shared ownership 2.0 towards a fourth a mainstream tenure pdfs/paddy's pdfs... · shared...
Post on 22-Jul-2020
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Shared Ownership 2.0
Towards a fourth a mainstream tenure Paul Tennant (Chief Executive, Orbit)
Sarah Davis (Senior Policy and Practice Office, CIH)
A changing market
• Home ownership in decline - down to 65% in 2012/13, from a peak of 71% in 2003
• But home ownership remains the tenure of choice • Emergence of ‘Generation Rent’ – PRS doubled in size since 2000 to 18% … an
estimated 25% by 2019 • Completions last year at half of what is needed to meet demand – house
building projected to increase to 152,000 a year by 2019 … still a shortfall of about 90,000
• Demographic pressure to drive demand – projected 10% rise in the number of households … 221,000 per year up to 2021
Source: UK Census, Savills Research
Home ownership – a shattered dream?
• Less than one fifth of families on lower quartile income can afford a 2-bed home with a 90% mortgage
• House prices have long been outstripping wages – average earnings in 2015 forecasted to rise by 2% versus house prices by 7.4%
• London, a market in its own right – house price inflation in 2014 at 21%, twice the national rate
• Deposit barrier – would take the average couple with a child almost 12 years to save up a deposit on 2-bed home
Why shared ownership?
• Challenges in UK housing market are complex and require multiple solutions – no silver bullet
• Affordability and aspiration - delivers social and economic returns … a couple with one child on a net income of £25k could afford a 25% share of 2-bed home in almost 90% of LA areas and 50% share in 75% LA areas … but same family would struggle to service a Help to Buy mortgage in 71% of LA areas … median income of £27k for SO compared to average of nearly £40k on a 80% mortgaged home … average monthly costs for SO cheaper than PRS (£668 and £784 respectively)
Why shared ownership?
“Without shared ownership I don’t think I would have been able to purchase a house suitable for my family due to my households income not allowing for a large mortgage and no savings.”(Orbit Shared Owner) “For many people in the South East, shared ownership is not just the most affordable housing option, it’s the only affordable housing option.” (Marilyn DiCara, Director of Sales & Marketing, Moat)
• Good value and social return for tax payer – grant released through
staircasing reinvested into new homes ... and approx. £15k of grant per SO unit versus average cost of £41,897 for Help to Buy loan
What we did
• Explored barriers, challenges and policy solutions … across brand, product and investor/lender confidence - huge opportunity for SO, but…!
• Gathered expert and practitioner views and reviewed existing research • Talked to current and possible future customers • Synthesised data, views and experiences to demonstrate the potential of SO
becoming fourth mainstream tenure
Challenges and recommendations
The product and brand
Scale (diversity)
Investment
Product and brand
Awareness
Access
A ‘social product’?
Simplified and consistent
Flexibility to life cycle
Managing costs
‘We underestimate what we can do as a
sector to improve the product and promote
it better…we can go a long way to
resolving some of the issues holding
shared ownership back’
Steve Michaux, A2Dominion
We need:
Clear and effective communication
Services that: support to move within tenure; enable effective financial
planning; manage costs; promote choice and control
Consistent and streamlined product – confidence for customer, lender
and investor
Incentivising through local plans
Demonstrating the value of tenure – consistent data collection
‘Hard evidence is a powerful tool… we need to…collect the right data…to support the
case for growing shared ownership as a tenure’
Tim Willcocks, Radian Grp
Scale
Ambition to double delivery to 13% of total homes required
Make it an attractive product to develop
Attracting lenders – addressing perceptions of risk
Tackling constraints on numbers
Creating a strong secondary market
Looking at diverse funding streams
Investment
Value for money of shared ownership
Average grant £15,000
Helping different set of customers to Help to Buy – social return
Plus additional ways to fund
Core purpose for HAs
Repayable equity funding
Institutional investment
Balance attractive returns and affordability
Institutional investors
Improving the product for customers
Balance with attractive returns
Most recommendations work for both
Repairs costs – different models have different impacts
We need:
Better measurement of risk for lenders – capital weighting
And data!
Mainstream tenure
Ongoing grant
Equity loan models
Modelling impact for affordability/ provider returns
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