What is the future for shared ownership?

But with this background controversy, as Labour looks to scale up social rent, will it therefore scale down shared ownership, by re-routing grant towards social rent? Mr Partridge does not think so. “I think the general view that seems to be coming out from officials and from Homes England is that it’s not about increasing social rents at the expense of shared ownership. It’s about increasing social rent in and of itself,” he says.

Ms Phillips, however, remains sceptical about its value, even outside London. “In some parts of the country, private rents are fairly stable and static, and that means the above-inflation rent rises in shared ownership can result in very poor value for money over the long term,” she says.

“People emphasise that you are still building up equity, but it has to be enough that it means something,” she adds. “If shared owners can’t accumulate sufficient equity on a share in a ‘starter home’ to make selling worthwhile, then what’s the point?”

One of the big questions about the future of shared ownership is who is it actually for? With only an estimated 2% to 3% of the total stock being ‘staircased’ up each year, the reality for many people is that they will just keep living as shared owners. Is this a good result?

Ms Nettleton says that there are some buyers for whom it works well under these circumstances. “What you’re seeing now is a much broader range of buyers: we are seeing people that are wanting to downsize but don’t want to go into retirement living… or families choosing shared ownership because it gives them security not available in the PRS.”

Gulf between provider and owner

Ms Phillips, though, is frustrated by a lack of long-term data about outcomes for shared owners. “For some people, the security turns into being trapped. They can’t sell and they can’t afford to stay,” she says. “There is an ongoing gulf between the social housing provider perspective, which tends to focus on demand and access, and the shared owner perspective. Satisfaction typically declines over time. Even then, it’s quite possibly overstated as new tenant satisfaction measures don’t assess satisfaction regarding ongoing affordability, or with shared ownership as a ‘foot on the housing ladder’.”

For Mr Bailes, there should be more focus on making it possible for people to staircase to full ownership. He says this could be achieved by fixing the overall price of the property, rather than asking buyers to purchase their future shares at the current market rate.

“Our modelling suggests that if you were to fix the price for five years and then index it at [inflation] thereafter, and then assume that people staircase much earlier than they would have under the existing model, what is lost in terms of windfall profits on sale would be gained by reducing the period over which we offer a subsidised rent. Earlier sales would also help providers free up balance sheet capacity and recycle grant more quickly.”

Floris ten Nijenhuis, founder of Stairpay, which assists shared owners in scaling up to full ownership, thinks that many more people could staircase if they had more support to do so.

“Typically, once you move into your shared interest home, the housing association is completely passive as to what happens to you,” he says. “I think the reason why people don’t staircase is that no one pushes them to and no one educates them on the process.”

He says that the shared ownership process should involve a much more thorough initial assessment of what people want from the product at the outset.

“That comes down to not only their ability to get 100% ownership, but also their intentions,” he says. “I think if you find someone who is in a public sector role with a salary which probably isn’t enough to get them to staircase, but they can afford the rent, and they’ve got 50% equity in the property, which is going up in value, and they’ve got security of tenure… then I think that’s a good use of shared ownership. Housing associations aren’t required to look beyond the affordability of the first 12 months, which I think is just completely wrong.”

This can cause problems because buyers can be required to purchase the maximum share they can afford, which will become unaffordable for them once rents, service charges and mortgage repayments rise.

Another important factor in the future of shared ownership is the growing appetite of investors. For-profit providers have increasingly looked at shared ownership as a tradeable asset in recent years, enticed by the inflation-linked rental payments and the capital gains on the property.

Blackstone-backed Sage Homes and UK-based institutions Legal & General and M&G have made major moves into the sector, purchasing large portfolios from associations and hoovering up properties developed by private builders due to planning requirements for affordable housing.

Mr ten Nijenhuis says: “I think private investors are going to end up taking over shared ownership in the next 10 years. Those people mostly look at it because of the fact that it’s inflation-linked, especially the rent, because it allows them to match pension fund liabilities,” he says.

“When you look at the new shared ownership being delivered, a large and growing proportion of it is being delivered by the for-profits. I think that as more institutional money comes in, eventually it’ll make more sense for those people to be the ones delivering shared ownership and for housing associations to focus on their core product, which is social rent.”

This likely gives shared ownership a future, regardless of what the government thinks. But as the product increasingly becomes a profit-generating asset for pension and investment funds, ironing out the problems and understanding who it really works for has never been more important.

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