Changing perceptions of shared ownership
There are times when you just have to admit you’ve made decisions based upon outdated and inaccurate assumptions – and, according to Nick Atkin the chief executive at Halton Housing Trust, there’s no better example of this than shared ownership.
The recently issued HCA Prospectus sets out a clear future focus on this housing product, with £4 billion of funding being made available, coupled with potentially higher grant rates of between £29,000 and £35,000 per home.
There have also been some key changes to how the Prospectus will operate, with the removal of bedroom restrictions as well as the new income threshold of £80,000 outside London.
If the targets are to be achieved, we shouldn’t underestimate the scale of the challenge. It has taken 30 years to build 175,000 shared ownership homes. The Government’s target is for an additional 135,000 to be built by 2021!
What is clear is that shared ownership suffers from an image problem on three fronts.
Firstly, there is an assumption that there isn’t demand for this type of product outside London and the South East. The interim report from the Commission for Housing in the North has evidenced how this is not the case. This was further supported in recent article by Jo Boaden and also the Smith Institute report into shared ownership in the North West.
Secondly, there is the misplaced assumption that shared ownership either doesn’t work in lower value areas, or is unaffordable. Again the analysis just doesn’t support this. The average age of shared ownership purchasers is 36, with an average income of £22,000.
Then there is the problem of the shared ownership market target audience being new and relatively unknown for some housing associations. This requires stepping into a commercial market, competing with other ‘discount’ products on offer to potential buyers.
So why are organisations looking to develop an increasing number of homes of this tenure? Probably most importantly there are very few other homes being built for people on an income less than £25,000. It’s flexible, relatively affordable and secure. It also offers a pragmatic option for former home owners who are looking for alternative housing after their relationships have broken down.
Across the North West there has been a 30% increase in shared ownership applicants over the last 12 months, highlighting an increasing demand for the product.
There is also a buoyant secondary market. Again unlike the assumptions that exist, people don’t get ‘stuck’ in shared ownership, they move on. The average shared owner staircases their share just over 4 years after moving in, with 77% of all staircasing transactions resulting in 100% ownership.
The facts speak for themselves. The monthly cost comparisons, coupled with the average levels of deposits needed for a new £150,000 three bedroom house, offer a realistic and affordable option.
So what do these figures actually mean? If you take this new build £150,000 three bedroom house at 25% shared ownership:
- Deposit £1,719
- Mortgage £202 per month
- Rent £236 per month
Total monthly cost = £438 per month
Of course for many who can stretch to starter homes they probably will. So in the same way Help to Buy took some of the demand away from the private rented sector, shared ownership will lose some market share to Starter Homes, as will Help to Buy supported sales.
One other barrier is the lack of mortgages for shared ownership, particularly at 95% Loan to Value ratios.
Despite these challenges, for those seeking a stable good quality home, shared ownership has an important role to play.
However, after 30 years it’s in need of a substantial makeover to shift some of those long held misplaced assumptions, my own included.
We need to adopt sophisticated marketing strategies to appeal to the target market that will benefit from the products on offer. We will also need to position ourselves amongst a group of customers that may not be aware of housing associations, or even worse, already have a negative or inaccurate view of what we offer.
The HCA are looking at ways they can help market shared ownership as a product. So the challenge for the housing sector is how we repackage and rebrand shared ownership to appeal to a wider market.