Frustrated hopes

First posted on Inside Edge 2, my blog for Inside Housing on July 6

What’s stopping shared ownership from fulfilling its potential as the fourth housing option?

Ever since it was launched, shared ownership has seemed to promise more than it delivers to people who can’t afford full ownership, want something better and more affordable than private renting and want something more or don’t qualify for social housing. Its part-rent, part-buy status and the fact that it requires less grant than social housing have ensured support from both Conservative and Labour governments and it’s become increasingly important to the finances of the providers that offer it. Yet somehow something is missing.

It’s a conundrum the government is trying to resolve through changes introduced in April and a review of longer term options out this summer. It would do well to take heed of a new report from Bristol, Kent and York universities and the Leverhulme Trust launched at an event at the House of Lords last week that I chaired.

From a wider policy perspective, shared ownership has huge potential. As Lord Best put it at the launch, we could create three to four times more home owners through shared ownership than through the Right to Buy.

Pacian Andrews of the Homes and Communities Agency highlighted recent improvements to the shared ownership lease but said problems remained with mobility, lending and complexity.

Jamie Ratcliffe, assistant director at the Greater London Authority, argued for a massive expansion of shared ownership in a city in which 90 per cent of households  who do not already own a home cannot afford to buy on a conventional basis. The GLA is working on attracting institutional investment alongside resources from government and housing associations as a way to deliver at scale.

Several different reports in the last few years (see here and here) have sought to find ways to improve shared ownership and help it fulfill what many people feel should be its destiny as the fourth tenure (or fifth, since co-operative housing may have something to say about that). A major expansion at scale could be a relatively cheap way of providing more homes at the same time as giving housing associations a future income stream and satisfying the government’s aspiration to increase home ownership

This one includes detailed interviews with shared owners as well as providers and other stakeholders. To give you a flavor, shared owners were asked to sum up their experience of the tenure in five words. Four of the top five – opportunity, affordable, security and independence – will be music to providers’ ears. The fifth? Frustration.

The government review is looking in particular at making it easier for shared owners to re-sell their properties. This report comes up with a pragmatic way to do this. However, it also identifies a number of other key issues that start with confusion about what shared ownership is and who it is for. At a more fundamental level, is shared ownership social or private? Are shared owners renters or owners?

That midway status, neither one thing nor the other, can cause huge frustration among shared owners. Here’s one comment from the report:

‘I don’t know what I am. I don’t know what they think I am. I think I’m the owner, but I’m also partly a tenant, but I’m a tenant that they don’t really care about. But they’ll look after their real – their tenants, who don’t own their properties. They’ll go and do everything for them. I don’t get anything.’

Shared ownership suffers from the same problems as leasehold: remote management (especially where housing associations have passed it over to a third-party managing agent); inability to control service charges and estate services or organise repairs and maintenances; yet without as much power as leaseholders to challenge decisions. In some cases, blocks may feature poor doors or facilities like gyms that are not part of the shared ownership deal. The motivation of the provider may be to keep down service charges but this may be at the cost of shared owner satisfaction.

But the problems go deeper than that. Even if it’s in the lease, and providers explain that the rent pays for the cost of borrowing to build the home in the first place, shared owners do not understand why they should be liable for 100 per cent of the repair costs if they only own, say, 25 per cent of the property.

Then there’s the relationship to the social landlords. Some shared owners may be able to staircase up, or move to an area with lower prices; others may have unrealistic expectations about the ability to buy an extra share; others are resigned to staying as a shared owner. Some had never heard of housing associations before they part bought while others thought the social landlord would support them in later life and offer to buy shares back if they ran into problems.

And shared owners can be bewildered when their sense of ownership runs into the reality that as far as the law is concerned they are tenants. The elephant in the room here is the case of Midland Heart v Richardson, in which a shared owner faced losing her entire capital stake as well as her home. Midland Heart recompensed her with an ex gratia payment but the worrying point is that legally she and other shared owners risk losing everything if they are repossessed for rent arrears. Even more worryingly, the researchers found that key stakeholders had either not heard of the case or sought to downplay its significance.

Other stakeholders also had mixed ambitions for the sector: whether shared ownership is a permanent or transitional tenure: who it’s for; and even whether there are any problems with the product currently on offer.

The researchers conclude that there are problems that lead to satisfaction levels among shared owners that are lower than for social housing as a whole. If you are a shared owner or you read the detailed experiences of those interviewed for the report, you will not be surprised by this. If you are a provider, you need to read the recommendations on everything from marketing to leasehold management and administrative costs and service charges to the resale process.

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