The Unaffordable Affordable
Published 3rd November 2022
When did you say no to a shared ownership home?
Was it before you realised it’s not a type of commune or student-share, but rather a part-rent/part-buy affordable housing tenure that’s been knocking around since the 1970s? Maybe it was once you’d done a little digging and discovered that – even if the incredibly low deposits would get you onto the property ladder – the combined monthly payments of your mortgage, rent (that would increase every year), and service charges were still way too much to handle.
Were you put off by the crippling legal fees involved every time you bought more shares? Valuations, solicitors, and paperwork galore could easily lump you with a £2-£3k bill. Or was it once you’d heard that some housing providers contractually blocked their leaseholders from ever staircasing to full ownership? With little-to-no regulation over what housing associations or private developers can enforce, you could have ended up with unfeasibly limited staircasing options or had your shares permanently capped at 75%, remaining ever under the influence of your housing provider.
Was it more than a little discouraging to find out that you would have to pay the full cost of any maintenance work, no matter how much of your home belonged to you? With no regard to your finances or plans for the property, you would pay for what your housing provider owned. In the past few years, there has been a multitude of homeowners facing life-changing maintenance fees. The most infamous example that devastated London leaseholders was the cladding crisis of 2020. Among the multiple systematic failures that affected the lives of roughly 3 million people from various types of housing tenure, it painted a painfully ugly picture of the division of costs in shared ownership (SO).
A survey by End Our Cladding Scandal (EOCS) interviewed 352 affected households: out of 106 homeowners who had received estimated costs, 51% faced a personal bill of over £20,000, and 35% faced paying over £50,000. Of the survey participants, 82.8% lived in SO, and out of those facing potentially bankrupting fees, 67.3% owned half or less than half of their home. There are strict criteria around who qualifies for SO, and you wouldn’t have thought that “has £20,000 to hand” would ever be one of them.
The fallout of the cladding crisis is ongoing, and it stands as an extreme example of the very worst of dangerous building regulations, insufficient government policy, and corrupt housing management. But it also brought to light the real and frightening vulnerability of those in SOs and the undeniable irony that people in an affordable housing tenure were paying substantial amounts of money for things they didn’t own.
The mounting suspicion towards affordable housing tenures and their subsequent lack of movability has left developers with less and less incentive to build them, so if (despite the less-than-favourable conditions) you did the maths and found SO could work for you, were you then stumped by the lack of choice? The lack of availability? You wouldn’t be the only one.
In London, where overcrowding is currently 5 x higher than the national average, only 3,471 new SO builds were completed (with 3,740 completed in the South East of England). Despite there being a steady increase in new SO builds (with the exceptions of 2015-16 when the new affordable housing programme was launched, and 2020-2021’s pandemic restrictions,) the reality is that it’s barely a drop in the ocean when weighed against the need for permanent options of affordable housing. (This has become even more apparent with the almost complete dissolution of Social Rent and the rise of Affordable Rent, which can be up to 80% of private rent prices.)
While there may have been 52,100 new affordable homes completed across England in the past year (16,984 of them being shared ownership), according to an estimate commissioned by the National Housing Federation (NHF) and Crisis from Heriot-Watt University, around 340,000 new homes need to be supplied in England each year, of which 145,000 should be affordable. Since 2000, we have heard yearly government aims of supplying 250,000-to-300,000 new permanent dwellings, but since then the annual average of completed permanent dwellings has only been 143,318.
A housing shortage, stagnant wages, rising interest rates, unreasonable rent prices, and a cost of living crisis are pushing the dream of stability further and further away for anyone not born with a hefty savings account. Across England, homes typically cost 9.1 x a full-time earner’s annual salary, but it’s at its worst where property prices are at their highest in London and the South East. Anyone looking to make a permanent home in either of these areas will have 7-to-11 years of saving before they have enough for a traditional deposit. That’s 7-to-11 years of trying to consistently save through the unstable contracts, rent levels, and poor living conditions that hound the private rent sector.
And when that still seems like a better deal than any customary tenure of affordable housing, you know things have to change.
In 2021 the government did promise updated regulations for SO properties developed through the government’s Affordable Homes Programme from 2021 onwards. These changes included lowering the initial purchase share minimum from 25% to 10%; allowing staircase purchases of 1% for the first 15 years; a 10-year Initial Repair Period (IRP) where the landlord fully covers the costs of necessary maintenance work, but only for external or structural parts of the building (a yearly application by the shared owner has to be made to receive a £500 contribution towards internal repairs); and enabling buyers to sell on the open market after 4 weeks instead of 8.
These changes might alleviate some of the problematic restrictions of SO and offer a significant – albeit short-term – reprieve from intimidating maintenance costs. Still, they could also add new tension for homeowners establishing what counts as essential and genuine repair work made by the landlord.
However, financially, these changes offer little to challenge the strain of SO’s compiling monthly costs. At the end of the day, you and countless others will continue to opt out of shared ownership because, aside from the temptingly low deposits, nothing else about it is that affordable. We know it can be better; we know it can go further. So much more is possible, and you’ll experience a real change with Keep Homes.
"We want you to fully own your home"
If it’s broke, fix it.
As part of our goal we’ve taken on SO and remodelled it to fit what people truly need: a home to keep. Your Keep Home (YKH) will have the good parts of SO – a low-deposit route into home ownership, with lower monthly costs than private renting or the open market – and lose the bad parts. Because while traditional shared ownership (TSO) undeniably gives you easier access to the same property on the open market, YKH goes further and will always give you more for less.
Unlike any other shared ownership out there, YKH homeowners will never pay rent. Whatever the property type, whatever percentage you own, and however long you’ve been there, you will never pay rent for your own home. We don’t want you to feel like a tenant; whatever you spend on your property will only invest further in your future, not line our pockets.
Staircasing with us is streamlined and barely a fraction of the cost: with no limits or conditions for your share purchases and a 5-year price freeze from day one, you’ll always know what future shares are worth. This means you’ll never need another valuation unless you’re remortgaging, and staircasing won’t cost you a penny more than the share-worth and a small legal administration fee. Your Keep Home can give you proper stability and empower you to beat the house price inflation/wage price inflation mismatch. Like every other homeowner, you deserve to fully benefit from any rise in your property’s value.
When it comes to maintaining freehold/leasehold properties, we’ll pay our share. No longer responsible for the total cost of maintenance charges, any fees will always be split between you and Keep Homes based on the division of equity: if you own 60% and we own 40%, that’s exactly how the charges are shared. There’s no time limit on this; we’ll do our part for as long as you’re with us, because why should you pay for what you don’t own?
Like any TSO, deposits can be anything from 5% of whatever initial share you settle on. But with our lower monthly costs of fair service charges, no rent, and bargain staircasing you’ll likely find that you can afford an even more significant share of your home, free from the monthly expenses of a TSO. With Your Keep Home, you’re paying less and owning more.
And lastly, you might be wary of the market and sceptical about re-selling your house from the way many housing providers handle them, but there will always be a demand for quality affordable homes, especially with the changes we’re bringing. So, if you choose to move on, we’ll do everything we can to keep your schedule on track. We’re confident that in the first four weeks we’ll be able to find a buyer who fits the criteria for affordable housing. But if you’re tight on time or no buyer comes forward, there are options for you to fast-track your sale.
A back-to-back sale where, despite not owning the property outright, you can put it up on the Open Market, and then when it sells you use the difference to pay Keep Homes for the remaining shares.
Another option is for Keep Homes to buy back the property from you at a price that fairly represents its market price.
Whether the right change takes you on to another Keep Homes property or not, our goal is to keep you moving forward. TSO re-sales are often stressful and stalled, but we know it doesn’t have to be that way.
Keep Homes will cut your monthly costs, give you unlimited flexibility, and focus first on locations where the housing crisis is at its worst. By providing homes that are more appealing for you to live in, and more appealing to build, we can start making home ownership a reality for everyone. Our homes will always be designed with you in mind.
Welcome to The Ethical Housing Market.