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Shared Ownership Affordable Homes Programme – The Opportunity

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Shared OwnershipThe Government’s target for 135,000 Shared Ownership Properties to be built in 2016-21 part funded with £4.7bn grant represents a quantum leap in Shared Ownership as a tenure and major opportunities for both historic providers of social housing and new entrants.

Background

Shared Ownership has been developed since the 1970s often as a small element of S106 intermediate provision. The current stock is c 170,000 units with an average landlord share of c 60%, almost exclusively owned by Registered Providers (RPs) with little secondary trading of retained interests. Funding has been provided under RPs corporate facilities (as part of the total £65bn), although some SO specific institutional debt funding has recently been raised.

The 2015 Autumn Statement announced a target of 135,000 SO units to be developed over the 2016- 2021 plan period, with £4.1bn of grant for England, averaging £30k per unit. The Prospectus for the Grant was issued in April 2015 (NB the GLA will issue their own prospectus later in 2016 in respect of London). The principal highlights are:

  • Grant available to both Registered Providers and private sector participants.
  • Private sector bidders must hold HCA Investment Partner Status or be in consortium with an approved partner. No requirement to be a registered provider to manage SO stock.
  • Bids will be evaluated 50/50 on value for money (i.e. grant levels bid for) and deliverability.
  • Bids may be for indicative or firm schemes – priority given for firm projects.
  • On stair-casing grant repaid with pro rata capital growth. RPs may recycle.
  • Bid deadline 2nd September 2016, but not expected to be fully allocated, and so further rounds and continuous engagement. Grant is 90% back ended to last three financial years.
  • Not available for S 106 properties. Leases must comply with HCA standard terms.

Opportunity

The delivery target will require c 35- 40,000 units per annum in the last three years, compared with recent delivery of c 7,500 units p.a., with a total funding need of £10bn to £15bn. This is likely to require access to sites, delivery capability and funding beyond the traditional SO providers and opportunities for new entrants. The potential roles are as follows:

Registered Providers – both existing SO providers and those new to the tenure.

Housebuilders/developers – developing SO either as part of mixed tenure schemes or standalone projects. Longer-term ownership of the residual interests could be transferred to RPS or institutional investors.

Local Authorities– looking to develop either through the HRA or housing companies, using any HRA headroom, existing land, prudential borrowing, grant and/or external funding.

Investors– either as debt providers or direct owners. The profile is an indexed linked rental stream, without management or void risk, with upside from house price inflation on stair-casing. The scale of the 2016-2021 programme will enable SO to become a better-understood and more liquid asset class.

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