Shared Ownership Housing

Jim Shannon Excerpts

Tuesday 14th July 2015 Westminster Hall

[Iain Stewart (Milton Keynes South) (Con)]

I beg to move,

That this House has considered shared ownership housing.

It is a pleasure to open the debate under your chairmanship, Mr Evans. I wish to advance some thoughts that I have had for some time, and which were debated in my constituency at the general election, about how the shared ownership model could be expanded and improved to become a larger and more successful sector of the UK housing market.

Housing issues are rightly high on the political agenda. I do not propose to analyse some of the broader issues about housing supply or schemes such as Help to Buy, rent to own, the right to buy for housing association tenants and so on, although I will refer to them as I explain my proposals for shared ownership. My proposals would assist with the size of the overall housing supply and operate alongside other policies, not replace them. They fit neatly into other recent and planned developments, such as the liberation of pension funds, which the Chancellor of the Exchequer is introducing. I will turn to those later in my speech, but first I shall explore why I and many others believe that the shared ownership housing model has not fulfilled its potential.

At its heart, shared ownership is a simple concept that helps people who aspire to own their own home to get on the housing ladder. Rising house prices increasingly make the goal of raising a deposit and taking out a mortgage beyond the reach of many, even those earning decent incomes in some parts of the country. In addition, for young people, the cost of repaying student loans post-graduation plus the need to begin building pension funds limit the affordability of a home buying. I know from the experiences of many people in my constituency that policies such as Help to Buy are popular and effective, and that will be the same for other welcome initiatives from the Government such as the proposed discount for first-time buyers purchasing a new brownfield property.

Without help from the bank of mum and dad, or if someone is not already in a council or housing association property—for those people the right to buy is, or will be, an option—getting on the housing ladder will remain elusive, and for many people the private rented sector will be their only option. As we all know, rents can be at a level that makes saving for a deposit and mortgage difficult. Shared ownership offers people the chance to gain some equity and move towards full ownership. It also offers greater security of tenure than renting. I do not wish to do down the private rented sector; far from it. It fulfils a valuable role, particularly in areas where there is a highly mobile population, such as in university towns and cities, or in places, including parts of my own constituency, where dynamic economic activity requires shorter-term tenure housing stock. There will always be people who want to rent privately for short or long periods for a wide range of reasons, and the buy-to-let market helps fulfil that goal. As the Chancellor rightly identified in the Budget, the buy-to-let sector cannot become too dominant. The Governor of the Bank of England pointed out that that could pose a risk to the country’s economic stability. In addition, if it is too large, it will continue, through simple supply and demand forces, to push the affordability bar higher still for people who aspire to own their own home.

There is considerable evidence to show that home ownership remains the tenure of choice for most of the population. I see it in my own constituency, where we have considerable new housing development, and large numbers of the new houses are not bought by aspirant owners but by buy-to-let landlords. As well as restricting the supply of new housing to would-be owners, there is also some evidence to suggest that too high a concentration of buy-to-let properties is not as conducive as a broader housing mix to developing community stability. I have noted comments from the National Housing Federation, Orbit Group and the Chartered Institute of Housing that having a stake in their own home makes people more likely to invest in their neighbourhoods. For those reasons, I see a greater role for shared ownership.

Shared ownership is not a new concept. Many residents already use it successfully. Its main advantage is that it allows a route into home ownership for low and middle-income families who could not otherwise afford a full equity mortgage straightaway. There is not one shared ownership scheme; there are various schemes, but they share the common feature of allowing an individual to take out a mortgage on an initial share of a property. They then pay rent on the proportion owned by the housing association and mortgage repayments on their share, with the option to buy more shares in the property later—a concept known as staircasing. The National Housing Federation has shown that, by and large, the combined rent and mortgage payments under shared ownership are considerably lower than equivalent full mortgage repayments or full private sector rental payments for equivalent properties—so far so good, but I believe that there is huge untapped potential in the sector.

The Government’s affordable homes programme will run until 2018. It commits £1.7 billion in capital grant funding for affordable homes outside London, and includes provision for shared ownership. I am also aware, from the autumn statement and the spring Budget, that the Government have been looking at rule changes, which should reduce bureaucracy in the system and remove some of the barriers. Those are all very welcome, but I believe that we can go further still. My motivation in securing the debate is to make some suggestions as to how that might be achieved.

[Jim Shannon (Strangford) (DUP)]

I am grateful to the hon. Gentleman for bringing the issue to Westminster Hall for consideration. In my constituency of Strangford, a great many people are involved in the co-ownership scheme. It has enabled those on low incomes to get on the housing ladder. The only thing that concerns me is this: for someone who is paying 50%, perhaps they should seek financial advice at the beginning about what happens when it comes to buying the other half, moving the other half through, or even legal problems if they cannot make their mortgage payments. Does the hon. Gentleman think that there should be more help to look at the long-term financial implications for those who want to go into co-ownership?

[Iain Stewart]

I will touch on that point a little later, because one problem with expanding shared ownership is that tenants can find it difficult to take a big additional equity share. I will touch on a proposal in a little while that helps to address the problem the hon. Gentleman rightly identifies.