Affordable Housing

High rates of house price inflation in recent years have made it increasingly difficult for even well paid people to buy their own home.  Accordingly, building societies support a wide range of affordable housing schemes. 

Building societies are working both in conjunction with the Government on national schemes and also through their own schemes to provide a route into homeownership.

The Yorkshire and Nationwide building societies participate in the Government’s Open Market Homebuy Scheme, while other societies, such as the Newbury for example, are developing schemes of their own involving shared ownership. Others are investing directly in housing provision (the Darlington for example) while many offer a range of products such as 100% mortgages that are particularly attractive to first time buyers.

We believe that the Government needs to work closely with societies to allow greater participation in public sector schemes. Particular issues which need to be addressed include the high levels of bureaucracy, the costs involved and poor public sector understanding of both mortgage markets and risk. A particular issue also concerns the use of Section 106 agreements by local authorities. These are used by authorities to force developers to provide affordable housing, but many such agreements in practice represent major barriers preventing societies from providing a mortgage for properties covered by such agreements. 

Although building societies are doing what they can to help people having difficulty affording a home, unfortunately they are unable to always deliver a solution. High house price inflation is the result of factors such as low interest rates; low unemployment; strong growth in real incomes; expectations of further house price increases; demographic change (people living longer, more people both young and old living alone and high rates of net immigration) and low housing supply in both the social and private sectors resulting from restrictive planning arrangements that fail to reflect high levels of housing demand.

Building societies have, despite this, developed products that specifically seek to help people buy a home. BSA has published a report Stepping up to the Mark that looks at what initiatives societies have in place to help people unable to buy. It can be found here

However, outright ownership is not the only form of tenure, and societies are keen to encourage  other tenures. As well as supporting affordable housing projects, building societies continue to be major lenders to the social housing sector.  £2 billion was lent to housing associations by societies in 2006, giving societies a market share of 44% of total lending to such institutions.

Many building societies also support the private rental sector through the provision of buy to let loans.