Amanda Bryden, head of Halifax Intermediaries reveals three ways to boost affordable homeownership.
We are in an era where millions of people feel like homeownership is out of reach.
They either don’t have the required deposit to put down, their income doesn’t stretch to get a sufficient mortgage, or both.
According to the Resolution Foundation, only 4% of young non-homeowners have both the savings and the earnings to buy a typical first-time buyer property in their region.
Unlocking homeownership
If getting on the ladder in the traditional way isn’t an option, an affordable homeownership scheme, such as shared ownership, offers an alternative route.
Of course, no scheme is perfect, but they can offer an opportunity for those who otherwise feel priced out of property ownership.
That has wide-reaching benefits because having a stable home without needing to continually uproot has deeper advantages for families and individuals, as well as for wider society, from better health outcomes to stronger communities.
Costs need to be carefully compared and understood, but it can be cheaper than renting over the long term. With every monthly payment paying down at least some of the mortgage balance, and the potential for house price growth, the shared owner could see an increase in the value of the share they own. Ultimately, this helps them to grow their wealth and improve their future financial security.
Importantly, it provides a reliably stable shelter where the owner has more control than in a purely rented property.
Growing shared ownership
Shared ownership is a tried, tested and long-established scheme, with the potential to support more people into homeownership. It’s well positioned to at least partly fill the vacuum left by the closure of Help to Buy.
By supporting this sector, we can help more buyers into their own homes and encourage much-needed investment into the supply of new affordable housing.
A win-win. But how do we get there?
There’s no silver bullet, but below are three ways we can improve access to the housing market for more of those who currently feel excluded.
- Boost consumer awareness
Despite being one of the older affordable homeownership options available, awareness of shared ownership remains low. According to Barratt Homes, more than half (58%) of first-time buyers are unfamiliar with the scheme.
We need to boost awareness of how shared ownership can help people onto the property ladder, address current misconceptions of the scheme, whilst being mindful it’s not the perfect solution to solve the housing crisis.
Of course, shared ownership is not the right solution for everyone but, for the right people, the benefits can far outweigh the negatives.
For many, being able to own a stake in their own home beats the alternative – a lifetime of renting a home and the impact this has on the ability to save for and own an asset in retirement. In reality, many people may never staircase to full ownership of their shared ownership home, but buyers often cash out after a few years and use their equity to put down a deposit on their next home.
Shared ownership can help lower the affordability barrier for those who want to buy outright but can’t afford to save the required deposit or get a mortgage big enough for outright ownership.
All stakeholders – lenders, developers, housing associations and brokers – have a role to play to inform and educate potential buyers who could use the scheme, how it works and what the benefits and drawbacks are.
The newly established Shared Ownership Council is working hard to develop a cross-market approach to this and to help the sector speak with one consistent voice.
The Council was designed to agree, promote and maintain best practice in this important sector and Halifax is a founder member alongside many cross-industry experts from housing associations, mortgage distribution, legal firms, and lenders.
- Encourage more private investment
In recent years we’ve seen the growth of private sector schemes that work on the same principle as shared ownership but, instead of a housing association, a private business part-owns the property with the buyer.
Through our build-to-rent provider, Citra Living, we support tenants with quality rental homes, giving them the option to purchase their property later through our rent-to-ownership Pathways scheme.
At Halifax, we believe the private sector has an important role to play in funding affordable homeownership. In theory, these new schemes backed by investors will help grow demand from home buyers, which in turn will give developers confidence to invest further in the supply of affordable new homes.
- Increase access to products, expertise and affordable homes
Ideally, we need more lenders to support the shared ownership sector and we’re hopeful this will happen over the next few years, as supply and demand grows.
It’s important that more demand feeds into more supply – of homes, mortgage products and advice – and lenders obviously have a role to play in growing this market and educating brokers and borrowers on the benefits.
We already have some great specialist shared ownership mortgage advice and conveyancing firms that play an important role in the sector and support borrowers with their expertise.
But all brokers can play their part by bringing shared ownership into the client conversation at an early stage, so aspiring homeowners understand the scheme and how it could help them get mortgage-ready and onto the ladder.
Whether you advise these clients directly or refer them to existing specialist advice services is up to you. What’s important is that all elements of shared ownership – homes, mortgages, demand and advice – grow in sync.
Access to homeownership
Shared ownership won’t solve all the problems first-time buyers face, but growing this sector along with other affordable homeownership schemes is one way to boost access to finance and housing for those currently struggling to get on the ladder.
We want to help those who aspire to homeownership to achieve it, so they can improve their life chances and build better communities.
Shared ownership could be one of the keys that unlocks access to the property market for many more people than it currently helps.
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