Shared owners – trapped in a permanent tenure?

Published by 24publishing for 24dash.com in Housing and also in Communities, Local Government

I spent most of this evening going through a report – commissioned by London-based Thames Valley Housing – looking into why it is shared owners stay just that…shared owners and don’t increase their stake in their property and hence leave the sector.

One might conclude - before reading the 38-page document - that this was always going to be inevitable given that shared ownership prioritises those least able to afford full owner-occupation, however, there are some useful points to take away.

The report, produced by the Cambridge Centre for Housing and Planning Research, highlighted that of the 145,000 shared ownership purchases identified in England since 2001, only 27,908 have staircased to 100% ownership.

Staircasing to 100% as a proportion of all shared owners has fallen from 4.2% in 2001-02 to 0.9% in 2010-11.

So why and what can be done?

Shared ownership – logical as it sounds (buy a share, pay rent on the rest, increase your stake over time and enjoy perks of home ownership) – has had a rough ride in the national press.

But it too has been hit from the market downturn and has thus suffered from tighter lending conditions, rising rents and the general volatility of house prices as the report makes clear.

Housing associations have obviously defended the option which they highlight has helped thousands into home ownership, but the fact is – as this report highlights – the sector, and crucially the offer, is ripe for reform.

The report doesn’t use the word trapped but that is how its findings come across - that those buyers that have entered the sector are stuck in what is fast becoming a permanent tenure.

The cost of selling their stake can be pricey with cash needed for valuations – especially complex when shared owners have improved the home; incomes haven’t risen inline with house prices and the low deposits paid initially by buyers have now seen them slip into negative equity. In addition, those that want to move to another shared ownership property can’t because they don’t have the same eligibility criteria as MoD personnel or social housing applicants.

So what would help?

The report makes some thoughtful and worthwhile recommendations – but they are radical in the sense that they could end up making the sector less affordable to get into.

They include reviewing the deposits. The report quite rightly asks whether it’s sensible to allow access into the tenure without paying a deposit big enough to afford buyers some protection during a housing market downturn. It says it would be worthwhile reviewing the minimum level of shares sold to ensure new purchasers are better placed to progress into full ownership.

It also recommends that shared owners wishing to move within the sector are given the same priority as social tenants and MoD personnel currently receive, in order to improve mobility within the tenure.

It notes: “The inability to move within the tenure is a serious issue. It must also affect the functioning of the shared ownership resale market since over 130,000 households who could be potential sellers and buyers are in most cases effectively excluded.”

It also recommends housing associations look to reduce or cover the costs of valuations in a bid to help those staircasing. When selling the properties it says valuations should be factored into the sale price and should be levied at the point of sale.

The report, which was based on the survey responses of 54 housing associations, is well worth a read.

Ross Macmillan is the deputy editor of 24housing magazine.