Co-Ownership as an effective route to home ownership

By Mark Graham, Chief Executive

Housing emerged as one the key issues in the election campaign. Although the details and emphasis differ, there was broad agreement that we need more social homes, a better private rented sector and higher levels of homeownership. More specifically on the last point of increasing homeownership, there is a need to help first-time buyers.

But a route to homeownership that wasn’t much debated was shared ownership. The political ambivalence to shared ownership is, I think, in large part due to recent bad publicity and stories of poor customer outcomes.

Looking at the reported issues with shared ownership in England, it seems less about shared ownership as a general model and more about uncontrolled rises in service charges and the unaffordability of the housing market in the South.

Shared owners often have a lower capacity to absorb large increases in service charges and this, together with increases in mortgage rates, put a squeeze on people’s affordability.

Equally, in very expensive housing markets, people’s ability to buy the whole property may not align with what they hoped for when they first purchased a share of their home. If on day one you can only afford 20% of the home, then you may never be able to buy the full home without a significant change in your circumstances.

But shared ownership in less expensive markets can, and does, provide very successful outcomes. Even if you cannot afford to buy the whole home, it’s usually a better and more affordable option than renting privately.

In Northern Ireland, we have a different and historically very successful form of shared ownership.

Co-Ownership is a housing association formed in 1978 with the sole purpose of delivering what is usually referred to as DIYSO (do-it-yourself shared ownership). This means that rather than building new shared ownership homes, Co-Ownership buys existing homes or new build homes developed for the general market.

There is a cap on the value of the property we will purchase, but apart from that, our customers have access to all the properties on the market. They will, of course, have to be in a decent condition and be mortgageable.

In Northern Ireland we operate in a more affordable housing market. The average property price is currently £179,000 and the average cost of the homes people buy through Co-Ownership is just under £150,000.

Our homes are typically semi-detached or townhouses, so service charges are rarely an issue. We carry out a careful affordability assessment. However, we do help people on relatively moderate incomes. The average earned income of our customers is £26,000.

Having access to a mortgage and the deposit for the home are also critical. We have been working with mortgage lenders in Northern Ireland for many decades, and two of our lenders have developed a mortgage product that doesn’t require a deposit. This makes a real difference to many of our customers who struggle to save for a deposit.

Given the relative affordability of the Northern Ireland housing market, the starting share for Co-Ownership is between 50% and 90% and, in my view, this means people feel more of a homeowner from day one.

It also makes it more achievable for people to buy us out, with around 90% of our customers doing so. In fact, in recent years, around half our customers bought us out within 10 years. Since 1978, we have helped over 33,000 people into homeownership, with over 20,000 people going on to own their home fully without our support.

We are part-funded by the Northern Ireland government through the Department for Communities, but unlike other shared ownership models, we do not receive a grant. Rather, we receive long-term government loans. Our ability to repay these loans is predicated on the spread of homes purchased over four decades and our consistently high levels of people buying out. This financial model means that very scarce capital funding can be used for other priorities, such as social housing.

What really matters, of course, is the impact Co-Ownership has on our customers. Our most recent social impact report indicates that over half of our customers would have remained in the rental sector without our help, and over 80% said owning a home through Co-Ownership had a positive impact on their well-being.

Shared ownership isn’t the solution for everyone. In Northern Ireland, we need to build more homes and, specifically, we need to build many more social homes. We also need a better private rented sector, particularly one that can provide a secure and affordable home for families.

But homeownership will remain the preference for most people and, as we have shown in Northern Ireland, shared ownership can help many people achieve that aspiration.