The decline of shared ownership and the need for creative homeownership alternatives

Because of this, now more than ever, it is crucial for the private sector to step up and provide innovative solutions to bridge the widening gap between renting and owning, particularly for those in the ‘squeezed middle’.

Shared ownership was designed to offer an affordable route onto the property ladder. Over the years, it has delivered tens of thousands of homes but, in practice, relatively few individuals have staircased to 100% ownership.

In a recent report, property company Savills estimated that there were almost 250,000 shared ownership homes in the market, but the number of people able to achieve full staircasing was fewer than 3%. The complexity of staircasing, rising house prices, inflationary pressures, soaring service charges and personal financial constraints often prevent buyers from purchasing additional shares over time.

Despite the recent changes to shared ownership via the new lease structure, staircasing rates remain far weaker than the government would hope for. Many remain in a perpetual cycle of part rent, part own, with limited prospects of ever owning their home outright.

“With the government’s growing focus on social housing and the likelihood that grant funding will be diverted away from shared ownership, the scheme will struggle to expand”

With the government’s growing focus on social housing and the likelihood that grant funding will be diverted away from shared ownership, the scheme will struggle to expand. In fact, it may even contract.

Many housing associations, once key supporters, are now unable to invest because of legacy issues in their portfolio, leaving the scheme to be supported primarily by for-profit registered providers. Without government grants, achieving the necessary returns will become difficult, pushing the market to explore other pathways to homeownership.

This is where the private market can play a pivotal role. Unlike government-backed programmes, which can be limited by political cycles, private capital offers the flexibility and creativity needed to tackle the housing crisis from multiple angles.

One such model is Rent to Buy. Under this flexible scheme, individuals rent a property they intend to own while building up their deposit. Unlike shared ownership, the model fixes everything from day one: rent, savings and final purchase price, giving a clear view of monthly outgoings to achieve a targeted deposit.

Those who decide not to buy can exit the scheme while retaining their first-time buyer stamp duty exemption. This flexibility is crucial for the growing numbers who want to own a home, but are not in a financial position to secure a mortgage.

According to the Institute for Fiscal Studies research institute, homeownership rates among those aged 25-34 has declined by 33% since its height in 2000. Innovative private market initiatives do more than offer a route to ownership, they also serve as a safeguard against the need for social or affordable housing in the future.

According to a recent report by the Pensions Management Institute, by just 2035, renters in retirement will cost the Treasury £15.4bn, because of the falling rate of homeownership and an ageing population.

“By providing more options for aspirational buyers, the private market can help stimulate demand, which in turn drives the supply of new homes and regional growth”

Given the increasing strain on government-backed housing, it is in the government’s interest to support private initiatives that keep people in the private housing market. Without such options, the pressure on social housing will only increase, exacerbating the housing crisis.

While private market capital offers significant potential, it’s important to acknowledge that the private sector alone cannot resolve the housing crisis fully. Government support, backed by progressive policies and agencies like Homes England, must play a crucial role in fostering innovative housing solutions. Something as basic as creating a housing incubator backed by seed capital to help new models scale could go a long way. Without such support, the real estate sector is likely to remain limited by its traditional methods, hindering efforts to tackle long-standing issues effectively.

Creating more routes to homeownership is not just a moral imperative, it’s also an economic win-win. By providing more options for aspirational buyers, the private market can help stimulate demand, which in turn drives the supply of new homes and regional growth. The key is to offer choice – whether through mortgages, Rent to Buy, shared ownership, or other innovative models.

This diversity of options will ensure that different demographic groups can achieve their homeownership goals, while simultaneously boosting housebuilding across the country.

Trevor Stunden, chief executive and founding partner, Kettel Homes