than owners, to pay for maintenance and repairs during the first ten years. This will apply to all newbuilds and there will also be a “right to shared ownership” for all rented homes. I also covered these issues in my blog last year. The government estimates that 300,000 new households will be able to access the model as a result of these changes.
Sector leaders have expressed concern about the impact this will have on the viability of shared ownership schemes. Shifting repair responsibilities to providers will presumably mean increases in rents or service charges and it is not clear how this will improve the
affordability of the product.
As for the staircasing changes, in 2014 I wrote a report for Gateway Housing which involved a survey of their shared owners. It found that one of the main blockages to staircasing was the fees involved in buying additional shares. If you have to employ a solicitor and obtain a valuation each time it starts to become expensive. Good news for solicitors and surveyors but not for owners. The government model appears to address this by promising “heavily reduced fees for up to 15 years”.
This will allow an estimated valuation to be carried out at each step up the staircase, based on the original sale price, without the need for an RICS surveyor. Landlords will also be prohibited from charging administration fees on this staircasing process, but, once again, it is not clear how these additional administrative costs will be absorbed by providers, nor whether owners will need to involve a solicitor at each staircasing moment.
At the launch of my Gateway report David Orr described shared ownership as “the tenure that refuses to die”. It has been beset by bad press in recent years and many people are still vague about how it works.
Some people still think that it means sharing your home with others. There is certainly a need to make it simpler and more accessible, but my report noted that providers often know less about their shared owners than their other tenants, and have fewer interactions with them. It also noted that mobility within the shared ownership sector is less than in the owner-occupied sector as a whole.
If these changes do lead to an increase in people staircasing upwards and into full ownership, bringing in new people at the bottom, so much the better. That will also bring in valuable capital receipts for providers.
But I worry that this is more about political expediency than hard housing reality. In addition, there could be a major correction in the housing market next year so many first-time buyers, including shared owners, could end up in negative equity. If I was in my twenties, I am not sure I would be committing to a mortgage just now.
I would wait for at least nine months to see how the market changes. There is, of course, an oven-ready alternative to this homeownership obsession. By following the SHOUT model, we could invest in 100,000 social rented homes a year.
Not only would this provide much-needed affordable homes, but it would save the Treasury billions of pounds in the long run and would, over the course of ten or 20 years, bring the
ratio between incomes and house prices down to an affordable level.
That means thousands of younger people would be able to buy on the open market without the need for the stepping stone of shared ownership. But that is perhaps a debate for another time and place, and another blog.