Is shared ownership the solution to the affordability crisis?

Expert discusses how shared ownership could benefit the market

Is shared ownership the solution to the affordability crisis?

Taking that first step onto the housing ladder has become a tough task for many first-time buyers, with high house prices, the cost-of-living crisis, and rising interest rates tightening affordability for many.

This has led to a growing number of people being priced out of the housing market; however, Craig Hall (pictured), director of LSL New Homes, said the housing market was an innovative sector and may already offer the solution.

Tackling the crisis

Hall said one possible option for those struggling with costs was shared ownership, which was designed to help make homes more affordable.

With rising interest rates, he said brokers had reported that due to the flexibility of the scheme, they had been able to adjust the mortgage loan amount in order to meet a customer’s budget and scheme affordability rules.

“While shared ownership can be great for first-time buyers, it can also be beneficial to previous homeowners who are struggling to get back on the ladder, those looking to buy a property after a divorce or separation, as well as those who have already got a shared ownership property and are moving onto the next,” Hall added.

Hall said shared ownership really could be a steppingstone to homeownership in a way that renting was not.

“Those who opt for shared ownership can buy more of their property as time goes on, paying larger chunks as their financial circumstances improve in what is known as ‘staircasing’,” he said.

The Levelling Up, Housing and Communities Committee, Hall said, had also renewed focus on the scheme by launching an inquiry into shared ownership this July.

“The committee will explore the challenges associated with shared ownership, and whether the scheme is genuinely an affordable route to owning a home,” Hall said.

The inquiry, he added, was also set to explore mortgage availability and how viable full ownership was via the scheme. 

Raising awareness

The positivity around shared ownership, Hall believed, would continue as there was a growing appetite amongst builders for more partnerships.

At the same time, he said housing associations were becoming more comfortable and willing to engage with providers.

An estimated 89% of housing associations would now consider some form of partnership, with 43% already partnering with one in some capacity, according to Savills.

Despite the benefits offered by shared ownership schemes though, Hall said awareness remained relatively low.

Research by Leeds Building Society revealed that over a third of first-time buyers had never heard of shared ownership.

“There are also several misconceptions around shared ownership, 19% of consumers think that it is too complicated, and 17% believe such schemes are not ‘for people like them’”, Hall added.

Hall believed this was where advisers could be front and centre, helping to raise awareness about the scheme.

“A lot of progress has been made around shared ownership over the years, but as individuals at the heart of the mortgage conversation, advisers can really help to dispel the myths, and ensure buyers understand how these schemes work,” he said.

Moreover, as modern society evolved, Hall said, the way that consumers paid for everything was changing too.

“Instead of buying individual albums or songs, we now subscribe to Spotify, instead of buying DVDs, we subscribe to Netflix, and rather than purchase a car outright or via a personal loan, many now opt for a Personal Contract Purchase (PCP) or salary sacrifice car lease scheme,” Hall said.

As such, he believed shared ownership was essentially just another subscription-based model; a modern way of paying that made buying a home more accessible and straightforward to do so.

“If awareness around shared ownership continues to grow and more people recognise its benefits, perhaps we could see a model emerge where it becomes a fourth main housing option, alongside owner-occupied, rental and social rent,” he said.

Do you believe shared ownership is the solution to the affordability crisis? Let us know in the comment section below.