Affordable homeownership initiatives are ‘ill-defined and poorly targeted’
Many affordable homeownership initiatives in the UK have been “ill-defined and poorly targeted” according to a new independent report by the research unit LSE London for the Building Societies Association and the UK Collaborative Centre for Housing Evidence (CaCHE).
The report, entitled ‘Thinking outside the box: Exploring innovations in affordable homeownership’, suggests initiatives have reinforced regional differences and sometimes overlapped with one another.
In addition, the research suggests that because many of these initiatives have been short-lived, they have had limited impact and have been confusing to both consumers and lenders.
The government is now looking at two new products: First Homes, a shared equity scheme, and a potential mortgage guarantee scheme linked to long-term fixed interest rates.
Professor Christine Whitehead, emeritus professor of housing economics at LSE, said: “The government has sponsored a range of affordable homeownership products over the last 40 years with varying success.
“What is needed is a better understanding of the nature and scale of the affordable home ownership ‘gap’ – taking account of house prices, incomes, the capacity to raise a deposit and attitudes towards risk of borrowers and lenders.
“We also need a more coherent set of affordable homeownership products.”
The report suggests that the UK could learn from abroad concerning mortgage guarantees, which are a cost-efficient way of expanding affordable home ownership opportunities.
The report also recommends market-based initiatives that help supplement the higher LTV market should be encouraged.
Professor Kenneth Gibb, director of the UK CaCHE, added: ‘This timely report reminds us how challenging it has been for government to grow home ownership, and how difficult it has been for mortgage providers to innovate in such a way that the market can expand for first-time buyers.
“The report is a comprehensive and intelligent reading of the current market, where it came from, and the likely factors shaping affordable home ownership in the future.”
Paul Broadhead, head of mortgage and housing policy at the BSA, said: “Building societies were founded to help people into homeownership, so they have often been at the forefront in the provision of products designed to support affordability.
“This valuable research pulls together what has been learned so far, and indicates how government, lenders and others might work together to help more people into homeownership the future.”