HELPING BRITAIN RECOVER - Home Ownership Andy Mason - Head of Strategic Partnerships & Housing Jonathan Buckle - National Account Manager ...
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HELPING BRITAIN RECOVER - Home Ownership Andy Mason – Head of Strategic Partnerships & Housing Jonathan Buckle – National Account Manager
Classification: Confidential DRAFT FOR DISCUSSION
With house price to income ratios near record highs in much of the UK,
many people are unable to access the benefits of homeownership…
Deteriorating house affordability has pushed more people into renting Fewer are able to access the significant benefits of homeownership
House price : income ratio (x) Lifetime spend on housing
13
12 Ldn £1.198m difference
SE
Buyers £427k
11
East
10
SW
9 Eng & Wal
8 W Mids Renters £1.625m
E Mids
7 Wales
6 Yorks
5 NW A home-buyer typically spends £430k on housing costs vs.
NE
4 £1.6m for a life-long renter (once adjusted for inflation)
3
2000 2005 2010 2015 2020
Sustained HPI growth and slow wage growth has resulted in the average
home in England & Wales costing almost 8x average household income
– this rises to almost 10x or more in London and the South East Other benefits of homeownership vs. renting
Stability of • Average private renter moves every 4 years (vs. 17 years for
Proportion of households by tenure tenure owner-occupiers) e.g. to short leases, or potential eviction.
100%
Private Rent • 69% of private renters experience one or more serious
80%
Quality of problem with conditions in their home
Council / HA housing • 23% of PRS housing deemed ‘not decent’ over the past
60%
decade.
Mortgage
40%
• Renters have less freedom to make home alterations, have
Own Outright Autonomy pets, take a lodger.
20%
0% • Moving house creates both cost (£700 per move) and
2000 2005 2010 2015 2020 Accessibility inconvenience (particularly if moving neighbourhoods).
Proportion of mortgaged households has fallen from 56% in 2000, to • Private renters face various types of discrimination, e.g.
~43% since 2014, while the proportion of private renters has grown Discrimination approx. half of private landlords refuse to let to recipients of
from 10% to 21% over the same period. housing benefits
2
Classification: Confidential DRAFT FOR DISCUSSION
Under Helping Britain Recover, LBG plan to address some of the
societal challenges with access to housing
Shared Ownership schemes
Take a leading role
in supporting How the scheme works:
Government schemes
• Housing Associations purchase “affordable” new build homes from
housebuilders and offer these for Shared Ownership.
• Customer buys a share of the home (e.g. 25%) using a SO mortgage and
Explore Partial rents the remaining share from the HA.
Ownership opportunities
Deposit from customer e.g. 5% of the share they buy
Mortgage via mortgage lender e.g. 95% of share they buy
Provide targeted support Rent paid by customer to the HA as landlord - typically
for key workers approx. 3% p.a. of unpurchased share (e.g. 75% share of
Deliver 2021 property).
initiatives
building on
identified
opportunities Equity Loans
Create quality private
rental sector How the scheme works:
• A proportion of homes constructed by housebuilders must be
‘affordable homes’.
• Builders can become registered to sell these new-builds under the
Deliver green lending Shared Equity scheme.
strategy Deposit from customer, e.g. at least 5% of initial property price.
Equity Loan e.g. (via Gov’t Help to Buy scheme) of 5% to 25% of
initial property price. The same % of the current property price is
repaid in the future when the home is refinanced / sold.
Enhance customer Mortgage via mortgage lender, on the remaining 75% to 90% of
education initial property price
3
Classification: Confidential DRAFT FOR DISCUSSION
We think Private providers can address some of the issues seen
with partial ownership today…
Gov’t Shared Ownership scheme Gov’t Help to Buy Equity Loans
Limitations Limitations
Customer restrictions – FTBs only - household income < £80k p.a. (£90k London) Ends in 2022….
Property restrictions – New build only Customer restrictions – Scheme available only to FTBs
Quality – Properties often smaller, or built to lower specification than others Property restrictions – Available only to Gov’t registered HTB house builders
Limited supply - HAs rely on government funding or rental income to pay for Limited supply – While 40k - 50k homes are sold using HTB Equity Loans p.a., this
additional SO homes represents approx. 30% of all new builds each year.(1)(2)
Resale/mobility – HA has first refusal to buy or find buyer if customers wishing to Property price caps - Subject to regional price caps: £186k NE / £437k SE and
sell own less than 100% £600k in London
Private Shared Ownership Private Deposit Boost / Equity Loans
Private providers enable customer to buy homes on a part-buy, part-rent basis - Private providers offer customers equity loans to boost their deposit, or buy their
outside of the government scheme. home outright - outside of the government scheme.
✓ Can be used on pre-owned and new-build homes. ✓ Available on pre-owned and new-build homes, and for FTBs and home-movers.
✓ Available for home-movers and FTBs, with no set income limits. ✓ Private, for-profit companies to grow the market beyond limitations of Gov't scheme.
✓ For-profit providers can access private capital to drive growth of the market. Some schemes are complicated and potentially costly
Rent usually higher than with Gov't SO, as funded by private capital • Providers offer different proposition design:
1. ‘Bolt-on’ product providers 2. ‘Standalone’ product provider
Flexible loans funded by Equity loan with Equity loan with no Equity loan with
friends / family. Can be no regular regular repayments, regular interest-
equity loans or amortising; repayments but increases as % only repayments
Provider buys and acts as landlord for the Provider acts as landlord and interest-bearing or interest of home value over
rented share, while separate lender (e.g. provides the customer with free. time
LBG) provides mortgage on customer share. finance for the share they buy
Key ✓ Positive feature Limitations Source: (1) ONS (2) NHBC (3) BuildScan research cited in IntroducerToday.co.uk, March 2021 4
Classification: Confidential DRAFT FOR DISCUSSION
Thinking about private partial ownership products…..
What are the
risks to
homeowners?
What support & What are the key
education do distribution
customers need? risks?
How can we What role could
How should we / increase technology play
brokers market customer in supporting
the product? awareness? marketing and
distribution?
What support & What are the key
development do advice
brokers need? considerations?
How would
customers
access the
provider
products?
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