Government proposals on shared ownership could make tenure unviable, say leading HA CEOs

Mark Washer, chief executive of 60,000-home Sovereign, said that the potential for associations to pay up to £5,000 for repairs on shared ownership homes would also impact the profits they could generate.

“If you take [an average] £25,000 net present value (NPV) on a shared ownership scheme which is used to cross-subsidise social housing, you’re talking about losing 20 per cent of that surplus,” he said. “It’s not immaterial and I think we would look to reflect that in any bid for grant.”

Mr Washer explained that this could disadvantage associations bidding for grant under the AHP which could not afford to carry that extra cost.

“If everyone bids an extra £5,000 [per home] then they’ll have to take a view on that,” he added. “But if half of the bidders factor it in and half decide that they’re going to absorb it then I guess it will be the ones who absorb it who get the bids.”

Mr Washer also warned that offering buyers the ability to buy 10 per cent of a home could lead more of them into financial difficulty, especially given the likelihood that some first tranche sales would fall below the minimum lending limit set by mortgage providers.

“There are concerns about different forms of unsecured lending, like credit cards or bank loans. I think that takes you to a slightly different concern, which is about the extent to which this is looking like a sub-prime product in the making,” Mr Washer said.

“Theoretically, to buy a 10 per cent stake in one of our properties you need to come up with, let’s say, £12,000. For us, those look like people who would be much better suited to long-term secure renting.”

The proposals around shared ownership were part of a more general push in the white paper on homeownership. But speaking earlier this week, Nick Walkley, chief executive of Homes England, suggested that the housing sector had so far failed to develop “a strong narrative” about how to deliver more homeownership.

“What we do know is that homeownership matters for this government,” Mr Walkley told delegates at Savills’ housing seminar. “It’s not the only thing that matters but we must get the message that finding pathways and routes for a greater proportion of the population to have… an ownership stake in their home is a critical priority for this government.

“And I’m not sure that between the agency, affordable housing providers, the major house builders and the small house builders there is a strong, confident narrative about how the sector incorporates that, and that feels to me to be a major challenge going forward.”

The consultation on the new shared ownership model, which applies only to England, runs until 17 December.