Promoting Homeownership at the Margins:

the experience of LCHO purchasers in regeneration

areas

Dr Kim McKee Centre for Housing Research

Department of Geography & Sustainable Development University of St Andrews

2

Small, exploratory qualitative study (funded by Urban Studies Foundation seedcorn monies)

Understand views & experiences of households who purchased their property through shared ownership/equity schemes

Explicit focus on regeneration areas in west-central Scotland:

◦ Traditionally successful in high pressure housing areas

◦ Different role to play in a regeneration context

Aims & Objectives

3

Growth of homeownership one of the most significant social changes of the 20thC

Become ‘normalised’ form of housing consumption

Expanding homeownership to be achieved through plethora LCHO policies (for example RTB, SO, SE)

In Scottish context LCHO important in delivering gvt policy objectives around regeneration & SI

Historically, lower levels of homeownership than rest of UK; with SRS also being larger

Homeownership in the UK

4

Creation of ‘mixed communities’ (through tenure-diversification) pivotal to regenerating public housing estates

Assumption public housing estates have ‘failed’ & that owner-occupation is the ‘solution’

Not just about attracting higher income groups, but encouraging ‘successful’ local residents to remain

Nonetheless evidence base for mixed-communities remains highly contested (Lupton & Fuller 2009)

Tenure-Mix as a Regeneration Strategy in Scotland

5

SG announced new Low Cost Initiative for First-Time Buyers (LIFT) in 2007

Two key elements include:◦ Shared equity: provides interest free loan enabling

purchasers to buy majority share in their property

◦ Shared ownership: pay part mortgage and part rent (occupancy payment)

Small but increasingly important segment of UK housing market

6

Faced with imminent budget cuts. notion of ‘social’ housing’ now being re-imagined as ‘affordable’ housing

Increasingly marginal, welfare role for traditional social housing in the future

‘Affordable’ housing much more geared towards housing for sale through LCHO

However, low & middle income groups particularly vulnerable to labour & housing market volatility

7

Aimed to gain deeper insight into purchaser’s experiences of LCHO schemes

Focus on regeneration areas in west-central Scotland: West Dunbartonshire & Glasgow City:◦ Median earnings: 88% & 94% of Scottish average◦ Average house prices lower than Scottish average◦ Large SRS comprising over 40% tenure structure

Reflects legacy of de-industrialisation that still scars much of the Scottish landscape in the west, as well as the higher levels of social housing

Research Design

8

In depth, face-to-face interviews with 14 LCHO purchasers

Although small, sample offers in-depth understanding of the key issues

Sample drawn from three housing developments:

◦ Glasgow Greater Govan: estd shared ownership scheme. Mix of rehabilitated pre-1919 & new build properties

◦ Glasgow North East: new build houses, shared equity

◦ Clydebank: new build tenements, shared equity

Participants drawn from a range of socio-economic backgrounds & housing tenures

9

POSITIVE BENEFITS AND OPPORTUNITIES OF

LOW COST HOMEOWNERSHIP SCHEMES

10

Described as the main benefit & attraction

By buying a smaller share, purchasers can reduce their required mortgage & deposit

Particularly important for single h/holds

Flexibility through ability to ‘staircase’ their share

Less exposure to risks of high mortgage borrowing

Risks associated with negative equity shared

Affordability

11

“Because I am single there are only so many options open to me […]. It’s really, really hard to get a mortgage nowadays, the majority of mortgage companies are looking for crazy deposits maybe up to thirty per cent which just wasn’t feasible for a single person to buy a house. So shared equity seemed the more logical approach to get on the ladder.”

(Natalie, 18-25 years old, shared equity purchaser, Glasgow North East, new household)

12

Enabled them to buy a ‘better quality home’ than otherwise able to afford on open market

Broadened options by allowing purchasers to enter new-build sector

Widens choice of house types on offer to FTBs, thus increasingly likelihood of ‘successful’ h/holds remaining locally

Newer properties perceived to have less maintenance issues & no renovation or decoration required

Quality

13

Interviewer: “You were talking about when you first started looking at houses in the local market. How easy was it for you to buy in the market?”

Angela: “A lot of them were affordable, but it wasn’t what I was desiring at all in quality. This has given me a better opportunity to get on to the property ladder.”

(Angela, 36-45 years old, shared equity purchaser, Clydebank, previously in social housing)

14

LCHO schemes enable ‘successful’ h/holds located in the rental sector to remain in the local area

All but one of the interviewees had purchased in the geographical areas where they ‘grew up’

Liked the familiarity & security this local connection gave them, as well as being close to family/friends

These local networks important sources of informal care

Local Connection

15

Schemes also free up social housing for those in greater housing need

Policy tension between promoting mixed communities & encouraging working households to exit the SRS

May increase social polarisation between homeowners & social renters

Exacerbated by homelessness legislation

Housing Need

16

CHALLENGES AND PROBLEMS ASSOCIATED WITH LOW COST HOMEOWNERSHIP SCHEMES

17

Taking out a mortgage was a source of much stress & anxiety for those coming from the SRS:◦ Concerned about over-stretching themselves ◦ Loss of HB

Less of an issue for those coming from PRS or who had previously been homeowners◦ Mortgage something ‘everyone has’

Costs of insurance products & financial responsibility of maintaining the property◦ Costs homeownership goes beyond monthly mortgage

Financial Costs of Homeownership

18

“Well I think [a mortgage] is a noose round your neck, it is definitely a worry. You know you’ve got to make sure you keep your job and that.”

(Eleanor, 46-55 years old, shared owner, Glasgow Greater Govan, previously in social housing)

“Mortgage wise and things like that it’s a big commitment, and you have to be able to do your sums.”

(Angela, 36-45 years old, shared equity purchaser, Clydebank, previously in social housing)

19

Limited range of lenders who would fund shared equity/ownership mortgages

Reduction in choice for consumers & less competitive mortgage products

More expensive nature of their borrowing has significant social justice implications

Need for impartial financial advice

Limited Financial Products

20

“There’s only a few (lenders). You can’t go the

whole market. And the APR is higher, than what it would normally be. Which isn’t fair either.”

(Ina, 46-55 years old, shared equity purchaser,

Clydebank, previously a homeowner)

21

To increase share, need to have the property re-valued & re-mortgage their home

Significant differences in ability to staircase across the two schemes:◦ Shared ownership: smaller stakes, occupancy payment &

mortgage, more difficult bridge equity gap (Frank)◦ Shared equity: larger shares to begin with, remortgaging to

become outright owner more likely, but not a formality (Nathalie)

Appropriate for gvt sell people dream of homeownership, when financially not within their reach? May become trapped in intermediate tenure

Staircasing

22

“You’d need to take out another mortgage to get another percentage off [the association]. And I feel that all you’re doing is giving the association a loan again because all they’re going to do is take rent off you again […] It’s never going to be yours. And people buy a house so that it’s theirs. You struggle to pay it but at the end of the day that’s going to be mine. But this will never be mine. I’ll struggle. This will put me in my grave trying to keep a roof over my head. And it will never be mine.”

(Frank, 46-55 years old, shared owner, Glasgow Greater Govan, previously a homeowner).

23

Guidance requires HA’s to make applicants aware of financial responsibilities attached to HO

Nearly all participants, maintained the fine details of the schemes were not really explained to

Significant as restrictions apply that differ it from conventional homeownership:◦ Restrictions on who can inherit◦ Prohibited from renting it out to third party◦ Limited in size of property (two bed spaces more)◦ Prevented from increasing stake in ‘pressured areas’

Administered in a rather bureaucratic fashion

Division of responsibilities between ‘landlord’ & purchaser further point of contention

Administration of the Scheme

24

LCHO products integral to diversifying the tenure structure at the neighbourhood level in Scotland

Schemes pose a number of challenges for purchaser, in addition to any positive benefits:◦ Financial costs & risks of homeownership◦ Additional expenditure of insurance, repairs &

maintenance◦ Paying higher premium for borrowing (limited products)◦ Restrictions on use and re-sale of property (compared to

normal HO)◦ Ability to staircase up their share and become ‘full’

owners questionable

Conclusions

25

Should gvt be promoting such schemes, given concerns about sustainability of HO; LCHO schemes are not without risk

Gvt could perhaps take advantage of these difficult times and rethink its attitude to tenure

Improving variety & quality of the SRS preferable to providing affordable housing for sale

Greater clarity needed from SG about what the ‘role’ of social housing is