As shared ownership now has four decades under its belt, we can take a cue from how this crucial tenure has endured previous property market cycles. While this resilience shows that the product will stand the test of time, there are steps the government and sector must take to support it.
With the right government support and industry innovation, housing associations will work hard to build new affordable homes. This will and must include shared ownership, which is vital, particularly in areas where house prices and deposits remain out of reach for many. However, government decisions on social rent ceilings, alongside high inflationary costs, mean we will have a smaller pot to invest, and housing associations are prioritising support for residents facing cost-of-living pressures.
Developers currently contribute around half of new affordable housing though conditions imposed on them via the planning system, so it is essential that proposed changes to the planning process are got right. The current draft outline of the Infrastructure Levy leaves a lot of uncertainty, and the risk is this will lead to fewer affordable homes being developed.
The prime minister must look again at these proposals as well as further planning reforms to deliver more affordable homes alongside the infrastructure that communities need.
However, the acute need for affordable housing means the planning system alone cannot keep up with the volume of new homes required. As house prices adjust, private developers will naturally reduce the amount of stock they put into the market.
The not-for-profit sector plays a vital counter-cyclical role. Affordable housing schemes, including shared ownership, have historically picked up the slack where the private market has held back. The Affordable Homes Programme is an important foundation to build from, but to truly unleash the recession-resilient contribution of housing associations and others, we need longer-term capital funding to attract other investors and partners.
Despite this, 2022 is different to previous downturns. Rising material and labour costs mean the average build costs have risen by 16% in the past year. Pair rising costs with a potentially below-inflation social rent cap, and meeting the need to keep building homes across the UK becomes even more challenging.
At SO Resi, rental income is our main source of reinvestible income, and allows us to continue to build homes, maintain existing ones and support residents. On all fronts, our sector is desperate to keep building, even when other parts of the market decide to take a step back, but we must be realistic about what we can do without further support.
Even with rising mortgage interest rates, we can show that shared ownership is comparable or cheaper than renting privately. There is strong demand for shared ownership homes, backed by good lending availability that ensures the overall costs of owning remain within reach for many people.
Where there’s a will there’s a way, and our sector will continue do all it can to weather the storm to build the affordable homes people need.
Guy Burnett is executive director of development at SO Resi