Market Insight - April 2015
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How Times Have Changed

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Sharing ownership
Starts of new affordable homes are starting to lag behind.

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The latest NHBC data on house building show that in the last three months private sector housing starts were up 7 per cent compared to the previous year. Public sector starts, of affordable housing, were down a third in the same time period compared to the previous year though. Most of this fall seems to be coming from housing associations, DCLG numbers show starts by housing associations down 40 per cent in the final quarter of 2014 compared to 2013.

The fall in delivery of new affordable homes is worrying given the context of increasing right to buy sales and the proposed extension of right to buy to housing association homes by the Conservative party. 11,261 local authority homes were sold through right to buy in 2013/14, whereas only 1,572 replacement homes were started by councils. While starts of replacement homes are likely to increase, the lag between starting and finishing a build means it’s unlikely we’ll see the one for one replacement promised on the original scheme any time in the near future.

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Affordable homes also include intermediate tenures like shared ownership. Shared ownership was introduced in the late 1970s to help people unable to afford a home on the open market get onto the property ladder. Predominantly provided by housing associations, the scheme allows the purchase of a share in a property, typically between 25 and 75 per cent, while paying rent to the housing association on the remaining share. Demand for shared ownership outstrips supply, with housing associations approving around 85,000 applications a year, against government funding for the development of just 11,000 homes. The tenure has the advantage of giving part owners security of tenure similar to outright ownership, not always available in the private rented sector.

Building more homes is only part of the answer to solving the problems in the UK housing market. Given high house prices relative to incomes and other affordability issues, attention must also be paid to the variety of tenures. While we have seen significant demand  ide stimulus from the current government, particularly in the form of the various help to buy schemes, we have seen less success on the supply side. We can only look to the next parliament in the hope that housing supply issues will be tackled in a more meaningful way.

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