Date published: 06 September 2019
Firstly, Shared Ownership hasn’t fundamentally changed in the 40 years it has existed. At Stonewater, we acquired our first Shared Ownership home in the 1980s, so it is time to explore what fit the needs of a modern housing market and customer aspirations.
Stonewater supports improving access to homeownership as a choice of tenure alongside other Affordable Rented homes. What is important is making sure that any alterations to the Shared Ownership model do truly enhance access for customers, as well as ensure housing associations are able to continue building more Shared Ownership homes.
Secondly, the idea of reducing staircasing requirements and challenging whether some of the costs incurred in staircasing can be reduced is a good one.
At present, shared owners can staircase in increments of a minimum of 10%.
To date, Stonewater has provided 2,500 Shared Ownership homes, with 1,000 more planned over the next three years. In our experience, the cost to a shared owner per transaction is usually around £1,000.
This is mainly made up of their own legal costs, valuation and any fees required to adjust their lending requirements. As with all shared owners, it also includes Stonewater’s administration costs and legal fees.
We are very conscious of the cost barriers around Shared Ownership and already offer £500 cash back on any staircasing transaction.
We are also exploring the provision of a maintenance package for shared owners to purchase at an annual fee that will cover the cost of labour for any repairs required to their homes.
However, we find that, even with incentives, only around 5% of customers currently staircase each year. They mainly do so at the point of sale in order to open the property up to the wider housing market and exit.
The government’s idea of a customer savings account that when it reaches 1% of the value of their home is used to buy 1% equity is very appealing.
We would be really interested to work with the Government to explore how this could be made to work in practice.
Another interesting approach is one taken by Metropolitan Thames Valley, where their shared owners are given the opportunity to overpay their rent in return for an annual 1% increase in equity.
On some of the other key proposed changes, we see no real issue for us in abolishing the eight-week pre-emption clause. In practice we rarely hold our shared owners to this and allow them to market the homes in the traditional way much earlier.
Replacing this approach with a first refusal seems sensible – we think 10 days is reasonable. If we decide to buy back a home, the fastest we could do this would be eight weeks, but 16 weeks would be much more realistic to accommodate the often-unpredictable delays encountered during the sale process.
On the use of a house price inflation-based model for valuation, this could work. There are two obvious caveats. One would be the likely increase in appeals by shared owners over the valuation of their home, as a house price inflation-based approach may well over-value it.
A second issue would be that if or when Shared Ownership becomes a significant part of a local market, valuations may still be needed, otherwise the valuation of the home would influence the House Price Index rather than follow it.
A final point concerns the introduction of a new Shared Ownership model.
If the new approach applies only to new Shared Ownership properties, there is a danger of creating a two-tier shared ownership system, with existing Shared Ownership homes potential being devalued as a result
However, if the scheme is applied to new as well as existing homes, this will affect the financial modelling housing associations have carried out to make existing schemes stack up.
Whatever approach the government decides on, its introduction will need to be carefully considered. We look forward to working together on delivering solutions.