Sharing the spoils event: Vidhya Alakeson presentation

A Foot on the Ladder: How shared ownership can bring ownership into

reach

Vidhya Alakeson Richard Donnell

Ben Marshall Geeta Nanda

David Lammy MP Patrick Butler

@resfoundation

……………………………………………………………………………………………………..

#sharedownership


reach Vidhya Alakeson

Resolution Foundation

www.resolutionfoundation.org

@resfoundation

……………………………………………………………………………………………………..

#sharedownership

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#sharedownership

Home ownership is in decline ……………………………………………………………………………………………………..

Housing tenure, England

Housing tenure, London

Housing tenure, under 35, low to middle income households

………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………

…………………………………………………………………………………………………….. But good reasons to promote ownership

#sharedownership

• Aspiration to own remains strong – 92% of our survey respondents would prefer to own

• Ownership currently offers greater security of tenure

• Satisfaction highest among home owners

• Asset building – large wealth gap between owners (mortgaged and out right) and renters

– Median wealth including property among mortgagors - £245,000

– Median wealth including property among private tenants - £25,000 (social tenants - £15,000)

………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………

Help to Buy helps those whose principal barrier is a deposit

#hometruths

Peter and Sue Cambridge: Help to Buy: Monthly costs: £1557 (85% net income) Shared ownership: Monthly costs: £772 (42% net income) Exeter: Help to Buy: Monthly costs: £970 (53% net income) Shared ownership: Monthly costs: £481 (26% net income) London Borough of Kingston: Help to Buy: Monthly costs: £1724 (94% net income) Shared ownership: Monthly costs: 855 (46%)

Net household income: £22,000

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The case for shared ownership ……………………………………………………………………………………………………..

#sharedownership

Low and modest income households

• More affordable – bridge between renting and owning

• Greater security than today’s PRS

• Route to asset building

• Lower risk than conventional mortgage – (but smaller asset)

Housing market

• Source of new supply

• Improving liquidity in the overall market

• Equity funded models reduce market volatility

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#sharedownership

But the current product is not fit for a bigger purpose ……………………………………………………………………………………………………..

• Not consumer-focused and differentiated by consumer group: staircasers and long term part-owners

• Inflexible – too bound up in rules and regulations set by government, local authorities, lenders and providers

• Lack of scale – hard to get into and small secondary market limits moving easily within shared ownership

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#sharedownership

Lessons from innovations so far ……………………………………………………………………………………………………..

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#sharedownership

Lessons from innovations so far ……………………………………………………………………………………………………..

• Innovations take time to be understood

• Innovations too often start with providers not consumers

• Savings need to be built in to the product

• Flexibility is critical – for the product and for providers

• Investment and lender buy-in require scale

………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………

#sharedownership

• One product with multiple entry routes: traditional shared ownership, home purchase plan, rent to buy

• Two distinct customer segments – stronger incentives to staircase for one and greater mobility and asset protection for the other

• Greater choice over property types: the return of DIYSO

• New set of standards focused on flexibility, simplicity and transparency

Designing the product for the future ……………………………………………………………………………………………………..

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#sharedownership

• A new equity fund to support new shared ownership homes

• A more proactive role from local authorities in planning for and supporting shared ownership

• The development of larger portfolios of assets across the sector to kick start the institutional market

• A new approach from Housing Associations – equity to facilitate development and DIYSO, consolidation and coordination across the sector, core product not a cross subsidy

Making shared ownership the fourth tenure ……………………………………………………………………………………………………..

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reach Vidhya Alakeson

Resolution Foundation www.resolutionfoundation.org

@resfoundation

……………………………………………………………………………………………………..

#sharedownership

@BenM_IM

#sharedownership

“You can just about afford to rent

so what makes you think you can

afford to buy a house…”

“I think there’s a lot of mis-

information [about shared

ownership] because where do you

hear about details and stuff like that?

I just heard of it years ago, I just

thought it’s for nurses…”

“It’s like when it says on the news

the average person buying a

house in London is in his 40s, so

that don’t give no hope for young

people or anyone really.””

Version 1 | Public © Ipsos MORI

Q And what, if anything, do you think are the main causes of the current

housing crisis in London? (spontaneous)

Why?

47

39

37

14

7

5

5

3

2

1

1

Affordability of housing/ house prices

Over-population/ immigration

Lack of building/ housing supply/ investment

Planning/ ability to build/ land availability

Government policy

Economic backdrop/ lack of financing

Local government policy (e.g. housing allocation)

Renting - poor landlords

Poor housing choice

Poor housing quality

But to Let/ people buying properties and not living…

%

Source: Ipsos MORI/London Councils Base: Londoners who agree there is a housing crisis in London (829), 18 - 29 October 2013

Government policy including welfare reform and

legacy of Right to Buy

14


24%

42%

30%

35%

16%

31%

29%

31%

36%

31%

30%

30%

49%

54%

47%

46%

57%

38%

33%

47%

57%

35%

A third or less (excluding nothing) More than a third

18-24

25-34

35-54

55-64

65+

Owned with mortgage

LA rented

HA rented

Private rented / other

Owners

Social rented (LA & HA)

Age group

Tenure

Q Approximately, what proportion of your total household income AFTER tax and

national insurance contributions, do you pay in mortgage payments or rent (excluding

utility bills and council tax). Would you say it is….?

Base: 697 GB adults excluding those who own outright, 25 October-27 October 2013

Young/renters squeezed most by housing costs 15

Source: Ipsos MORI/Panorama


27

18

11 14

22

11 13 11 11

‘Debt peril’ – some low tipping points

Q. Thinking about the total amount of outgoings your household has – that is the amount your household spends to cover living costs and bills – what is the lowest this would have to increase for you for start to find it difficult to afford?

Social renters Private renters Owner

occupiers

Base: 2,016 GB adults 16-75, March 2013 (313 social renters, 289 private renters

and 1,384 owner/occupiers) Source: Ipsos MORI for Halifax

% By £24 or less

per month

% By £25-£49 per

month

% By £50-£74

per month

16


+9 +15

+20

+33

+40

+64

-20

0

20

40

60

80

Apr-11 Oct-11 Jan-12 Mar-12 Jun-12 Oct-12 Dec-12 Mar-13 Jun-13 Sep-13

House Price Outlook

– balance of %

higher minus %

lower (+)

Q. Do you think the average property price in the UK will be higher or lower in

12 months time or will it be the same? [respondents given average UK

house price sourced from Halifax HPI]

Source: Halifax/Ipsos MORI Housing Market Confidence Tracker

Base: 1,000-2,000 British adults 16+ (c400 PRS)

“Momentum behaviour”: house price/rent expectations 17

Rent outlook – balance of % higher minus %

lower (+)

+56 +56


70%

75%

80%

85%

90%

95%

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

Pre war Baby boomers Gen X Gen Y Overall

Q. If you had a free choice, would you choose to rent accommodation, or would

you choose to buy? % Buy

“The nearest the British have to a religion”? 18


For most, renting isn’t a tenure of choice

Q.

19

57% of non-homeowners…A similar

proportion believe that people can

never feel fully settled in rented

property.

47% think it is important for parents to

bring up children in a home that they

own, not rent.

61%

Unhappy

Neither 19%

13%

Happy

Q. If you were told that you had to rent, rather than buy, a house or flat for the

rest of your life, how would this make you feel?

Source: ComRes for BBC (2,009 18-29s,19-20 June 2013)

Source: Halifax, Generation Rent: A Society Divided?

Over half (52%) predict that Britain will

become a nation of renters within

the next generation.


35%

33%

11%

11%

3%

3%

3%

Size of deposits required

Property prices

The Government

The banks

Older generations for pricing youngpeople out of the market

I do not hold anyone responsible forthe difficulty of getting on property…

Yound people themselves

Responsibility: it’s the market, stupid?

Base: All non-owning/mortgaged 18-29 year olds who think getting on the property ladder is

difficult (1,748), GB, 20-27 March 2013 Source: ComRes/BBC

Q. Who or what do you think is most responsible for young people finding it

difficult to get onto the property ladder?

20


‘The fourth tenure’?

% No % Don’t Know % Yes

.,.whilst a government-

backed scheme helped you

buy the remaining share

(shared ownership)?

39%

29%

32%

…with financial help

from a private developer

shared ownership or

shared equity product?

24%

40%

36%

…with the assistance of

a government-backed

repayable low-interest or

no-interest loan (shared

equity)?

46%

27%

27%

Q. Would you consider buying a part share in a home…?

Base: All potential consumers (3,365)

Source: HCA Consumer demand and attitudes in the intermediate market (Ipsos MORI 2010)

21


1%21%

24%

53%

Scope to build awareness

I am interested in buying or renting an intermediate market

home and have already applied

I don’t know enough about intermediate

housing to know if I am interested or not

Q. Which of the following, if any, best describes your attitude towards

intermediate market housing?

I am interested in buying or renting an intermediate market home but have NOT

applied

I am NOT interested in buying or renting an intermediate market

home

Base: All potential consumers (3,365)

Source: HCA Consumer demand and attitudes in the intermediate market (Ipsos MORI 2010)

22

23%

18%

16%

14%

12%

12%

9%

6%

4%

24%

13%

3%

Multiple barriers but info & eligibility key

Q. Which, if any, of these do you think are barriers to buying a home through a shared ownership scheme?

Don't think I am eligible because of income

Want to buy without funding from anyone

Want more choice in type of property

Too difficult to sell on

Too difficult to arrange mortgage for these schemes

Couldn't buy in location I wanted to

Don't think I am eligible because of my job

Don't want to go through application process

Rules/conditions make it difficult to increase share/sublet

etc

Don't have enough information to know

None/there are no barriers

Other

Base: 591 private renters 16+, 11-24 November 2011 Source: Ipsos MORI for Catalyst Housing

@BenM_IM

#sharedownership

Thank you!


reach

Vidhya Alakeson Richard Donnell

Ben Marshall Geeta Nanda

David Lammy MP Patrick Butler

@resfoundation

……………………………………………………………………………………………………..

#sharedownership

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Sharing the spoils event: Vidhya Alakeson presentation