Councils have begun making their first tentative steps into building, managing and selling shared ownership homes. Kate Youde finds out more
Source: Gary Manhine
When Mary Mensah and her three adult children moved into their new home just before Christmas, they created a piece of housing history. The four-bedroom townhouse in Homerton, east London, is the first shared ownership home to be built, managed and sold by Hackney Council – and is among the first by any council in the country.
While shared ownership homes have been available in the borough for years, usually through housing associations, this is the first time the council has brought its own shared ownership stock to market. As the demand for intermediate housing grows, will other councils look to follow its example?
In December, Ms Mensah, an NHS bookings supervisor, bought a 25% stake in a £365,000 house in Shepherds Lane. It is one of 40 new build homes across Brooklime House and Chervil House, half of which are for shared ownership or shared equity. It is the first of 500 shared ownership homes Hackney Council is building over the next decade as part of a wider £500m, 2,760-home estate regeneration programme funded through its housing revenue account (HRA).
Ms Mensah’s previous home – a two-bedroom council flat across the road in Marian Court, which she had bought in 2004 through Right to Buy – is being demolished under the scheme. She has used equity from that flat for the 25% stake in her new home, meaning she has no mortgage but pays £582 per month rent on the remaining 75% [see box: Cost of living]. As well as giving the family much-needed extra space, she feels her new home, which she couldn’t afford without shared ownership, is ‘a really good investment’.
Keeping existing resident leaseholders on the regeneration estates is one reason Hackney Council has opted for shared ownership and an equity swap model. The other, says Cllr Philip Glanville, cabinet member for housing, is a desire to have a ‘mixed community’. ‘It’s about ensuring there are homes for people to buy on lower incomes and retaining a mixed workforce,’ he says. ‘It is about the place shaping we want to see in the borough.’
The council’s arm’s-length management organisation (ALMO) Hackney Homes will manage the shared ownership homes until it moves back in-house on 1 April 2016. Cllr Glanville says the benefits of the council building and managing shared ownership include being able to use its experience managingtenants and leaseholders to ensure service charges are affordable, ’democratic accountability’ and the avoidance of the ‘pepper potting’ that comes with some large registered providers, which may not have a local office for residents to visit in the event of a problem.
He says shared ownership is essentially ‘cost neutral’ compared to the subsidy needed for social rent and the need to cross-subsidise with private sales. ‘It basically pays for itself in terms of the constructioncosts [estimated at between £80 and £100m for the 500 units],’ he adds. ‘It’s not subsidising another home but we’re not requiring a huge amount of subsidy to deliver it. That is partly because we are building on our own land, so I think if you’re talking to registered providers they obviously have to factor in the fact they have to buy the land and they’ve got the development costs on top of that.’ The council will explore introducing an in-house sales team when it has developed a sufficient number of units.
Source: Gary Manhine
The Local Government Association and London Councils declined to comment on whether it thinks other councils will follow Hackney’s lead in building and managing shared ownership homes. However there will be 300 shared ownership units, including some built and managed by Camden Council, among 3,050 new homes delivered through the north London borough’s 15-year Community Investment Programme.
Sarah Davis, senior Policy and practice officer at the Chartered Institute of Housing (CIH), says that if councils have the in-house expertise (through an ALMO or because they have retained housing stock), capacity to build and borrowing room in their HRA, building and managing shared ownership fits with their position as a ‘major provider housing solutions for their communities’.
The final report of a project by the CIH and 37,000-home landlord Orbit Group, looking at how to scale shared ownership up from around 15,000 new homes a year to at least 30,000 by 2020, improve the product and encourage investment, is expected next month. Only 0.7% of UK households – 1.3% in London – are currently shared ownership, according to the 2011 Census.
Ms Davis says councils could play a role – as providers as well as enabling developments through land use and clear priorities in Local Plans – in helping to expand the tenure, which, she says, addresses the challenge of the ‘growing middle market’ of people who can’t access home ownership through the government’s Help to Buy scheme or social housing.
But Hackney Council’s entry into shared ownership comes at a time when some housing associations are questioning the tenure’s viability in central London, as Inside Housing reported last month.
‘Shared ownership is a great option for people looking to get a foot on the property ladder in most parts of the country,’ says Cllr Richard Livingstone, Southwark Council’s cabinet member for housing, which will deliver 11,000 social rent homes over the next 30 years. ‘However we are finding in Southwark, as in most parts of inner-London, that increasingly the rising costs of homes in the area result in even shared ownership becoming less of an option, as the minimum income needed is beyond a large number of would-be buyers.’
Ms Mensah, who earns about £22,000 a year, thinks shared ownership is ‘quite reasonable’ however. ‘In my case, I haven’t got a mortgage so it’s only one payment, which is rent’, she says. But she adds, laughing: ‘And then if I win the lottery, I will pay off the balance!’