Shared ownership and the changing reality of middle income Britain

7/30/2019 Shared ownership and the changing reality of middle income Britain

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May 2013

Shared ownership and the

changing reality of middleincome Britain

Alex Marsh

School for Policy StudiesUniversity of Bristol


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Shared ownership and the changing reality of middle income Britain1

Shared ownership and other low cost home ownership schemes have been around since the

1970s. Yet, the volume of research into intermediate tenures is not all that extensive. Interest

has tended to be cyclical, mapping on to peaks in the market. These schemes increase in

prominence as affordability deteriorates, and researchers correspondingly take more of an

interest.

But there has been quite a lot more interest recently. That is in part cyclical. It is also in part

because relatively well-established theoretical arguments about the desirability of

intermediate tenures offering different bundles of characteristics to those offered by

conventional owner occupation, private or social renting have received renewed attention.

But it is also because something may have changed in the housing market. The ongoing lack

of affordability, the political failure to effect structural reforms or invest sufficiently inhousing, and the continuing stagnation of household incomes all add up to a situation in

which many households face housing costs that account for a major chunk even the

majority - of their post-tax income. Sustaining conventional mortgaged owner occupation or

market renting is not simply a challenge but an impossibility for many households. In this

situation thinking almost inevitably turns to what else might be done to assist people to

secure adequate, affordable housing.

In addition, there is a sense that this isnt about coping with the peak of a cycle. Rather, this

time we may be trying to cope with something more deeply-ingrained and long-lasting.

Much of the existing research on intermediate tenures has focused on the supply side:

questions of scheme viability, how to use intermediate tenures as a means of cross-subsidy

for social renting, the role of intermediate housing in s106 negotiations.

There has been much less focus on consumers. How are intermediate tenures viewed by

consumers? Do they meet consumers aspirations? Where do they sit in individual housing

careers and trajectories? And, therefore, how does intermediate tenure housing relate to and

influence broader local housing markets? It is not that these things have not been examined,

and much of the work that has been done has been done relatively recently. It is just that

there isnt a lot of it.

When we think about intermediate tenures and affordable home ownership there are a

myriad possibilities and schemes. In many countries it is most likely to refer to some form of

shared equity scheme.

1 This is the text that accompanied a talk given to the NHF conference Affordable home ownership and

intermediate tenure, 21 May 2013, London.


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The intermediate sector is diverse. It is a sector in which providers are willing to innovate

and experiment with new products, alongside those that have a proven track record.

Schemes often differ considerably at the level of detail for example, in terms of the rights of

the various parties and who bears risks.

Diversity and experimentation may be taken as a sign of a vibrant sector. But the flipside is

complexity. It makes the sector less intelligible from the consumer perspective. It increases

the risk that consumers are not fully informed about options available and what they are

purchasing.

In the UK shared ownership, rather than shared equity, has been the dominant mechanism

used. That may now be changing in practice. But it does mean that most of the research has

looked at shared ownership. Here I want to reflect on some of the points that emerge from

that literature. I will leave open the issue of the extent to which these points read across to

other intermediate tenures.

The broad context is that household aspirations to move into owner occupation remain

robust, perhaps surprisingly so. It could, however, be argued that there are some signs that

this has started to soften slightly very recently.

What has clearly changed is household expectations of when, or indeed whether, they will

be able to enter owner occupation. The age of first time buyers edges upward, seemingly

inexorably.

The dominant discourse is one in which owner occupation is both normalised and

aspirational.

The strength of the discourse becomes apparent when we consider the very term shared

ownership. Looked at objectively, on the basis of rights to the equity in a property and the

terms upon which it is occupied, it would be more appropriate to describe the tenure as

mostly renting. But we dont. And that tells us something important and interesting about

how we think about housing and housing hierarchies. Shared ownership is a step up from

just renting. It is a step closer to full ownership. The dominant narrative is of an alignment

of shared owners with full owners, not with renters.

Yet if you talk to housing lawyers you get a completely different perspective on shared

ownership. The talk is not of how close shared ownership is to the outright ownership of a

freehold. The terms upon which shared ownership properties are occupied are structurally

similar to those faced by leaseholders, which have a family resemblance to those facing

private renters. Including mandatory grounds for possession for rent arrears.

But perhaps, even if policymakers and many practitioners are perfectly well aware of this,

policy is less keen to highlight this particular comparison.


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So I think there are important questions about the expectations created for shared

ownership. And the image of it that is projected to (potential) consumers. There are at least

two important dimensions to that image. Shared ownership as akin to full ownership.

Shared ownership as a transitional tenure: a step on the ladder to full ownership.

When we think of the characteristics of full ownership, prominent among them are financial

security once the mortgage is paid off, equity accumulation, an asset that can be used to

resource other activities, flexibility in the way one uses the dwelling. There are also argued

to be less material, psychosocial benefits such as ontological security.

Shared owners, in contrast, can find it difficult to withdraw equity while continuing to live

in the property. There can also be difficulties in releasing equity in older age. Equity

staircasing up and down is possible. Staircasing up does happen, but households have to

acquire additional equity in fairly large chunks. Staircasing down is relatively rare. None of

these things is impossible, but the administrative or transaction costs can be considerable. In

this respect, shared ownership is different from full ownership.

Shared ownership has been portrayed in policy terms as a way of not just acquiring housing

equity but benefiting from rising house prices as a means of accumulating wealth. How

much of the wealth generated by rising prices accrues to the occupier depends on the details

of the scheme and the ownership percentage. Yet we dont really know very much about

how wealth is accumulated in this way. We do know that lower income households tend to

accumulate less wealth in rising markets, but we dont have much detailed information on

how shared owners fare.

Housing markets can be thought of as coming in two flavours: static and dynamic. Some

countries have largely static markets, others are dynamic. In static markets households tend

to buy a property and modify it in situ as housing requirements change over the lifecycle,

through extensions or loft conversions, for example. In a dynamic market, like the one in the

UK, households tend to adjust their housing consumption through moving to a different

type of property rather than adapting in situ.

Shared ownership properties tend not to offer the same potential for in situ adaptation asfull ownership property. In part that is because many such properties are flats. But, also, the

resident does not have the same latitude as a full owner to decide unilaterally to modify the

property. Modifications typically require approval from the landlord and some types of

modification will be ruled out on the basis of landlord judgements informed by notions of

asset management. That doesnt mean modification is necessarily impossible, although it

might be. It means that the processes to be negotiated are rather different to those associated

with full ownership.

Similarly, in terms of mobility to adjust consumption, shared owners can face a relativelythin resale market. Schemes differ in whether shared owners seeking to move can offer


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properties on the open market, whether the landlord has first refusal to buy, and whether

the next resident will be identified through a nominations process. There is also some

evidence that it is easier to sell shared ownership properties with small equity stakes rather

than where the resident household owns the majority of the equity.

If archetype for full ownership is associated with choice and freedom to dispose of ones

assets as one sees fit, then the reality of shared ownership can be a long way from that

archetype. That doesnt make shared ownership inadequate or deficient; it makes it

different.

The prevailing narrative around shared ownership is that it is a transitional tenure. It is a

step on to the ladder towards full ownership. To what extent is that image justified?

It is undoubtedly the case that some households in shared ownership follow that route.

Similarly, some households are able to staircase up in the sort of large chunks of additionalequity that schemes typically require.

Moves into more conventional home ownership are typically associated with significant

changes in household composition and circumstances single people becoming partners,

promotions and significant salary improvements. While the former are no doubt still

happening, a key part of the current context is the increased scarcity of the latter.

That suggests that more people entering shared ownership are going to be shared owners

for the long term, rather than in transition. There are already household that are long term

residents in shared ownership who would like to move on and up to full ownership but

cant. They recognise the gap to the next rung of the ladder is so great as to put it out of

reach.

This in turn raises questions about how easy it is to move within the shared ownership

sector, and whether the sector offers the range of types and locations of property that means

it is realistic to pursue a housing career in the shared ownership sector.

It is also the case that some households move out of shared ownership into renting, either

private or social.

So shared ownership is not necessarily a step on to a ladder or an escalator that leads

eventually to full ownership. For some it is. For some it isnt.

Is that a problem?

It depends on how you look at it. And how the tenure is understood and marketed.

Survey evidence suggests that overall current shared owners are happy with their position,

although there can be specific concerns. Some households are happy with the situation

where they own a proportion of the equity and they are likely only ever to own a proportion


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of the equity. For them this situation is more desirable than full renting. And they are not

looking to increase their ownership stake.

Yet there is also a strand of discontent shared ownership is perceived by some not to be the

real thing.

Shared ownership is an entirely legitimate way of consuming housing in its own right, as

are other intermediate tenures. Framing them or marketing them as stepping stones to

something else that is seen as more desirable isnt necessarily helpful, especially when the

something else is increasingly unobtainable. We could argue that the current constellation

of economic circumstances offers an opportunity to articulate a different, more diverse

landscape of housing consumption. To validate intermediate tenures.

If an increasing proportion of households are unable to attain conventional home ownership

it is likely that more will be interested in intermediate tenures. They may well be differenttypes of people. Their benchmarks will be conventional owner occupation. Failure to

articulate a case for intermediate tenures as different as offering a unique combination of

strengths and weaknesses when compared with other tenures could lead to an increase in

the proportion of shared owners who feel let down.

It would be wise to shape and clarify expectations so they align better with the reality of

intermediate tenures, rather than seek to suggest they are something that theyre not.

No doubt that point is not new, and not news, for many practitioners. But policy clearly

plays up the putative family resemblance between shared and full ownership. It also seems

likely there are occasions when not dwelling too heavily on some of the detailed distinctions

between the various tenures may be seen as helpful in getting the potential purchaser-renter

to sign on the dotted line.

Failing to bring clarity to the information upon which the consumer makes their decision

runs the risk that the household sees its (unrealistic) dreams turn sour. And that is a recipe

for discontent.

For academics, the developing literature on intermediate tenure points very strongly to theneed to find better ways to analyse, think and talk about tenure. Statistical series are largely

blind to intermediate tenures. Much discussion is still couched in terms of the contrasts in

the fortunes and characteristics of the big three owner occupation, social and private

renting. We need to increase the sensitivity of analysis to a situation in which more exotic

and unconventional ways of consuming housing are almost inevitably going to become

more important.


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Reading

If you are looking for a way in to the academic literature on some of these debates may I

suggest:

Bright, S. and Hopkins, N. (2011) Home, meaning and identity: Learning from the English

model of shared ownership, Housing, Theory and Society, vol 28, no 4, 377-397.

Monk, S. and Whitehead, C. (eds) (2010)Making housing more affordable: The role of

intermediate tenures, Oxford: Wiley-Blackwell.

Wallace, A. (2012) Shared ownership: Satisfying ambitions for ownership?, International

Journal of Housing Policy, vol 12, no 2, 205-226.


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About the author

Alex Marsh is Professor of Public Policy at the University of Bristol. He has been Head of the

School for Policy Studies since 2007. Alexs research and writing has encompassed a wide

range of topics in the field of housing studies, particularly concerned with policy in thesocial and private rented housing sectors and with issues of regulation.

Between 2005 and 2009 Alex has been managing editor of Housing Studies, the leading

international academic journal in the field. He continues as a member of the journals

Management Board.

Alex worked part-time as a Visiting Academic Consultant to the Public Law team at the Law

Commission between 2006 and 2010. His work with the Commission addressed compliance

issues in the private rented sector and systems of redress against public bodies.

From 2004 until 2012 Alex was a trustee of Brunelcare, a Bristol-based charity providing

housing, care and support for older people. For six years he chaired Brunelcare's Audit and

Scrutiny Committee.

www.alex-marsh.net

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Shared ownership and the changing reality of middle income Britain