Shared ownership could help plug the housing gap

Home ownership is in decline. Rising house prices, falling wages and restrictions on mortgage lending have left this common aspiration far out of the reach of the vast majority of low- and middle-income households.

Though today 64% of Britons still own their home, that figure is fast dropping, in no small part due to coalition policy. Help to Buy, an equity loan from government on properties worth up to £600,000, is over-inflating an already swollenhousing market. London, where the impact is being felt most keenly, saw average prices rise by more than £50,000 in a month between September and October.

Yet research into public attitudes shows that 78% expect to be homeowners in future, regardless of their current financial circumstances, and the majority want to do so because it provides stability for children, or for security in later life, or both. On Wednesday, the Resolution Foundation thinktank publishes a report, which I co-authored, addressing how shared ownership could help plug the gap.

While a couple with one child with a joint income of £22,000 would struggle to afford the monthly mortgage on a two-bedroom home in two-thirds of local authority areas, that family could afford a 25% stake in the same property in almost 90% of authorities.

Shared ownership – part buy, part rent – is now three decades old. It has been tried and tested, but over the years its scope has narrowed and problems have crept into the model. I have been critical of its faults, and those criticisms were reflected in my conversations with shared owners in preparation for the report. They worried about the affordability of paying both rent and a mortgage on the equity stake: many had been taken aback by rising rents and service charges.

They also felt it was unfair that the cost of upkeep was not split between them and the housing provider, but that the full responsibility falls on the tenant. They feared becoming trapped, because shared ownership prevents tenants from renting out their home. Above all, they felt that the full financial implications of shared ownership had not been made clear.

Today’s report calls for shared ownership to be made a fourth property tenure, in addition to social housing, home ownership and the private rented sector. It calls for shared ownership to be simple, transparent and flexible.

This would include being able to secure a shared ownership mortgage on any property on the open market, not just newbuilds. This “do-it-yourself shared ownership” was scrapped 15 years ago. Eligibility criteria should also be relaxed, and rules and regulations stripped back so there is nothing to stop a shared owner renting their property out. I would go even further: housing providers should look at fixing rent and service charges for set terms to give tenants stability in their first years of shared ownership. To create this new fourth tenure, the Resolution Foundation proposes a third stage of Help to Buy, offering government loans to secure shared ownership mortgages to attract priced-out buyers to the idea. But, government, hear this warning: if shared ownership is simply expanded in its present form – without these amendments then, just like the burgeoning private rented sector, we will create another trap for people.

Of those who have already entered into shared ownership, some cannot manage the spiralling cost: wages have risen slower than inflation while rents on the portion of the property they do not own have gone up faster than expected. Let us not, in our appetite to meet aspiration, strap a ball and chain around the legs of already struggling households.

This article originally appeared in The Guardian