Shared ownership’s time has come so here’s six ideas to help home buyers in the high cost capital
There is an iconic image of the Patterson family stood outside their house with Margaret Thatcher. The first people to purchase their home under Right to Buy in 1980, Thatcher delivered the deeds herself.
Right to Buy is back in the news, with the government striking an agreement to extend the scheme to housing association tenants. Unlike the 1980s, both the housing association home and the high value council house sold to fund the discounts for the tenants will be replaced. In London, there is a strong consensus that more than one replacement home could be built, providing an important boost to house-building. It also helps address a decade-long decline in home ownership, with fewer than half of Londoners now owner occupiers.
But what if you’re not a social tenant? As a new report by the Centre for London argues today, there is a need for more intermediate homes for people who want to buy but who are locked out due to high prices. The government is introducing Starter Homes, targeted at first time buyers with a 20 per cent discount. This should sit alongside other forms of mid-market housing, notably shared ownership, which allows households to buy a share, benefit from any value increase, and pay rent on the rest.
Shared ownership’s time has arguably come. Although it’s been around since the 1980s, it represents less than 2 per cent of London’s stock. This is because such intermediate homes have for too long been viewed by some as a side-show to traditional affordable rented housing. But that’s changing. As the Centre for London report concludes, intermediate housing is a brilliant opportunity for Londoners to buy in a high value city.
That’s why the mayor set a punchy target to help 250,000 Londoners over the next decade through intermediate homes – a five-fold increase – with 52,000 Londoners benefiting already. Enormous efforts have been made at City Hall to promote shared ownership. Importantly, eligibility has been widened so that all Londoners, including those outside the public sector, can benefit. So if London needs more of these homes, how do we make it happen? Here are six ideas.
The first challenge is the products – there are too many. Nearly 70 at the last count, this needs to be reduced to address confusion among planners, lenders and consumers alike. Shared ownership should be simplified – along the line of the model lease promoted by the GLA. Second is a marketing makeover. There should be a single brand, something the mayor has sought to promote in London through First Steps and a twice-yearly homes show attracting thousands of Londoners.
Next are the lenders. Since its inception, shared ownership defaults have been infinitesimal. Yet some banks still treat it as sub-prime. Government should press them to support intermediate products as they have small businesses. Fourth, more private providers should be encouraged to enter the market – it shouldn’t be the preserve of housing associations. This would also encourage institutional investors, who are already eyeing up the build-to-rent market.
The fifth challenge is liquidity. Options for Londoners to move within the intermediate market can be limited. The GLA is piloting share trading between families, which underscores the importance of boroughs resisting artificial planning restrictions on the homes. The final thought is proposed by the Centre for London, which is whether there could be an employer-backed shared ownership model, supporting staff and helping to retain talent. It’s an interesting notion and worth exploring.
This gets to the heart of London’s need to ensure it provides enough mid-market homes, supporting people experiencing higher rents but who aren’t a priority for traditional affordable housing. Build-to-rent is an important part of the mix. But in some boroughs, shared ownership is more affordable than renting. Indeed, the latest data shows how well calibrated these products are to London salaries – typical buyers earnt £37,000 last year, bang on the London average. So here’s something exciting to expand – let’s just think of a better name than shared ownership.