Shared ownership expansion can help tackle the housing crisis
CIH chief executive Terrie Alafat assesses Prime Minister David Cameron’s announcement of a major expansion in shared ownership.
Working with housing group Orbit, we’ve been calling for an expansion in shared ownership to help people on lower incomes get a foot on the housing ladder. We believe it could help the growing group of people who we might call the squeezed middle – people for whom home ownership is increasingly out of reach, but who don’t have the level of need and vulnerability to qualify for social housing. Our research showed that households benefiting from shared ownership tend to have an income of between £20,000 and £35,000 compared to nearer £40,000 for first-time buyers.
So it was good to see chancellor George Osborne putting shared ownership at the heart of what he called “the biggest house building programme since the 1970s” in last month’s spending review. In Shared ownership 2.0, we set out a series of recommendations to increase shared ownership from its current 15,000 homes per year to at least 30,000 within the current Parliament (or 150,000 in total). The spending review included plans for 135,000 new homes, under a new help to buy: shared ownership scheme (our report also called for help to buy-style branding to help raise awareness of shared ownership as a product). Another of our recommendations was to make shared ownership simpler and more flexible, so it works better for consumers, housing associations and mortgage lenders. Today David Cameron announced more details of the expansion – the rules on who is eligible for shared ownership are going to be relaxed, and people will now be able to use the scheme more than once, which will make it easier for people to move up to bigger properties as their families grow for example. We look forward to continuing to work with Orbit, the government, the wider housing industry and investors as the expanded scheme begins to roll out from April 2016.
As we have said before, we need real ambition if we are going to solve our national housing crisis within a generation. Increasing the supply of shared ownership homes will make a big contribution, helping thousands of people who have been priced out of a decent place to call their own.
But I also want to sound a note of caution. The chancellor announced a significant investment in housing in the spending review and autumn statement, most of which is going towards home ownership in one form or another. We need to make sure that these new homes for ownership and shared ownership are affordable for people on lower incomes. David Cameron announced today that anyone earning below £80,000 in England or £90,000 in London will be eligible for shared ownership – which are interesting thresholds when you consider that the government’s definition of a ‘high-earning’ social household for the proposed ‘pay to stay’ policy is £30,000 for England and £40,000 for London.
And what about the people who are always going to struggle to afford home ownership and even shared ownership? In most developed economies, there are usually around 20-25% of people who can’t afford a home of their own. To provide for everyone, we need to make sure we are building a range of new homes which are truly affordable to people on all incomes, including those that cannot afford to buy even under shared ownership type schemes.