Shared ownership: a role for funders?

Almost a year on from the launch of Help to Buy, millions of Britons are still unable to get on the housing ladder. The ongoing costs of a high loan to value mortgage are too great a stretch on a modest income, however small the deposit. Among the under thirty fives on low to middle incomes, almost half now rent, with little prospect of ever owning. But home ownership remains as much an aspiration for this generation as for those of the past. It provides greater security than private renting and offers families the chance to accumulate a significant asset.

Thirty years ago, shared ownership was launched to help those on lower incomes move into home ownership. It’s a part buy, part rent model in which individuals buy at least a 25 per cent share of a home with a mortgage and pay rent on the remaining share which is owned by a housing association. Shared owners can buy a greater share of their home over time – known as staircasing – and eventually own the home outright.  While shared ownership has survived the test of time, there are still only 177,000 shared ownership properties in the market and a shortage of three and four bedroom homes.

Shared ownership is not without problems. It is a relatively complex and cumbersome product that is shaped by the needs of government, mortgage lenders and housing associations more than by those of consumers. Perhaps the biggest challenge facing shared ownership is that fact that staircasing rates have fallen, with the majority of shared owners remaining as part owners for the long term. However, the product was not developed as a part ownership product and, therefore, works less well for those who do not staircase, particularly if they want to move and remain shared owners.

If we start from the point that shared ownership needs reform to work better for consumers, there is then a strong case for more, not less, shared ownership in the current housing market to act as a bridge between renting and home ownership. For large numbers of low to middle income households, this is now a gap that is too vast to cross. Shared ownership or a reformed part ownership product needs to become the fourth tenure in the housing market to better meet the needs of those who currently have only one option:  the private rented sector.

Funders could play many roles in supporting the development of this part of the housing market, from communicating the need for shared ownership at scale as part of the housing mix in the UK to supporting the development of a reformed shared ownership model to investing in the development of local schemes, adding to what government currently delivers. For organisations more traditionally focused on housing issues affecting the most vulnerable in society, supporting people to access home ownership may seem far removed from a social need. But in a country in which home ownership dominates aspiration and offers families the greatest security and in which wealth inequality dwarves income inequality, getting a foot on the ladder is a social issue.