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Is shared ownership the answer to housing affordability?

The desire for home ownership remains strong but house price rises and lack of supply make it difficult for low income households to access housing markets. ‘’Shared ownership can act as a bridge between renting and owning a new home’’ says last month’s report by Resolution Foundation. The report sets out the facts about shared ownership and considers the opportunities for this sector to flourish. It states that ‘’shared ownership is the most affordable tenure on an ongoing cost basis in the initial years’’.


The concept of shared ownership has been around for 30 years but still only one percent of households live by this tenure. Yet it is the tenure that can offer affordability, security, flexibility and asset accumulation. 


Housing associations are sharing ownership of homes for cash strapped young families giving them the opportunity to become home owners. Brand new homes are being built where buyers buy a part share of the home and rent the balance on favorable terms.  The idea is that the homebuyer can buy a greater share of the property as time goes by, increasing their share of ownership by a process called ‘stair casing’.


Social housing is seen as unattractive by some buyers. Where shared ownership homes are sited alongside low cost rented housing on large sites there can be a resistance to them. Today Housing Associations are seeking to build Shared Ownership homes on sites of just a small number of homes. These exclusive homes are those most likely to become privately owned over time.  


So how does Shared ownership work? Simple; the buyer buys say 25% of the value of the home on a lease obtaining a mortgage on this portion with a small deposit. He will in addition to the mortgage repayment, pay rent to the Housing Association. This rent however is at a reduced rate typically 3%. He gets the opportunity to buy greater percentage of the home as time goes by.


There are drawbacks to Shared ownership. Repair maintenance and service charges to be paid by the buyer. New homes are the much better option. Purpose built for shared ownership, they require so much less repair and maintenance and are cheaper to heat.  Houses rather than flats have limited service charges. 


There is too, the restriction on sub letting rooms, which seems unproductive when we are crying out for more housing for young single people. The Resolution report favours removing this restriction.


Stair casing in small steps can be costly as the buyer needs to pay for a valuation on each step. A solution would be to allow incremental acquisition to a pre-arranged formula.


What is clear is that there are not enough shared ownership houses being built to meet demand and that demand can only increase.  Let us meet the challenge of increasing the number of properties for this tenure.


DBS are working with Moat Housing in 2014 to provide Shared Ownership Houses in Sevenoaks .

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