Shared Ownership, which has existed since the 1970's, is a part-buy, part-rent, low cost home ownership solution that can enfranchise 4 times more buyers compared to private outright purchase - or alternatively sell homes 4 times faster.
Buying a share of the property and charging an affordable long term rent on the unpurchased share means that the initial cost of purchase and ongoing cost of occupation is lower and appeals to a broader market – enfranchising thousands stuck in “generation Rent”.
In the UK there are currently more than 200,000 buyers on shared ownership waiting lists - and to be honest the tenure is not that widely known about. One waiting list organisation, Share to Buy, has a register of over 80,000 'wannabe' shared ownership buyers in and around London alone.
In light of this, delivery rates of new build share ownership properties reported by the Homes and Communities Agency for 2014/15 were 7,102 completions and 3,334 starts on site - the majority of which are actually 'built' by house builders as part of planning obligations – therefore these 200,000 people are a ‘dam waiting to be broken’.
However, whilst shared ownership is the ideal solution to deliver a step change in output by private house builders (indeed the demand for 1,000,000 new build shared ownership properties across the UK at current prices is unlikely to be a constraining factor), Heylo acknowledges that the tenure, market standard leases and processes could be improved.
Firstly, the shared ownership offer has been confused over the years with too many names and inconsistencies.
Second, the true nature of a shared ownership position' needs to be addressed (particularly in respect of a protection of tenants’ equity in distressed scenarios). Heylo believes that the Homes and Communities Agency standard form lease (expected by lenders) should more closely reflect the position of a typical mortgaged property and that simple changes to the lease could achieve this.
Thirdly, given that shared owners are responsible for the maintenance of the whole property but the landlords benefit over time from this maintenance in respect of the value of the landlord’s share, the increased value to the landlord could be more equitably shared with the customer via an improvement in the lease terms when customers purchase the property outright.
Fourthly, mortgage availability, pricing and the simplicity of transacting sales and purchases of what is essentially leasehold property needs to be much improved.
Fifth and finally, given consumer protections at law under the Landlord and Tenant Act and related statues, delivery of shared ownership by private organisations should be further encouraged to significantly ramp up delivery.
These changes and increasing demand to fulfil a step change in new build housing supply should be straight forward. In fact it would be much more straight forward than reversing 200 years of economic competition theory and dismantling, amending or replicating the current house building sector if we truly want the 1,000,000 new homes the UK so desperately needs in the next 5 years.
About Heylo Housing
Heylo, a joint venture with a leading local authority backed by pension fund investment, is currently active in over 40 Local Authorities. Having already acquired over 500 shared ownership affordable housing properties, Heylo is contracting with major house builders to deliver thousands of affordable homes across the UK over the next 5 years under its Home Reach brand.