For people struggling to buy a property, shared ownership schemes can provide a solution.
However, demand heavily outstrips supply and getting a mortgage for a part-owned flat can be a hassle.
The National Housing Federation's ‘promoting shared ownership’ week starts next month, highlighting their worth as an affordable housing solution for people on lower incomes.
Elizabeth Austerberry is Chief Executive at Moat Homes, a leading housing association in the South East of England.
She says Government needs to do more to promote shared ownership and help develop other schemes to help people on the road to owning their own property.
Central Lobby: How many people approach Moat every year about shared ownership?
Last year we had 11,000 enquiries and could only deliver 300 units, so there is definitely a demand for the product.
Shared ownership as a product has been around for a long time but has never had the sponsorship and interest from Government that we think it deserves.
It is not the solution for everybody, but for some people it really does help to get them on the housing ladder. It is one of the few intermediate housing products available and it is a way of allowing low income families to move through to full ownership in a housing market that is otherwise pretty unforgiving.
What sort of people use shared ownership schemes?
The demographics of people that have successfully used shared ownership have changed. It used to be people who would be struggling to get on the housing ladder. Now we see young professional people whose incomes fall below the £60,000 threshold who are finding it impossible to access ownership by any other means.
One of the things we have identified is that shared ownership works better if your income is likely to perform better than the house price inflation, and that is clearly quite difficult.
That does not give us a problem (as a housing association) but it becomes something other than a transitional product.
How does it work?
You can buy a share, normally 25% or 30% of the value of the home. You pay rent on the bit that you don’t own and over time as your circumstances change you have the ability to buy the rest, but pro rata to the then current market value, not at the time you entered into the transaction.
What tends to happen is that people who aspire to shared ownership need a mortgage product that enables them to manage without a large deposit, ideally 90% to 95%, because by definition these people do not have the financial strength to enter the housing market.
There are relatively few building societies that are willing to provide mortgages on that basis, they often say that it is to do with risk but statistically it is not a very high risk product. It is generally performs much better than for example self-certifying mortgages.
The volume is relatively small and there is a bit of extra work to do to approve that mortgage because there are two parties involved, with the housing association owning part of the property.
How has the financial crisis changed the lending environment?
The Bank of England is rightly focusing on the prudent management of banks, but it is very likely that higher loan-to-value mortgages will be increasingly penalised from a regulatory point of view.
Building societies and banks may be required to set aside more capital for those mortgages. The inherent cost of providing these mortgages may go up if they are perceived as high-risk.
It is a pretty blunt instrument to put them in the high risk category; they are more complex than that.
How can Government help?
We want to make it easier for people to get mortgages and we want to continue to provide shared ownership, but that is not the only solution.
It needs to be part of a suite of intermediate housing products that work for people in a variety of circumstances. People who aren’t quite suitable for shared ownership should have other options.
How will the changes to housing benefit and other benefits impact on housing associations?
It will be quite dramatic and will have a knock-on effect on how many homes we can build and how many shared ownership homes are out there.
We are going to have a problem with people managing with less money than they are used to, for example they might be under-occupying or would be hit by the benefit cap.
Then you have the fact that people are going to be paid housing benefit directly, as opposed to being paid directly to the landlord.
The inevitable effect is that housing associations will have much greater levels of arrears and the income will be less certain.
We have always have the ‘can’t pay’ and the ‘won’t pay,’ but now we will have the confused and the people who are genuinely trying to manage on less income.