Can we build a bigger and better partial-ownership sector?

The government’s new model of shared ownership (SO) aims to make it “fairer, more affordable and more consumer friendly”. This is a laudable aim, but it will challenge some current providers and funders. And while 10% shares open up the market to some, without doubt it will also increase the number of permanent partial owners.

In reality, and despite modifications made over time, SO is still fundamentally unchanged since it started in 1980 as a government scheme – part rent, part own and, until now, with 100% repairing obligations and increasing numbers of households becoming permanent partial owners. A crude estimate would suggest around 400,000 shared-ownership homes have been built in England and around half remain as SO. That’s about 10,000 homes per year since the start, though recently output increased to about 15,000-18,000 before falling back. This was in large part due to registered providers (RPs) reworking their development programmes to focus on cladding and net-zero agendas.  

“What is clear is that the partial-ownership sector as a whole has become overly focused on sales and getting people in, and insufficiently focused on their customers’ subsequent journeys through to full ownership”

There is no lack of demand – the supply is just limited and falling. Given the constraints on the current main providers, is it not time for new providers to come into this market to inject new energy and more provision?

To a degree they already have, in the form of for-profit RPs, but there is now evident appetite from a wide variety of investor-led channels to start supplying variants of SO. This opens up the possibility that SO and partial ownership could be expanded more generally and at the same time break more fully from the constraints of government-led funding.

This might bring in more competition and innovation. While RPs would continue to be important providers, the partial-ownership provision would be likely to more fully respond to market demand. In so doing, there will be a need for much better reporting and greater transparency in relation to all forms of partial ownership, including hard data on arrears and possessions, partial and full staircasing, and customer satisfaction. Markets need proper market data and intelligence to thrive and expand.

What is clear is that the partial-ownership sector as a whole has become overly focused on sales and getting people in, and insufficiently focused on their customers’ subsequent journeys through to full ownership. Too much attention has been focused on the receipts from sales and too little on the longer-term customer experience, or the journey to exit. Indeed, as one SO staffer recently commented, it was treated like “housing’s dirty secret” – in essence fulfilling a policy requirement that sat alongside their access to grant funding for rented homes.

The time is right to reflect on whether a more open partial-homeownership market driven by competition would lead to increased output, better performance, more advice and support, and higher levels of customer satisfaction. A significant number of investor-driven firms are now entering the partial-ownership market. The question is whether this new appetite can be harnessed to really boost output and provide some genuine competition and market innovation, as well as some decent market metrics.

“We probably all agree that partial ownership in whatever form needs to become a bigger part of the market and, within that, SO has a key role to play”

It is probably time, too, to do more by reintroducing partial-ownership options for buying existing homes and for significantly boosting the after-sales support all partial owners both deserve and need. They should be able to, where possible, progress their journey to full ownership – aided, not least, by an annual review delivered by the provider and perhaps alongside some incentive packages.

We probably all agree that partial ownership in whatever form needs to become a bigger part of the market and, within that, SO has a key role to play. Progress has been too slow to date. If we stick with where we are now, capacity will shrink at a time when it needs to grow.

Given the clear investment appetite to provide more partial-ownership provision and to improve products and the customer journey, that capacity and appetite should be embraced. It holds out the prospect of delivering a partial-ownership market more fit for the 21st century, and one in which the aspirations and needs of buyers are more likely to be met properly.

Let the debate begin.

Professor Peter Williams, researcher and departmental fellow, University of Cambridge’s Department of Land Economy