With millions now facing rising energy bills and food shopping costs, coupled with the sharpest decline in real wages since 2001, achieving a sense of financial security through housing has never been more critical - yet beyond the reach - of so many. Recent research has indicated that 70% of first-time buyers are delaying planned purchases of homes and instead choosing to rent.
This is unsurprising given the cost-of-living crisis, and back-to-back increases in interest rates are driving the cost of average rent below mortgage repayments for the first time in 14 years. At the same time, however, reports on the UK rental market also reveal a sharp 11% rise in average prices since 2021.
The culmination of property and rental prices rising faster than earnings is that both become inhospitable avenues for helping people achieve financial security. With many now pressed between a rock and a hard place, the housing sector must raise awareness of the alternative routes toward achieving housing security often overlooked with the potential to break this deadlock.
Shared Ownership: The housing sector’s most misunderstood product
While often overlooked by the majority, one way to provide individuals a helping hand onto the property ladder is through the expansion of low-cost homeownership schemes. While the terms ‘Shared Ownership’, ‘Equity Sharing’ and the concept of ‘buying a share’ in a house feel foreign to many, the reality is these schemes offer a springboard into homeownership regularly dismissed by those most in need.
VIVID’s own Shared Ownership schemes allow first-time buyers to purchase a share of a home (typically between 25%-75%) with the remaining owned by VIVID. The homeowner then pays a below-market-rate rent to VIVID but acquires all benefits of homeownership, such as the power to sell their portion as it potentially increases in value. As the buyer only requires a mortgage for their share, they can avoid securing a large deposit, meaning the monthly repayments can typically be funded on a single-income basis.
Low deposits and more easily accessible mortgages offer individuals long-term housing security without over-stretching themselves financially, especially when considering that a standard 10% deposit on a typical first-time-buyer home now equates to 56% of an average annual income. The jewel in the Shared Ownership crown is, however, the power of homeowners to purchase further shares of their home in a process known as staircasing. Within VIVID, we have dealt with over 200 cases of residents staircasing and are committed to expanding this route to homeownership.
Unfortunately, a stigma remains attached to many affordable homeownership schemes which come from a general lack of understanding. This in turn dampens the drive for the housing industry to expand its availability; a trend that must be revered. The reality is that shared ownership has the potential to be a fantastic springboard to help many people get on the property ladder, even during this economic climate.
However, there are limitations to these schemes, meaning that they remain out of reach, but for those limited to seeking security in the rental market, there are similar alternatives worth pursuing.
Expanding affordable and social rent homes
In the current climate, the once very common process of renting in the short-term to save towards a later purchase of a home is now out of reach, not least due to the rise in average rental prices. This is where social and affordable rent homes can come in. The NHF’s recommendation to ramp up the development of affordable homes to 140,000 per year – with the majority dedicated to social rent – would be a significant shift in development priorities, considering that in 2016/17, just 2.5% of the 217,000 new homes delivered in England was dedicated for social rent.
Couple that with the fact that last year’s annual report by the CIH found that over 280,000 social rent homes had been sold, converted to higher rent or demolished in the previous decade, with an influx of only 70,000 new homes, and it’s easy to comprehend that steps need to be made to counteract these significant losses.
Indeed, more must be done by the housing sector and government to provide people with access to a broader range of homes to ensure everyone has the ability to rent. This has been a mission at the heart of VIVID borne out in our development figures; of the 1,401 new homes delivered this year, 260 and 429 were for social and affordable rent, respectively. We’ve also built the most homes committed for social rent within the Homes England Strategic Partnership at 1,670 since beginning operations, demonstrating our commitment to delivering genuinely affordable homes.
We’ll be continuing this trajectory, dedicating ourselves to providing people with safe and secure places to call home. Looking ahead, 60% of the 17,000 houses we plan to deliver by 2030 are ringfenced for social and affordable rent tenures. However, to turn the tide on the housing crisis, we hope to see other stakeholders in the housing industry follow VIVID’s lead and prioritise increasing the supply of these types of tenures. The initiative would benefit from increased collaboration and support to meet development goals, especially given the challenging economic landscape ahead.
Housing Associations: Support through the storm
While many developers have forward sold, meaning that the impact on production will not be immediate, if the economic downturn continues, property purchasing will diminish, likely leading to ‘development hesitancy’ amongst private developers. At its core, VIVID and other housing associations seek to address the shortcomings of the UK’s housing market and in this instance, will become an essential stakeholders in the industry, helping these developers offload their sites and convert them into another product (i.e., affordable/social rental housing and shared ownership homes).
Such joint partnerships will be essential in providing developers with increased financial resilience and ensuring that the country remains on track to meet its development goals.
As a financially robust and resilient housing association, VIVID is primed to weather the present economic turpitude while remaining committed to long-term community development.
As we enter a period of increasing economic uncertainty, the unique functionality of housing associations like VIVID in the UK housing market enables them to address shortcomings that few others can adequately resolve. It’s time to bring awareness to these schemes, remove the stigma and encourage the industry to expand its offering – we can do more to provide affordable, accessible housing.
