The Unrealised Potential of Shared Ownership

In the current challenging market, housebuilders are increasingly looking for novel and engaging means of marketing to achieve the necessary supply/demand balance.

But providers of shared ownership have the opposite problem. In the world of shared ownership, demand consistently exceeds supply.

In 2023 housebuilding slowed down considerably. More than half a million new developments have been put on hold during the past five years and official data shows that only 19% of planning applications are processed within the recommended 13 weeks, compared with 57% a decade ago.

Because around half of new affordable housing (which includes shared ownership) is delivered through conditions imposed on development through ‘planning gain’, the reduction in housebuilding results directly in a reduction in shared ownership properties.

And as the already acute need for affordable housing increases, the planning system alone cannot keep up with the volume of new homes required. This may be exacerbated if the proposed Infrastructure Levy is introduced, because it would result in planning gain revenue becoming available for local authorities to spend on the many wide-ranging financial demands that they face in addition to housing.

Growing demand

The economic conditions have substantially increased demand for shared ownership.

But against the odds, the sector has made considerable progress in meeting demand. 19,386 new shared ownership properties were delivered in 2021-22 according to the English Housing Survey: the highest number since records began in 2014-15, a 14% increase on the previous year.

Inevitably, given the economic downturn, demand for affordable housing, and shared ownership specifically, is extending to a wider demographic.

Today first-time buyers in the UK today are paying almost a third more to get on the property ladder than they were five years ago and in the last decade the number of private renters moving into home ownership fell by 23%.

Traditionally shared ownership was most popular among those aged between 25-35 (32-37 in London) but, as salaries fail to increase in line with inflation, the upper age is increasing.

In the five years 2018 to 2023 the average house price rose by as much as 40% in some regions, while the average income rose by just 11.6% in the same period.

Although shared ownership remains limited to those with a maximum household income of £80K (£90K in London), many people are finding that due to the impact of interest rates rises on mortgages, car and credit card loans together with the cost of food and utility bills, they can no longer afford to buy outright, and shared ownership is a good alternative.

A replacement for Help to Buy?

Perhaps the greatest impact on the demand for shared ownership housing was the cessation of the Government’s Help to Buy scheme last year.

Although various initiatives aimed at first time buyers remain, the absence of Help to Buy is very strongly felt. The scheme, which enabled buyers to buy with a 5% deposit using an equity loan worth 20% of the price of a new build home (40% in London), aided the purchase of almost 390,000 new build homes.

It was inevitable therefore that in July 2023 Barratt said the number of first-time buyers acquiring its homes had fallen by 49% in the past year as Help to Buy was wound down, and predicted a drop of 23% in build volume over the period July 2023-24.

Government support needed

My view is that the government needs to get behind shared ownership in the same way it did Help to Buy.  Help to Buy benefited from a dedicated, widely recognised brand with an effective information campaign and website which pointed would-be purchasers in the direction of suitable products. There are many myths around shared ownership which need to be addressed (for example that shared ownership is that it's only available to people with low incomes or those on social housing lists; that you can never fully own a property through shared ownership; that shared ownership properties are of inferior quality compared to properties sold on the open market; that It's difficult to sell a shared ownership property, or that shared ownership is only available for flats… the list goes on) – but doing so comes at a cost.

Helping first time buyers and others to get on to the property ladder is vital not only for the individuals involved but for the country’s social and financial prospects. We have a great product and great demand for it – but more needs to be done to fully realise this potential.