Two weeks ago Shelter launched its call for a bigger, better shared ownership market for low to middle income families.
In our report, Homes for forgotten families, we found that 1.8 million families typically earning £20,000 – £40,000 were unable to afford a family home in their area through full ownership. With home ownership out of reach and social housing in short supply, the only realistic option for most of these families is to raise their children in our insecure private rented sector.
We found that the only existing model that aligned with their aspirations to own a home, and proved affordable to a wide number of families, was shared ownership.
Our report was very clear that shared ownership offers the most potential to meet these needs and aspirations, but that it also needs a comprehensive shake-up before it can be scaled up to be a realistic, sensible option for England’s low to middle income families.
Our policy proposals set out a wide range of components needed for a successful government led housing programme, but did not uncritically endorse every existing example of shared ownership.
On the contrary, there are significant concerns with the current shared ownership offer, many of which were raised by those responding to our report. These concerns will need to be dealt with if shared ownership is to be scaled up, and we will be addressing them as we develop our thinking for making shared ownership a truly good, fair, and affordable option for low to middle income families. And we’re keen to get others’ views on how best to do this.
Legal issues
Nearly Legal has rightly highlighted legal issues with the current shared ownership model. The main issue stems from a 2008 court case in which a shared owner abandoned the home, stopped making rent payments, and was able to be evicted without having the right to take back the share they owned.
It is clearly unfair that they could not get back what they put in. However, I understand that most housing associations would use their discretion to ensure that in the very rare occasions where a shared owner was completely unable to make the rent and mortgage payments, that they would get back their equity stake.
While it may be a very rare occurrence, it’s clearly not good enough that someone could build up all that equity and have no legal right to it. This would need to be addressed if families were to have confidence that they were indeed building up an asset.
We are keen to hear any suggestions that others may have for developing a legal structure that would safeguard shared owners’ equity in the worst case scenario of their home being repossessed.
Control and responsibility issues
People have also rightly highlighted issues with the current shared ownership offer being too restrictive when it comes to selling the home, as well as conditions on shared owners when they are in the home.
- Currently, most shared owners have to advertise the home to a closed waiting list of prospective shared owners, usually for a period of three months before they can sell it on the open market. This is a symptom of the undersupply of homes for this market. Under our proposals, with significantly increased supply and less need for rationing, we believe shared owners should be able to sell their homes on the open market to all eligible households.
- Shared owners typically face restrictions in letting out their home if their circumstances change. It makes sense to ensure that scarce subsidy doesn’t help someone become a Buy to Let mogul, but one of the key advantages of being a home owner is having that flexibility to hold on to your asset through life changes. Should it be easier for shared owners to let out their home, but should it be for a maximum defined period at first, e.g. one year?
- Currently, shared owners, even those with small shares, are liable to pay for the full cost of any repairs to the home. Some find this unfair, especially where the housing association owns most of the home. Do we need a re-think on the extent to which each party is responsible for the repairs? Could this be accounted for in a different rent structure?
Shared ownership is at crossroads. The model has been around for more than thirty years, but so far it has only helped a relatively small number of people (0.8% of English households). Nevertheless, it could help 95% of the 1.8 million forgotten families who want to own, but can’t in today’s market.
One of the benefits of shared ownership having been around so long is that all these issues have come to light. None of them are insurmountable.
Rather than starting afresh with a new, un-tested model, shared ownership offers the chance to learn lessons, adapt the framework surrounding it, and develop a strong, fair, affordable offer for these families.
Now is the time to share your ideas as we develop our thinking on how to make shared ownership a genuinely good option for these families.