Five out of six people want to own their own home. But as we all know, house prices in recent decades have accelerated wildly to end up beyond the reach of many.
Even among talented, affluent young City workers, the uncertainty, vagaries and high costs of the private rented sector have become the norm, with only 25 per cent of under-35s owning their own home. And of that small minority, many have had help from the “bank of Mum and Dad”.
So given we know that most people want to own, but it is unaffordable for so many, the question is how we respond to this – do we completely give up on people’s aspirations or do we help them achieve their dreams?
That’s where I believe shared ownership has got to come in.
For the buyer, the advantages are massive. They could own a share of their home for less than it costs to rent it, and without having to put up a huge deposit. Unlike renting, they also start building up equity. Private rented housing is the most expensive tenure in all but a handful of postcodes, with monthly costs exceeding buying with a mortgage.
Shared ownership is an equally attractive proposition from an investment perspective. That’s why Heylo Housing – a company I chair – is confident today when launching a major new drive to raise £1bn of institutional investment into the sector.
We’ve all heard before that institutional money can “save the day” in the housing sector, so why is this different?
Quite simply, because shared ownership offers a much stronger proposition for institutional money than investment in the private rented sector. With markets uncertain and interest rates low, investing in shared ownership offers predictable long-term yields which exceed those offered by the private rented sector. Private rented properties also tend to come with a high maintenance burden, voids and marketing costs unattractive to institutional investment.
Read more: Where will Generation Rent live?
Most of all, shared ownership offers local authority pension funds, such as Lancashire County Council, which already invests in us, the sort of long-dated and index-linked investment that exactly matches their liabilities. It gives these investors precisely what they want and need.
In the past, the advantages of shared ownership have been held back by government policy which failed to encourage private shared ownership providers. But that is changing, and for the first time in a long time, we are starting to see clear support for innovation in the sector.
There is no silver bullet in the housing crisis – the housing minister Gavin Barwell is right to say that – but there are different sized weapons in the armoury. We have already invested over £300m of institutional funding in the last two years which will provide over 3,000 new homes for people desperate to get on the housing ladder. But this is nowhere near enough to satisfy even the tip of demand from those 250,000 plus who have registered with housing associations for a shared ownership home.
There are 2.5m households – more than 5m people – who want to own but cannot. The UK now has the fourth lowest rate of home ownership in the whole of the EU. By launching this major drive and working with government on policy changes to support it, we believe shared ownership can bring home ownership into the reach of many more people.
Housing is expensive in the UK but ownership, and the security and lifestyle that comes with it, does not have to be. The government is right to call for serious institutional investment into shared ownership as only then will supply match the aspirations of the 86 per cent who want to own their own home.