Shared Ownership has stood the test of time, having provided an affordable alternative to traditional home ownership for more than 50 years – and the reforms that have come into force this summer show just how vital the government sees the model in addressing the country’s housing crisis.

Implemented after the Ministry of Housing, Communities and Local Government’s (MHCLG) consultation on the tenure, the changes, such as the reduction of the minimum purchase share to 10%, came into place at roughly the same time as the government’s First Homes scheme. This flagship government programme offers first-time buyers a discount of at least 30% on new-build flats and houses up and down the country.

This shows the government understands there needs to be a variety of housing options available to people and that First Homes is not a replacement for shared ownership, but one more option to cater to people’s different requirements and financial situations.

The need for more affordable options has rarely been more pressing, reflected in unprecedented demand for Shared Ownership: our own scheme is receiving interest consistently higher than pre-pandemic levels, for example.

This growing demand, alongside significant changes to how the model works, will require more widely available bespoke mortgage products that accommodate the increased flexibility delivered by the reforms.

Even lenders, such as Virgin Money, Atom Bank and Halifax, that already offer Shared Ownership products, may need to tweak them. There is also still room for others to enter the market.

Tackling confusion

Despite growing interest, misconceptions are a persistent issue. Research we carried out in 2017 showed that 40% of people don’t fully understand how the tenure works and although it is better understood now, significant changes to the model will undoubtedly lead to new questions and misunderstandings that need clearing up.

It’s been encouraging to see the government launch an online tool to help first-time buyers find the right home for them via the ‘Own Your Home’ website, which provides a single gateway for all routes to home ownership, including Shared Ownership. This kind of guidance will be essential to First Homes and shared ownership working in tandem effectively and ensuring people are guided to the product that is right for them.

Yet the reforms, while having the potential to make the tenure even more accessible, do risk adding complexity.

Take the changes to the staircasing process, for example. Under the new model, owners can increase their stake in their homes in 1% increments for 15 years, instead of being limited to a minimum increment of 5%.

This should make it easier for shared owners to buy more equity in instalments that suit their means, but there will also be questions to answer: what kind of administrative and legal costs need to be factored in and how will smaller increases in equity share affect the owner’s existing mortgage?

In a similar vein, the new reforms have also reduced the minimum initial stake needed to buy a shared ownership property from 25% to 10%. On paper, this should prove an attractive prospect to buyers looking to gain a footing on the property ladder. But reducing the financial commitment needed may make it more likely that people jump in without doing their due diligence.

This makes it even more important for those involved in the buying process, whether the mortgage lender or housing association running the scheme, to educate and guide potential buyers.

A problem shared

Any reform that makes Shared Ownership more accessible to a wider audience will always be welcomed – but reforms won’t succeed without everyone doing their bit to promote and educate. Alongside the housing association running the scheme, the mortgage lender is likely to be a main point of contact for anyone buying a shared ownership property, meaning that brokers and lenders are well placed to provide education and guidance.

Prospective homeowners and the lenders they borrow from should be encouraged by the government’s focus on making ownership more attainable, whether through shared ownership reforms or the First Homes scheme. The increasing popularity of affordable options such as Shared Ownership is an opportunity for the mortgage lenders that offer products tailored to the tenure.

But the mortgage industry, alongside housing associations and government, must do its part to educate potential buyers if the new model for Shared Ownership is to fulfil its potential.

Amy Nettleton, assistant development director – sales and marketing at Aster Group