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 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.
For more information
Sue Windebank, LSE press office, T: 020 7955 7060 (will connect to duty press officer)
Notes to Editors:
The report: Thinking outside the box: Exploring innovations in affordable homeownership
A blog by Professor Christine Whitehead and Peter Williams
LSE London is a research unit based at The London School of Economics and Political Science (LSE). LSE is an internationally-renowned university specialising in the social sciences. Its expertise spans a wide range of disciplines from economics, politics and law, to sociology, health policy, accounting and finance.
As one of the most international universities in the world, the School’s diversity of people, ideas and interests make it an exciting centre for research, teaching and public engagement.
Established in 1895, the original vision of LSE as ‘a community of people and ideas, founded to know the causes of things, for the betterment of society’ remains true to this day. It continues to use its research-led expertise to influence governments, NGOs, businesses and others to help tackle the world’s most pressing problems. For more information visit lse.ac.uk
The UK Collaborative Centre for Housing Evidence (CaCHE) is a consortium of 14 institutions led by the University of Glasgow.
The centre, which was established in August 2017, is a multidisciplinary partnership between academia, housing policy and practice. Over the course of the five-year programme, CaCHE researchers will produce evidence and new research which will contribute to tackling the UK’s housing problems at a national, devolved, regional, and local level. CaCHE is funded by the Economic and Social Research Council, Arts and Humanities Research Council and Joseph Rowntree Foundation.
The Building Societies Association (BSA) represents all 43 UK building societies, as well as 6 credit unions. Building societies serve over 25 million consumers across the UK and have total assets of £420 billion. Together with their subsidiaries they hold residential mortgages over £330 billion, 23% of the total outstanding in the UK. They hold over £290 billion of retail deposits, accounting for 19% of all such deposits in the UK. Building societies account for 38% of all cash ISA balances. They employ approximately 42,500 full and part-time staff and operate through approximately 1,470 branches. For more information go to bsa.org.uk