An established fixture on the housing landscape, Shared Ownership offers its residents an affordable route to home ownership.
Shared Ownership (SO) has come a long way. Since its inception four decades ago it has become an established fixture in the housing landscape. Now, more than 200,000 households live in the tenure. There were over 13,400 Shared Ownership completions in 2018, and Rightmove listed around 2,500 secondhand Shared Ownership properties in Q4 2018: 69% more than in Q4 2010.
Those households represent a broad swathe of the population. Yes, Shared Ownership has helped many thousands of households to become first time buyers. It has also helped growing families, downsizers, divorcees, and people moving regions for work into secure and affordable homes.
As it stands now, Shared Ownership occupies a similar but much smaller place in the market to the Help to Buy equity loan (HtB). Our analysis shows that, given the same deposit, monthly costs for the two schemes are similar. Shared Ownership offers lower barriers to potential homeowners, however, as the initial deposit can be as low as 1.25% of the total property value.
Due to these similarities, there is significant overlap in the target markets for Shared Ownership and Help to Buy. This has helped suppress take-up of Shared Ownership over the last five years. Once Help to Buy ends, as Government states it will in 2023, Shared Ownership will become the main route to home ownership for those unable to access the market. This could increase demand for Shared Ownership homes by over 15,000 homes per year.
"The end of Help to Buy could increase Shared Ownership demand by over 15,000 homes per year" - Savills Research
This has implications for housebuilders, who will look to Shared Ownership when Help to Buy comes to an end. By providing alternative routes to market, either through bulk deals or individual sales, Shared Ownership helps increase sales rates and helps housebuilders recycle their capital faster. The first step to achieving this must be educating new homes sales staff, so they’re able to offer Shared Ownership to potential buyers as part of a range of options where appropriate.
It could also have implications for institutional investors, whose demand for long-term, inflation-linked income makes Shared Ownership a natural fit. We believe that recent deals by Heylo, Sage, and ReSI are the first of many such private investments into this sector. This could drive opportunities for housing associations to unlock capital for more housing development.
The sector is not without its problems. For housing associations, taking on sales risk leaves them more exposed to fluctuations in the housing market, while for residents, contracted rent increases could mean their housing costs rise faster than the open market.
Despite these issues, Shared Ownership gives housebuilders a new route to market and helps them recover their capital quicker, provides investors with a longterm income stream, and gets Government closer to its aim of delivering 300,000 new homes per year. Most fundamentally, it offers its residents an affordable route to home ownership.