Many affordable homeownership initiatives in the UK have been ill-defined and poorly targeted according to a new independent report by the research unit LSE London for the Building Societies Association and the UK Collaborative Centre for Housing Evidence (CaCHE), published today (Thursday 12 November).
These have reinforced regional differences and sometimes overlapped with one another says Thinking outside the box: Exploring innovations in affordable homeownership.
In addition, because many of these initiatives have been short-lived, they have had limited impact and have been confusing to both consumers and lenders.
The government is now looking at two new products - First Homes, a shared equity scheme, and a potential mortgage guarantee scheme linked to long term fixed interest rates.
Professor Christine Whitehead, Emeritus Professor of Housing Economics at LSE, said: “The Government has sponsored a range of affordable homeownership products over the last 40 years with varying success.
“What is needed is a better understanding of the nature and scale of the affordable home ownership ‘gap’ – taking account of house prices, incomes, the capacity to raise a deposit and attitudes towards risk of borrowers and lenders. We also need a more coherent set of affordable homeownership products.”
Professor Kenneth Gibb, Director of the UK Collaborative Centre for Housing Evidence (CaCHE), said: ‘This timely report reminds us how challenging it has been for government to grow home ownership, and how difficult it has been for mortgage providers to innovate in such a way that the market can expand for first time buyers. The report is a comprehensive and intelligent reading of the current market, where it came from, and the likely factors shaping affordable home ownership in the future’.
Paul Broadhead, Head of Mortgage and Housing Policy at the BSA said: “Building societies were founded to help people into homeownership, so they have often been at the forefront in the provision of products designed to support affordability. This valuable research pulls together what has been learned so far, and indicates how Government, lenders and others might work together to help more people into homeownership the future.”
The report suggests:
- A long overdue and fundamental reform of shared ownership going well beyond the existing proposals in England and giving it the potential to be scaled up to include the provision of a comprehensive database of shared ownership, and related products
- The UK could learn from abroad concerning mortgage guarantees, which are a cost-efficient way of expanding affordable home ownership opportunities.
- Market-based initiatives that help supplement the higher Loan-To-Value market should be encouraged
- The government should set out its vision for home ownership in general and affordable home ownership in particular in some detail, looking at current provision, the risks and the potential scale of demand, funding and supply.
Thinking outside the box critically examines what has worked and what has not as these homeownership products have come and gone. It also looks at what the market has been able to deliver and what gaps market products could fill.