Shared Ownership homes should not be classified as affordable

Introduction

Local planning standards say that 40% of all new homes built on major housing developments in Enfield should be “affordable”.

Affordable is supposed to mean that the homes cost less than the normal market rate, so that they can be bought or rented by people who would be unable to afford these rates.

However, our analysis of recent planning applications shows that most local people will not be able to afford the new so-called “affordable” housing being built in Enfield.

There are many different types of “affordable” housing, and this can create a lot of confusion. The truth is that some types of housing classified as “affordable” are genuinely affordable, and some are not.

The most misleading is Shared Ownership. Although Shared Ownership is classified as an affordable housing solution, we shall show here, that it costs more than most private market housing. There are two things wrong with this: 1) it means that developments being built in Enfield are providing much less affordable housing than they claim and 2) these homes are not genuinely affordable to Enfield residents. Therefore, Shared Ownership being classified as “affordable housing” is misleading to all of us and fails to help the local people who need help to buy a home.

Which housing is classified as affordable?

The level of complexity that surrounds affordable housing classifications can make it difficult for residents, journalists, and councillors to understand the amount of genuinely affordable housing that a scheme will deliver and makes it nearly impossible to hold developers and planning officers to account.

There are two main categories of affordable housing in London: 1) Social Rent levels and 2) Intermediate Affordable; and there are different types of affordable housing within each of these two categories. The different types of affordable housing are each designed to reflect different housing needs and incomes. More detail about each of these can be found on the GLA website.

Table 1: Main types of affordable housing in London   

Social Rent levels	Intermediate Affordable
London Affordable Rent	London Living Rent *
Social Rent	Shared Ownership **
	Discounted Market Rent

What is Shared Ownership?

Shared Ownership is classified as an affordable housing solution by the London Mayor and is defined in The London Plan as “an intermediate ownership product which allows London households who would struggle to buy on the open market, to purchase a share in a new home and pay a low rent on the remaining, unsold, share”.

Despite being classified as “affordable”, the monthly costs associated with Shared Ownership homes are often higher than other types of home. This is particularly problematic because Shared Ownership homes target people on lower incomes and “who would struggle to buy on the open market”. 

Many of the homes at the Montmorency Park redevelopment in New Southgate are nearing completion and a high number of these are now being marketed as Shared Ownership. This data has enabled us to conduct an up-to-date analysis of the cost of Shared Ownership, compared to other types of homes in the borough.

Table 2 below gives an example of what we found and shows the monthly costs associated with each type of “affordable” housing.

We have found that Shared Ownership is:

• far more expensive than other affordable housing tenures (e.g. London Affordable Rent and London Living Rent).
• far more expensive than even the highest private market rental rates

and

• overall costs are no better than purchasing with a mortgage.

Table 2: Summary of monthly costs for each tenure

	Shared Ownership*	Purchase with mortgage **	Local Private Rental Sector – upper quartile rents	Local Private Rental Sector – median rents	London Living Rent / Rent to Buy	London Affordable Rent
2 bed	£1,997	£1,975	£1,475	£1,375	£1,031	£710
3 bed	£2,459	£2,451	£1,900	£1,800	£1,134	£750

Our findings suggest that Shared Ownership should not be classified as affordable

The problems with Shared Ownership are beginning to surface and the model has been widely criticised in the media. In December 2020, the BBC’s Panorama programme titled “The Home I Can’t Afford”, showed how people in shared ownership schemes were experiencing escalating costs and huge debts.

The list of problems associated with Shared Ownership is growing, with residents living in the shared ownership homes raising issues related to a lack of control/flexibility; unforeseen costs; high service charges; legal costs; issues with lease lengths; problems selling; difficulty increasing share owned; lack of protection if falling into arrears; high increases in rental costs; higher mortgage costs and feeling trapped/unable to move.  Some people have described Shared Ownership as the worst of both worlds – a poor way to buy and a poor way to rent.

Furthermore, many Shared Ownership buyers have had the double-whammy of being caught-up in the cladding scandal and are facing enormous costs associated with making sure the building they live in is safe and being unable to sell up and leave.

What does this mean for Enfield?

Enfield has planning policies in place that are designed to limit the number of affordable homes coming from Shared Ownership. However, these housing policies are routinely broken, and a large proportion of the “affordable” homes being approved in Enfield are in fact Shared Ownership and, as a result, far fewer genuinely affordable homes are being built.  The recent planning applications for Chase Farm and Colosseum Park are prime examples. Shared Ownership is a relatively easy way to inflate the amount of “affordable” housing a scheme appears to deliver. 

Looking ahead, over half (57%) of the “affordable” housing proposed for the first phase of the council’s Meridian Water redevelopment will be Shared Ownership. No figures have as yet been provided to show what these homes are likely to cost, but we can estimate from other similar schemes that purchasing a 25% share of a 3-bed home will require an average annual income of £80,000 and a deposit of at least £7,000.   This is clearly far higher than the average incomes of most first-time buyers in Edmonton. Average incomes in Edmonton are reported to be £26,000 – £30,000 per year.

There is an affordable housing crisis in Enfield. We have one of the highest levels of temporary accommodation use in the country, overcrowding is far higher than the national average, waiting list times for family sized homes are 10-15 years and many people on low incomes would not even qualify to join the waiting list. First time buyers are now spending 11 times their income to purchase a home.

Given the seriousness of the situation, it is vital that the council starts rejecting schemes which rely too heavily on Shared Ownership as a way to deliver “affordable” housing. Instead, there needs to be a focus on delivering the types of affordable homes that local people can genuinely afford (such as London Affordable Rent and London Living Rent).

Furthermore, local news stories about new housing developments often report the amount of “affordable” housing as a single overall figure. We think it would be beneficial if these reports also informed the public about the types of affordable housing that are being approved in Enfield, especially where a significant proportion will be Shared Ownership, as these should not be classified as affordable.