"On costs alone, shared ownership substantially outperforms private renting as a choice for many households on the cusp between owning and renting, and it does so across all regions, including London and the South East."
- Peter Williams, co-author of the report
Leeds Building Society is calling on the government to recommit its support for affordable homeownership by building more shared ownership homes after new research revealed that monetary gains for shared owners are significant.
Of 294 local authorities, shared ownership is forecast to be more affordable than private renting in 272 (93%) at year 10, rising from 227 (77%) in year one.
Across 83 ‘high rent’ local authorities, where rental payments make up over 30% of income, shared ownership is more affordable in 81 (98%) at year 10, rising from 77 (93%) in year one.
Factoring in capital repayments and expected house price increases on the share purchased, the research shows that shared owners would be on average £29,000 better off as a result of equity growth, rising to £42,000 in London, in addition to incurring lower monthly costs.
ONS data shows that only the highest earning 10% of households can afford to buy an average-priced home of £298,000 in England, with house prices in January reaching a record high.
Leeds Building Society argues that maintaining a strong shared ownership sector is key, not least because it provides low and medium income households the flexibility to vary the size of property share purchased and alter their mortgage size and deposit.
Government data shows that for every six social rent homes, 10 shared ownership homes could be built. The Society says this equates to a saving of more than £5bn should the next Affordable Homes Programme deliver an even split of homes for affordable ownership and social rent, compared to only social rent.
Andrew Greenwood, deputy chief executive at Leeds Building Society, said: “The UK is facing an urgent housing crisis. We welcome the government’s commitment to building the housing our country needs, including social and affordable rent properties.
“However, the overwhelming majority of people in England aspire to buy a home of their own. It would be a missed opportunity not to recognise the role shared ownership plays in achieving that for low and medium income households.
“Our independent research shows that shared ownership extends the promise of homeownership to more people, and will make the majority financially better off over time.
“The Spending Review provides the government with the opportunity to listen to what voters want, which is why we’re calling on them to set out a long-term plan that includes shared ownership and which delivers for everyone.”
Peter Williams, departmental fellow in the Department of Land Economy at the University of Cambridge, and co-author of the report, said: “This study provides new and significant evidence of the benefits of buying a shared ownership home compared to renting privately. It’s clear that on costs alone, shared ownership substantially outperforms private renting as a choice for many households on the cusp between owning and renting, and it does so across all regions, including London and the South East.
“More fundamentally, the full power of ownership is realised when we include capital repayments and the benefit of house price growth on their share. Without any doubt, the majority of shared owners will be materially better off by making this choice.”
