Last month, the government launched a consultation to develop a new national model for shared ownership, aiming to make it easier for people to buy more of their home in increments of just one percent, sell their home and get a mortgage.
As Help to Buy comes to the end of its shelf life in 2023, shared ownership is being positioned by government as the natural successor.
But with just one percent of the UK’s population living in shared ownership homes, the government is anxious to increase its popularity by breaking down the barriers and restrictions that come with buying through the part buy – part rent model.
The review will seek to allow people to buy as little as one percent at a time, removing the current 10% barrier, to make full home ownership more accessible to low-income groups.
But presenting shared ownership simply as a route into full homeownership misses the point.
For over 40 years, shared ownership has been a bedrock for families and individuals who have been priced out of the housing market, providing an alternative to private rent and providing thousands with a chance to call a house a home by buying into the housing market with its potential for capital growth at an affordable scale while stabilising future rent costs.
Importantly, shared ownership homes provide stability and create the foundations for real independence, ensuring that residents are not at the whim of landlords raising rents beyond inflation and market rates.
This stability allows shared owners to plan their own lives, and have greater control of their finances.
There are clear practical challenges that also come with sweeping aside the 10% threshold.
Paying in 1% increments will be expensive.
According to the Homeowner’s Alliance, it costs around £2,000 in conveyancing, stamp duty and mortgage fees to purchase an additional stake – of any size – in a shared ownership property.
Data shows that households living in shared ownership tend to have lower incomes than those living in outright sale, and their capacity to save up may be limited.
For shared owners with limited equity or saving power, a lifetime ISA could offer a better path to staircasing.
Saving through an ISA would allow savings to build up before buying a bigger stake in the property- which could be say 5%, reducing the need to pay for disproportionately expensive administrative and legal fees.
By not ploughing all their savings and equity into the home in one percent stages, shared owners will be able to keep their options open and access their savings if life throws a curve ball or to choose a point when it makes sense to buy more equity and reduce their outgoings.
In reality, enabling a shared owners to staircase in one per cent increments will only help a handful of existing shared owners.
But increasing the supply of new homes across all tenures, whilst investing in shared ownership as a real alternative to Help to Buy, will make homeownership accessible for a wider range of people.
Above all, if the government is truly serious about tearing down the barriers to home ownership, it first needs to tackle the root cause of affordability in the housing market.