Shared ownership isn’t shared and it isn’t ownership. It’s arguable to what degree it constitutes affordable housing.
Yet housing associations market this complex tenure with the same degree of levity with which a company might sell, say, comic books or whoopee cushions. The National Housing Federation (Nat Fed) marketing campaign promotes shared ownership schemes with vacuous slogans including: ‘Painting every wall luminous green’ and ‘Cooking in your pants on Sundays’.
My younger self would have enjoyed the jocular tone of Nat Fed advertising. My older self thinks the campaign does home buyers a great dis-service by failing to live up to laudable claims of ‘myth busting’ and ‘explaining what shared ownership means’. Taking out a mortgage could be one of the most expensive decisions first-time buyers ever make. And, if they get it wrong, the consequences can be catastrophic.
An advertorial published in The Guardian during Shared Ownership Week 2020 included a quote from first-time buyer, Laura: “I think a lot of people don’t understand it, they think there’s a catch. There isn’t.” And there’s the problem in a nutshell… It’s perhaps a moot point exactly what constitutes a ‘catch’ but there’s no shortage of possibilities.
For a start, shared owners are often surprised to discover they don’t ‘own’ their home in any meaningful sense. The ‘part buy, part rent’ slogan is widely used in promoting shared ownership. But legal experts suggest that such terminology is potentially misleading as it misrepresents the legal form of the tenure.
The Nat Fed campaign appears to confuse a marketing strategy (defining ‘it’s yours’ as ‘not sharing’) with the legal reality of acquiring an assured tenancy (it’s not ‘yours’ and there are therefore risks of possession, and loss of equity (in the event of possession) or reduction in equity (if shared owners can’t afford to extend a short lease prior to the 80-year threshold).
Shared ownership isn’t even that good an investment. The Homes England model contract specified a minimum lease length of 99 years for flats up until 2016, and 125 years thereafter. Shared owners have been shocked to discover a need for expensive lease extensions before they’ve finished paying off the mortgage on their first share.
Shared owners have no statutory right to lease extension unless they’ve staircased to 100%. Which very few will; one estimate is that only 2.3% of shared owners achieved full staircasing in 2018/19.
What about much vaunted affordability claims? These appear reliant on comparison with private rental or open market purchases over a relatively short timescale. They don’t factor in whole life cycle costs such as lease extension; rents that increase annually regardless of whether average market rents are increasing, static, or even declining; and full 100% liability for service and management charges regardless of the % share purchased. (Fire safety remediation costs are too complex to go into here but are self-evidently a source of huge emotional and financial distress for affected shared owners).
Shared ownership is pitched as the ‘affordable’ route into housing. Marketing rhetoric implies that ALL buyers benefit from shared ownership as a ‘step onto the housing ladder’. But this is over-simplistic and fails to recognise that the wider housing market creates both winners and losers.
Could the shared ownership model be improved? Could it be made more affordable? To some degree perhaps… But here’s the rub… housing associations’ overall funding model has historically depended in part on profits arising from shared ownership schemes (for example, the receipts from staircasing shares sold at current market value rather than original market value) to generate cross-subsidy for social rented homes. So the financial interests of individual shared owners are directly in conflict with the wider objectives of housing associations.
If I had to choose one key policy reform…? “To stop using the term affordable for housing that isn’t” (a phrase I’ve stolen from Tom Murtha). To stop using the term ‘shared’ for housing that isn’t. And to stop using the term ‘ownership’ for housing that isn’t.
This post is a shorter version of an article originally published on Red Brick Blog.