More than 3 million households have missed out on home ownership since the 2008 financial crisis, according to a new report from specialist lender Pepper Money.
Growing affordability challenges mean that an increasing number of would-be buyers are turning to shared ownership schemes as a pathway onto the property ladder.
The report, authored by economist Rob Thomas with policy input from former Cabinet minister David Gauke, estimates that around 3.3 million households - who would previously have been expected to buy - have been priced out of the market since 2008. This highlights the need for alternatives to traditional full ownership.
“In light of this, we believe shared ownership needs to be embraced as a mainstream tenure, fully integrated into the broader housing landscape,” the report says.
How does shared ownership work?
You may be eligible for shared ownership if your household earns £80,000 a year or less outside London, rising to £90,000 if you live in the capital.
When you buy using shared ownership, you buy typically buy a share in a property equivalent to between 10% and 75% of its market value. You then pay rent to a housing association on the share of the property you don’t own.
You can buy extra shares in your property when you can afford to. The more of your property you own, the less you’ll pay in rent to the housing association.
The scheme significantly lowers the upfront costs of buying a home. For example, Pepper Money says that during 2023–24, the typical shared ownership buyer acquired a 40% stake in a home valued at about £313,100, putting down approximately £22,800 and borrowing £99,200.
By comparison, a first-time buyer across England purchasing a property the conventional route, needs a deposit of around £68,600, more than three times the deposit required by shared ownership, and a mortgage of about £223,000.
Shared ownership is not without its drawbacks, however. These include the fact that properties are typically leasehold, so often there will be ground rent and monthly service charges to pay. The rent you pay also usually increases over time, so your monthly outgoings may not be as low as you initially expected.
Growing demand for shared ownership
Despite the potential downsides of shared ownership, the report notes that there has been a 21% year-on-year increase in shared ownership mortgages, reflecting strong demand from those who might not otherwise be able to afford to a home.
Rob Barnard, Intermediary Relationship Director at Pepper Money, said: “Since its introduction in the late 1970s and formalisation in the 1980 Housing Act, shared ownership has become an established tenure in its own right, with some 250,000 homes, roughly 1% of the country’s housing stock. Despite this, consistent policy changes have impacted the product’s development, creating both opportunities and challenges for prospective purchasers.
“With the much-publicised affordability pressures afflicting the housing market over recent decades, shared ownership has been a crucial route by which many households have been able to gain a housing stake of their own.”
