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When the Government’s Help to Buy scheme comes to its declared end in March 2023 what will fill the gap for aspiring homeowners unable to realise their dream without assistance?
Enter Shared Ownership. Far from a new idea, it’s already a reality for some 200,000 households who part own, part rent their home and is now an established feature of the housing landscape. It is a tenure that has come a long way and has a lot further to go.
According to our projections, demand for Shared Ownership homes could rise by more than 15,000 a year post Help to Buy – more than twice the number currently being built. At present, around 40,000 first-time buyers use Help to Buy each year. Of these, 38 per cent – 15,300 households – could not have afforded to buy their homes without the equity loan. If, as predicted, this demand switches to Shared Ownership, new supply will need to increase by over 150 per cent.
For housebuilders and developers, Shared Ownership provides alternative routes to market either through bulk deals to housing associations or individual sales. It helps them increase transaction rates and enables them to recycle their capital faster and move on to the next site more quickly, so speeding up housing delivery.
As for the costs of buying through Shared Ownership, our modelling (see below) shows that given the same initial deposit and the same property, the monthly costs are in line with Help to Buy and substantially cheaper than for full ownership.
By the end of a 25-year mortgage term, Shared Ownership ultimately becomes more expensive. However, Shared Ownership buyers have the opportunity to 'staircase', buying a bigger share of their home and reducing their rental payments if they can afford to do so.
Even without staircasing, Shared Ownership works out significantly less expensive than the private rented sector, with the added benefit of security of tenure and an equity stake in their home that grows with house price inflation.
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