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Is Osborne serious about shared ownership?

Is Osborne serious about shared ownership?

Moat

6 min read Partner content

The Autumn Statement next month is expected to have new announcements on house building. But how many of those new properties will be shared ownership?

Housing association Moat has commissioned a reportahead of the Chancellor’s fiscal statement, focusing on various uncertainties that need to be tackled by the Exchequer to prevent housing affordability across the South East of England becoming a further drag on economic growth.

“We commissioned the report from a desire not just to build houses, but to build the right homes in the right places at the right level of affordability,” explains Moatchief executive Elizabeth Austerberry.

“What does that mean in London and the South East? That was the challenge we set in this report.”

Its author, Andrew Heywood, spoke to landlords, local authorities and housing associations across the region as part of his investigation into housing affordability, the spatial concentration of poverty, and the prospects for low to medium income earners across the South East over the next decade.

“The South East has an image of leafy affluence, if you think about South East you think of Captain Mainwaring - ‘traditional’ areas with rolling hills and comfortable suburbs,” explains Heywood.

“And indeed it has some of those features, but it also has profound problems in housing terms for those on medium incomes and below.

“By medium incomes we mean £559.70 per week in 2013 for those in fulltime employment, which is noticeably higher than English average.”

Heywood says housing provision is a significant factor.

“Effectively the South East needs about 70,000 new homes per year it’s actually building about 20,000, so it’s a massive shortfall.

“You can see the impact of that on house prices, where the divergence with the rest of England has widened dramatically.

“For a medium income buyer on average a property costs nine times their income.

“Considering there are very few mortgages being given out on multiples of more than three times salary, it means even if they can even find someone rash enough to lend them the money it would be a pretty challenging proposition.

“We picked up evidence that with affordable housing that grant levels have fallen about 50% to less than 10%, and so the reliance on cross-subsidy affordable development grows.

“That is more viable in areas where land values are higher, which is not where those on lower incomes tend to be living - we do have a disjunction there.

“One of the things we need to examine is the extent to which we move from supply side subsidy in the form of grant to a demand side subsidy in the form of housing benefit which is effectively what is happening.”

Heywood says grants actually give more control “because above a certain level you can enforce standards and negotiate where houses should be built”.

Yet some housing associations are saying “thanks but no thanks” to grants because of the complex regulations attached.

“Government is therefore losing important policy levers,” Heywood says.

The report says new supply is constrained by the low grant environment, combined with the downward pressure on Housing Benefit through reforms such as the benefit cap.

Many housing associations have questioned (privately and publicly) the value of the 2015-18 grant-funded programme.

With the increased reliance on private sector funding to deliver new homes, cross-subsidy from commercial products has become the most viable route for building new affordable properties.

But with the tendency of those on lower incomes to live in the areas of lower land values (the east, Kent and the coastal strip), a situation is emerging where commercial imperatives are shifting development away from these areas – where need is greatest.

Meanwhile the housing of everyone from those in work on medium or low incomes, to those on benefits increasingly falls on the private rented sector.

Shared ownership if the obvious solution, but as Austerberry explains, demand outstrips supply.

“When we at Moat build a shared ownership property, we can normally sell it 10 times over to people who can afford it. However, the model works less well when house prices are increasing so much faster than wages, such as the South East.

“There is a challenge but the main issue is that the constraining factor is not many lenders do not lend to shared ownership, not because they perform poorly but they are bespoke products and do not fit well into a volume-based, ‘screen decision’ system of lending. There are only six to eight lenders who will engage with shared ownership.”

Austerberry says that the “mood music” from all political parties on shared ownership is encouraging, “but I am still waiting” for concrete action.

“They are starting to get the message. I went as a group of housing associations to the party conferences and we talked about the shortage of lenders.”

She adds that “in the public eye people don’t understand what it is”.

Heywood says that there is an unplanned migration to areas of the South East.

“We tend to see those on lower incomes congregating on the south and east coasts, and tending to be in urban rather than semi-rural areas which tend to be more affluent and that isn’t happening in any planned way,” he explains.

“It isn’t in parallel with employment or service provision policies so that you have real risks.

“If someone moves down to Hastings for example it may well be that their access to employment in the travel to work area is significantly less and someone on a low income has less ability to travel.”

Heywood says that government can take action by “diverting some of its resources away from Right to Buy which is causing local authorities to lose stock which isn’t being fully replaced - and a large proportion of those properties end up in private rented sector anyway.

“Government should give more impetus to shared ownership, which is a success within the South East region, but the problem is that it is on a very small scale. There are only 33,199 shared ownership homes in 2012/13, compared to around 700,000 in the private rented sector.

“It houses an important group those who are in work and in lower quartile incomes and the costs are significantly less than trying to buy a whole house.

“The problem is in many cases getting the deposits together, so we are recommending that government should look at deposit saving schemes to overcome that hurdle.”
Austerberry adds:

“The current model really does not work in areas that are failing and are deprived are getting more people pushed into them. The cost of housing relative to earning is a problem that is getting worse.

“We are not delivering enough homes and even if it was helping to address the quantum housing but it is not even doing that.

“Government must loosen the regulation regimes for housing associations and give them flexibility.

“Housing poor and vulnerable people in the private rented sector does not save any money in the long-term. We don’t want to put our money into benefit but into bricks and mortar - something that can house families in the futures.”

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