We’ve seen in the previous section how Shared Ownership appeals to a different market from open market sale. Developers can sell homes in bulk to registered providers or investors, who then sell the equity stakes on to individual households.

This is a win-win scenario. Aspiring homeowners will enjoy a broader range of housing options to choose from. Housebuilders benefit from freeing up their capital faster. Government will come a step closer to achieving its housing delivery ambitions.

1. Residents win

Our modelling shows that the monthly cost of buying a 50% Shared Ownership property could be 27% lower than using the same deposit to buy outright. This widens the range of households who can afford to buy.

Increasingly, affordability stress testing is limiting the number of households able to access home ownership. Unless those stress tests are relaxed or removed, they will only get more restrictive as interest rates rise over the next five years. Shared Ownership offers access to the same property with lower monthly housing costs, lowering that affordability barrier for households who can’t afford to buy outright.

Alternatively, households could use Shared Ownership to purchase a larger home than they could afford to buy outright. This is similar to how many households currently use the Help to Buy equity loan scheme. This approach will grow in popularity as the equity loan scheme wraps up, particularly from April 2023 when Government intends to end it entirely.

Around 40,000 households become first time buyers each year through the Help to Buy equity loan. Of those, 38% or around 15,300 purchasers, could not have bought a home without the scheme.

If all this demand were to switch to Shared Ownership homes after the equity loan scheme ends in 2023, Shared Ownership supply would have to increase by more than 150%.

2. Housebuilders win

Shared Ownership offers housebuilders a way to broaden the range of products they bring to the market. That’s attractive at a time of slowing sales rates. Our analysis shows that sales rates have levelled off for the eight largest UK housebuilders since 2016, with falls over the last three months of 2018.

We’ve seen developers announce a flurry of bulk deals for Shared Ownership over the last six months, including Taylor Wimpey and Bovis. Some of these deals represent a discount to gross development value of up to 15%.

Part of this discount reflects the finance and marketing cost savings the developer makes by selling in bulk, which will become even more important as interest rates rise over the next few years. But it also demonstrates the scale of housebuilders’ appetite to recycle their capital and move onto the next site quickly. Whether selling in bulk to housing associations or directly to buyers, Shared Ownership can help housebuilders increase their rate of housing delivery.

3. Government wins

Government remains committed to delivering 300,000 homes per year in England by the mid-2020s. Energy Performance Certificate registrations suggest that 238,200 new homes were completed in England in 2018, a 12% increase on the previous year.

These figures are encouraging, but it’s difficult to see how delivery can accelerate much further without developing a broader range of housing tenures and types, as suggested in the Letwin Review.

First tranche Shared Ownership sales have averaged just under 10,000 per year over the last three years. That’s a substantial increase on the 2012-15 average, 7,700, reflecting the scale of Government support in the 2016-21 Affordable Homes Programme: over £4 billion to fund 135,000 new Shared Ownership home starts by 2021.

As well as purchasing Section 106 stock, registered providers are developing their own Shared Ownership homes on land-led schemes. The receipts from these first tranche sales can help them cross-subsidise other affordable housing tenures.

Private investors are already involved, acquiring both Section 106 stock and doing bulk deals with housebuilders to build portfolios of scale. With Government inviting proposals for how to unlock more Shared Ownership development through private investment, this trend is set to continue.

Our analysis suggests that Shared Ownership sales supported just under 5% of new housing delivery between Q2 2013 and Q1 2018. In some local authorities this proportion is far higher: in the Test Valley first tranche Shared Ownership sales accounted for 19% of new home EPC registrations. Shared Ownership supported more than 15% of new homes in a further four local authorities.

Shared Ownership can also help support the Letwin Review’s recommendations through increasing the supply of housing for older people. Shared Ownership for Older People is a distinct scheme offering homes for the over-55s.

Our previous research has shown there are 150,000 older households who own some housing equity but could not afford to buy a purpose-built retirement apartment outright. Shared Ownership, whether specifically for older people or not, could unlock this market, releasing the equity stored in their former homes and freeing up family housing for younger households.

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