One Step Beyond? The Limitations for Government Promotion of
Home Ownership
Rob Rowlands
Centre for Urban & Regional Studies
Paper presented to ENHR Working Group Conference “Building on Home Ownership”, 13/14 November 2008, TU Delft
NOT FOR QUOTATION WITHOUT AUTHOR’S PERMISSION
Abstract
Britain has become a nation of home owners, or so we are told. Throughout the second half of the 20th Century and up to today, home ownership has grown. Research over the last 30 years has suggested that the majority of British households want to be home owners. Whilst a significant proportion are already owners, the dominance of a discourse around ownership has created challenges for government of how to assist others into being home owners. This paper contends that governments in the UK have reacted to the normalisation of home ownership over time by developing policies which assist households to become home owners. It argues that these policies respond to previous research highlighting the demand for home ownership whilst also directing further research to understand how many more people want to be home owners and their barriers to ownership. This paper suggests that this activity underpins and perpetuates the dominant discourse and assumes that ownership should be accessible for all. However, the extent of home ownership is not limitless or universal and not every household can be a home owner. Whilst recent analysis has focussed on the economics of ownership through affordability modelling, the qualitative aspects of these limits, particularly in relation to specific policy initiatives, are missing. Using evidence from a recent evaluation of a low cost home ownership initiative in England, this paper demonstrates that the construction oft he affordability problem has focussed on only the economics of the issue. Through reference to a social survey of households and in-depth interviews that the qualitative aspects of purchasing housing have not been fully considered but that these shape the demand for home ownership initiatives. The paper concludes by suggesting that the measurement of the “affordability problem” needs to be reconsidered and that policy makers need to reshape their response to this problem in response.
Contact:
Birmingham Business School
J G Smith Building, University of Birmingham, Birmingham B15 2TT Email: r.o.rowlands@bham.ac.uk
Introduction
Home ownership is now at an all time high in the UK. Together with second home ownership and buy-to-let it seems that we are a nation obsessed with property ownership. Indeed you only need to turn on the television on most nights of the week to see how you can buy, renovate and make money on property by selling it again and notably be reminded of a familiar refrain with its call for continuous movement through the system - “relocation, relocation, relocation”. Within this socio-cultural dimension, governments of both the Conservative and Labour parties have continued to push for its growth and the means for the rump of the masses to enter into the “dream”.
As researchers we cannot stand aside from this phenomenon without having played a role and over the last 20 years this role has been particularly on sided. Since Saunders and Harris’ paper in 1987, academic research has continued to provide a case for a continued push for home ownership by declaring its natural state. Furthermore the acceptance of the normalisation of home ownership as the natural tenure form has shaped the research agenda to focus on the barriers preventing aspirant households entry into normality. Thus, I will argue in this paper that our knowledge of home ownership is flawed, partial and prejudiced leading to a particular set of research parameters which underpin the dominant discourse. Furthermore, that this position leads to a gap in our knowledge of the rental sector as a dark only partly research yet prejudged residual.
This paper uses the data and experience of evaluating a nationwide pilot low cost home ownership scheme for the English government to explore the continued push for home ownership. The view expressed in this paper are those of the author and do not represent the view of the Department of Communities and Local Government or the Housing Corporation. I am however grateful to the department and in particular key members of staff for their support in the undertaking of the research on which this paper is based.
The paper begins by outlining the reasons why home ownership has grown in the UK in the last 30 years. It presents the political and economic context and then outlines the sociological explanations which have developed latterly in explaining this rise but which have become the foundation for the continued push for home ownership. The paper then explores the role of research in underpinning the dominance of home
ownership and at the same time the response of government to these signals. The mutual role of each should be recognised in the dynamics it creates. Finally the paper uses evidence from the evaluation project to explore the behaviour of a group of “would-be” home owners and by dissecting the research data argues that home ownership has reached its limited through a combination of purchaser attitudes and the changing economic conditions which we are now facing.
The UK, A Nation of Home Owners?
Without doubt, the UK now has a clear majority of households who are home owners. By 2007, 70% of households in England and Wales were home owners, the majority owning with a mortgage. This is almost a complete about face from the start of the 20th Century and indicates the way in which home ownership has been embraced by the masses. Property in no longer theft but the most basic of rights according to more recent advocates of property ownership.
So why has this happened. The causes are linked and should be seen as such although the initial explanation has been subsequently bolstered by more sociological explanation. They are not specifically British if we look at them objectively, although they have sometimes been spun with a quintessentially anglicised refrain. What is important to recognise is that the rise of home ownership needs to be placed in a context of wider socio-political changes.
The fist factor is linked to freedom. Home ownership has grown over the course of the last 60 years and in the initial phases was promoted as part of the post-war rebuilding in the UK. Although initially small in scale and slow in take up, politicians throughout the 1950s and 1960s have linked home ownership to democracy and subsequently freedom. The link to freedom is perhaps obvious: as households became owners they gained greater control over their dwelling and so could do what they wanted with it. Of course, this freedom is limited not least in the fact that the majority of owners do so with a mortgage and so in theory the lending institutions retain some control over these properties.
Freedom is linked to economics and the rise of neo-liberalism in the 1970s made this very clear. As the recognised father of this paradigm, Friedman made his analysis in 1962 clear that economic freedom is an essential prerequisite for political freedom. The links to Eden’s “property owning” democracy are therefore clearer as a result
and home ownership is an essential form of providing such freedom to individual households. In reviewing the impact of the right-to-buy in its first year, Margaret Thatcher highlighted the denial of this freedom, “the most basic ownership of all” by “Socialist council[s]” and that the right-to-buy had given tenants the chance to “turn a dream into reality” (Thatcher, 1980). As neo-liberalism has risen so home ownership has become an important tool in realising economic freedom and ironically control by exposing households to the benefits of ownership and the impact of monetary policy. Importantly though, the rise of home ownership has allowed a further withdrawal of the state from the provision of goods and services. In the UK, the introduction of the Right-to-Buy in 1980 was a demonstration of the link between the freedom aspirations and home ownership as a means of rolling back the state’s function as a provider of housing. Whilst the growth of home ownership in the UK has never seen households move solely from council housing to owner occupation, over the last 30 years the Right-to-Buy has played a critical role in facilitating this shift. In the early years of the scheme more affluent tenants living in more desirable estates were able to utilise this opportunity and have since used it as a social escalator (Forrest, forthcoming). And these notions of security and freedom have become common currency in everyday life. Articles by Gurney (1999a;1999b) and others have highlighted how long-term financial advantage of owner occupation over renting has been socialised into a rhetoric for promoting owner occupation. Terms such as “renting’s dead money” and “it’s yours at the end of the day” are commonplace in this argument.
At the same time, increasing rates of home ownership have provided households with new and rising assets. This new affluence has provided households with increased wealth bases which have been increasingly drawn upon to secure and finance new consumption. In the last ten years this has clearly been linked to the purchase of consumer goods such as cars and holidays using secured loans. Therefore over this period as house values have risen they have provided a powerful underpinning to the UK economy.
But not only have these assets allowed consumer spending to rise but have facilitated an increasing shift from collective welfare to individual asset based welfare. These developments are not new and can be observed in North America and especially in East Asia (ref). In the UK, the move has been slow yet one which has gathered pace. Malpass (2006) has described home ownership as the Trojan horse – a means of attacking traditional welfare regimes through a cover of freedom and
fortune. From an objective point of view it is clear that households are being increasingly asked to “sweat” their assets, seen most clear to date in the securing of care in later life and by parents helping their offspring to gain a foot on the property ladder through inheritance and gifted equity. Therefore, home ownership and the assets created have helped intensify the withdrawal of the state and compound the notion of individualised welfare provision.
Furthermore, owning one’s home is couched in terms of choice and aspiration and it is rising affluence and the development of assets which have (seemingly) facilitated the growth of home ownership.
This framework within which the growth of home ownership has taken place has been analysed by a host of researchers over the last 20 years and there has been a growth of sociological explanations for the trajectory. Here I will focus on 2 of the more well versed reasons, for these are what I see as the main factors underpinning the development of housing policies in support of home ownership.
The first is the well noted “ontological security” gained from home ownership. This argument was proposed by Saunders in a series of papers and the book “A Nation of Home Owners”. The notion of ontological security is one of finding stability through continuity. In the post-modern world where flux, change and instability are abound, ontological security is concerned with those elements of one’s life which provide certainty. Saunders argued that home ownership provides this element, It has been suggested by a variety of sources that there is a “natural desire” to own rather than rent. Besides Saunders, various households surveys have indicated that between 8 and 9 households out of every 10 identify owner occupation as their preferred tenure. One interpretation of Saunders has been put forward by Curtice that because of this “natural desire”,
“…it will always be preferred to any other form of tenancy, regardless of changes in people’s social and economic circumstances.” (1990 p90)
Saunders has taken this “natural desire” to own and has suggested that it arises from privacy, control and wealth acquired from ownership. Hence, one can gain the necessary continuity to feel secure from this set of characteristics.
Of course, the contrary can be argued and in the current economic climate it is worth considering the contrary arguments. Owner occupation does not necessarily provide
security. Saunders’ work was published prior to the collapse of the housing market in the recession of the early 1990s. The events of the past 10 years have shown a development of this debate. In the preface to The Eclipse of Council Housing, Cole and Furbey quote Nye Bevan (1952) who suggested that the home can be a base for adventure but should not be an adventure itself (1994 p v).
Murie takes this a step further through an analysis of the British Social Attitudes survey (1997). He suggests that the recession did have an impact on the desire to own,
“Even if most people evidently would still prefer to own their own home, they now appear much more aware of the risks associated with owner occupation.” (p149)
As the events of the early 1990s and the last 12 months have shown and are showing, home ownership has not provided security for a large number of owner occupiers. It has been suggested that ontological security is not tenure specific (Darke, 1994; Forrest, 1991; Gurney, 1997, 1999a). Furthermore, the concept has been described as the “fantasy of academics” (Franklin, 1986 p39). One question which should be raised with regard to this issue is whether owner occupation is not the product of genuine choice, but rather a “coerced purchase”, the result of the lack of alternatives?
This leads to the second point – housing consumption is part of individuals and households’ image and prestige and therefore is a good which confers taste in the way outlined by Bourdieu’s Habitus (1977). The rapid growth of home ownership in the UK in the 1980s deliberately coincided with and as a part of, a Thatcherite drive for individualism and individual consumption. Yet furthermore, consumption is a social role to be performed by all citizens. To Bauman, consumption also makes and identifies the individual. The failure to do so is termed by Bauman as the “flawed consumer” (1998 p29). Therefore, the social pressures around conforming have normalised the practice of becoming a home owner. Pressure has grown on younger households to enter the housing ladder earlier with a tendency to focus on the negatives of “missing out” on the ladder. This is a far cry from the immediate
post-war period where parents thought buying your own home was a risk!1 Therefore, as Rowlands and Gurney (2001) have highlighted, even children now assume that home ownership is normal and renting some how substandard.
Therefore we have reached a point reminiscent of Vanishing Point: the question is not should I be a home owner but how can I become one. The focus has shifted away from housing needs per se to a focus on the barriers hindering access to home ownership and the steps necessary to allow households to realise the “dream” of being “normal”.
However, in light of the more recent economic events, it is likely that we are seeing a shift in the political and economic paradigm away from neo-liberalism. Whilst the housing market in many countries has experienced shocks of varying scales in the course of the last 30 years, for example the UK’s housing market crash in 1990, there has not been a convergence of these conditions across a series of countries nor one which has threatened the financial systems to such an extent during the course of this paradigm. If these shocks do result in a subsequent reordering of the economic system, how they affect housing in general and home ownership more specifically will be of significant importance bearing in mind the topography described above.
Framing and Responding to the Problem The role of research in framing the “problem”
The role of research has been important in shaping and underpinning the wider support for home ownership. Saunders’ work has been critical in both underpinning and entrenching the debate about the normality of home ownership. The initial development of Saunders’ argument was based on the analysis of survey data with council tenants and has formed the foundations for a defence of the support of home ownership. In the work Saunders uses the responses of tenants to questions about the control they feel over their dwelling together with their attitudes and aspirations towards home ownership. He concludes that because tenants are unhappy with their landlord and in particular feel they have little or no control in the management of their homes that they therefore want to be home owners. This assertion, though criticised
1
elsewhere, has formed a beneficial evidence base on which home ownership promotion can take place.
Subsequent research has been largely uncritical of the pursuit of home ownership and has continued to consider the demand for owner occupation. In particular it has focussed on why households want to be home owners and the barriers they face in achieving access to the tenure. Consequently, renting is treated as a residual which will pick up those households unable to afford. As the number of households in this position has increased so there has been political concern and research focus on the causes of the growing affordability gaps and the barriers faced by households in becoming home owners. The assumption is that as a residual sector, the rental sector is not a desirable location for households. Therefore, arguably research is helping to underpin and accentuating the perpetuating cycle of need/demand.
The construction of the affordability problem
As a result of this discourse developed around home ownership, the scope of research around housing need has changed shape to a discussion of affordability and in particular the affordability of home ownership. The affordability problem is constructed as purely economic problem where the relationship is between incomes and house prices. At a crude level this provides only a very basic understanding of the extent and scope of the issue. The problem is that it assumes that all households are wanting to enter the housing market. It also assumes a standard product in terms of quality and price of both property and location. Whilst more sophisticated analyses has been developed ofver the course of the last 10 years, for example CURS work on “at risk of low demand” areas and work for the West Midlands Regional Housing Strategies (WMLGA, 2003; West Midlands Regional Housing Board, 2005) the basic connection of income to price has remained constant.
But none of these methods actually consider the qualitative aspects driving housing consumers either in the locational factors they face, the desire for a larger dwelling that the efficiency model (which mirrors housing allocation policies) uses or through other personal factors. It is a rational economic model which assumes that the market is undistorted and that (wo)man behaves in a rational manner.
The response of government to the “problem”
What the research agenda and the construction of the problematic of affordability creates is an assumption that there is latent demand for home ownership. Thus governments in the UK have continued to provide ways and means for households to realise their wants for home ownership in order to suffice their needs for accommodation. Whilst the history of government support for home ownership in the post war years is long and various, the purpose of this paper is to consider current approaches to extending the scope of ownership.
Both Conservative and Labour governments have responded to the results of the household surveys, research and academic analysis of these trends and the more general socialisation of attitudes to ownership by attempting to develop more routes into ownership. Politicians claim that they are responding to what people want, even at a time of economic and housing market uncertainty, as highlighted by a recent speech by the (then) Housing Minister:
“Ten years ago, house prices were around three and a half times average household income. Today, they are more than seven times average income. But with the effects of the credit crunch, borrowing on this scale is simply no longer possible. And yet, why should responsible young people be denied the opportunity to realise their dreams of homeownership - the sense of independence and stability that comes with having a secure base? Some people have asked why we are doing this when house prices are falling. But I do think it is right to explore all the possible options which could help meet their needs and give them a sustainable route into the housing market.” (Flint, 2008a)
Affordable home ownership has become an integral part of the Government’s housing policy and responses to meet housing need are no longer couched in terms of social renting alone. Indeed, private housing has become the focus of attempts to address affordability and “affordable home ownership” is an important element of this. Affordable home ownership comes in a variety of shapes and forms including below market value sales and part- or shared-ownership. Often called low cost home ownership, these products have grown in importance in the last 10 years and have been targeted at a range of groups for whom home ownership has been seen to be
increasingly out of reach including key workers, more affluent social housing tenants and first-time buyers.
Nor is the response confined to these subsidised products. The recommendations of the Barker review of housing supply place great emphasis on a market based approach to rebalancing the market and improving affordability through an increase in housing supply, the majority of which would be home for sale (Barker, 2004)
It is therefore with some surprise that policy makers view low take up figures for some of these products. The example of the Social HomeBuy scheme outlined below highlights this and also illustrates the way in which low demand for the product is assumed to be a result of the way in which the programme is implemented rather than limitations on the demand for and appeal of the product. This further reinforces the view by government that there is a continued need to pursue a perceived demand. Whilst civil servants recognise that products have a limited impact and that the current climate does not present the best conditions for marginal home owners to be sustainable owners, they are resigned to following ministerial commitment to fulfilling this assumed potential.
The events of the recent months make the continued pursuit of home ownership all the more interesting to consider. The present problems have been created in the sub-prime markets but have spread into main stream mortgage lending. Low-cost home ownership is targeted at those at the margins of full home ownership. Whilst providing access to “the dream” it is easy to see how it might also become a nightmare for some. As credit availability tightens and lenders seek to minimise further risks, the question has to be asked if continued pursuit of high levels of home ownership are sustainable.
The case of Social HomeBuy
The Social HomeBuy scheme provides new opportunities for tenants who do not have the Right-to-Buy or Right-to-Acquire or for those tenants who cannot afford to purchase 100% of the equity of their property, to buy a share in their rented home. It is operated by both RSLs and local authorities. Participation in the scheme is voluntary but the Government is encouraging landlords to offer it. To qualify, individuals must have been public sector tenants for at least 2 years Tenants may purchase a minimum initial share of 25 per cent of a home. The remainder of the equity is retained by their landlord who will levy a charge of up to 3 per cent of the
capital value of their retained equity. A lower target average for the charge has been set at 2.75 per cent. When the scheme was implemented, buyers receive a discount on the initial share purchase based on the Right-to-Acquire discount levels which vary according to local authority area and was apportioned pro-rata in accordance with the share of equity purchased. Following purchase, local authorities and RSLs grant long leases to purchasers who become leaseholders of the property. Under the scheme, purchasers are responsible for all repairs and maintenance costs even where they own less than 100% of the equity. When a tenant wants to sell, if they do not own 100% of equity, they sell as a shared ownership property. Some, but not all, properties which do not qualify for the Right-to-Buy/Right-to-Acquire schemes may be offered for sale under Social HomeBuy. There are some exemptions, including properties in designated rural areas and groups of properties for people with long term disabilities or special needs, which are exempt from the Right-to-Acquire scheme and which landlords are unable to sell under Social HomeBuy.
One of the aims of the evaluation study were to understand the take up of Social HomeBuy and the characteristics of tenants who use the product and the barriers to take-up those who have not. In order to better understand the attitudes of tenants towards the Social HomeBuy scheme, we have carried out research with tenants which included a social survey of 600 tenants in five case study areas and follow-up In-depth interviews with tenants who had indicated in the social survey that they were potentially interested in Social HomeBuy.
At the start of the pilot scheme the Housing Corporation made available resources which would provide 2000 “opportunities” for tenants to buy a part share or the whole of their property. This figure was based on preliminary analysis of income trends of tenants and intelligence from housing associations that were supportive of the scheme. The Housing Association sector was targeted in a structured way, in part because it was felt that many housing association tenants did not have the necessary Right-to-Buy or Right-to-Acquire and so there was assumed to be a high level of latent demand for home ownership amongst this group. Social HomeBuy was also rolled out in the local authority sector but on a much more ad hoc basis. Take up amongst housing organisations reflected these positions. At the end of the evaluation only 7 local authorities, most of who were in London and the South East, had offered the scheme in comparison to 74 housing associations offering the scheme across stock nationwide.
Against this setting, the actual take up of Social HomeBuy amongst tenants has remained low. At the end of the evaluation there had been 135 sales made by housing associations. By October 2008 this had risen to 278. These figures are low, especially in comparison to the 2000 opportunities made available by the Housing Corporation’s funding at the start of the pilot programme. In addition, the majority of sales have tended to be of 100% of the equity of the property. In part this is explained by the absence of the Right-to-Buy/Right-to-Acquire for many of these tenants – Social HomeBuy has been a means of accessing home ownership for this group in the same way that the Right-to-Buy was a means of access for council tenants in the early 1980s. However, it is also clear from interviews with tenants that many of them view part-shares as something alien to them. Comments by tenants referred to the futility and cumbersome nature of owning only part of a property, particularly there were concerns that it could prove more expensive and about paying for repairs, maintenance, water rates, and buildings insurance even if you only part own.. The following responses highlighted these concerns:
“What’s the point in buying part of the property?”
“Just don’t like the idea of buying and renting at same time – seems more complicated, two payments to make each month”
“If you sell and make money Council takes “a chunk” but if you lose money tenant pays for the loss”
These remarks were more marked outside of London and the South East where shared ownership schemes have only more recently become part of the housing option mix. These begin to highlight the limitation of shared ownership products in meeting the pursuit of home ownership as many prospective purchasers do not view it as home ownership. Arguably the socialisation of tenure preferences has made consumers immune to a more economically rational choice of purchase method. In some cases this has led to households making more irrational or risky choices in order to keep the dream alive.
In addition, many tenants view the product as poor value for money – they might want to be home owners but they do not want to buy the property that they currently live in. The survey data suggests that tenants who are in a position to buy rarely rule out purchase of their current home because it is too costly or poor value for money but rather rule it out (if they do so) because of prior considerations related to the
property and location. These represent push factors that are not easily balanced by incentives. There are other factors associated with a desire to keep options open which also make shared ownership (but also perhaps the Right-to-Buy with penalties on resale within the medium term). If strong push factors are not present then the incentives work. There remains a question then about the strength of the incentive package and issues about discount, rent and repairs are important.
Measuring Demand – A Tale of Two Elements
Therefore there are a series of concerns which need to be factored into modelling the demand for products such as Social HomeBuy. The survey and other data presented in this report provides evidence that can be drawn upon to assess the potential impact of Social HomeBuy and other home ownership products. The survey data gained on the evaluation project has enabled us to more directly assess the impact of Social HomeBuy amongst tenants. Here we will demonstrate the difference between 2 methods and in doing so indicate the limitation of the methods of demand assessment and the limitations of home ownership amongst marginal owner groups. We do this in two ways:
A normative calculation indicating what proportion of the inactive group2 in the survey can afford to purchase; and
An alternative calculation of latent and manifest demand
The normative calculation uses the survey data on household income at a case study level and compares this with the amount required to purchase a council owned property in each area. The guide property price is an estimate based on the valuations for sold council properties in 2005/6 and makes the assumptions that affordability relates to:
Y = ((V-D)/3.5)+R
2
The inactive group is made up of a) tenants whose landlord is participating in the scheme but have not themselves expressed an active interest in Social HomeBuy and b) tenants of landlords who are not participating in the scheme.
Where Y is the income required to purchase a stake in the property, V is the base date valuation, D is the discount and R is the rental element on retained equity in shared ownership.
The resultant calculations are tentative and indicative that provide an indication of scale the scale of possible sales based solely on household characteristics. It is recognised that at every stage the data is far from ideal and the low response rate to the question on incomes adds to the caution with which these results should be viewed. Having said that it remains a useful exercise to provide a similar base line to the assumptions of demand outlined above.
Table 1 sets out the results of this calculation for each case study area. Initially it sets out the income needed to fully purchase the property and calculates the proportion of inactive tenants in the survey reporting incomes sufficient to support this level of purchase. These range from 2% in London (we have used a Southwark valuation which is relatively low for the area of the survey and so will err on the optimistic side) to 11% in the South Midlands. Table 1 then shows the affordability threshold for 25% shared ownership. Much higher proportions of tenants can afford to buy under this calculation highlighting the intended impact of the shared equity model for enabling access to “home ownership”.
Table 1: A Normative calculation of affordability
Equity Purchased London North East
South
Midlands South West North West Income required to
purchase 100% £34,215.21 £14,608.53 £21,926.82 £28,663.71 £19,877.55 Proportion of inactive
tenants in sample with income at this level3
1.6% 10.9% 14.5% 3.9% 10.5%
Income required to
purchase 25% £12,465.39 £5,487.20 £7,893.08 £10,259.98 £7,219.39 Proportion of inactive
tenants in sample with income at this level
35.0% 79.4% 76.3% 44.2% 61.6%
3
Inactive tenants are those who have not taken part in the Social HomeBuy scheme and includes tenants of landlords who do not participate in the scheme. It excludes respondents who answered “don’t know” or refused the question on income.
This normative view outlines of how many could afford to buy and does not take into consideration household preferences for ownership or the type and location of the property they live in or may wish to purchase. This calculation demonstrates that affordability affects considerably more households in London and the South West under Social HomeBuy where housing market conditions are tighter, than in the other regions. However, it provides a useful indicator of notional demand and the final line of the table is the key in comparison for the next part of the paper.
Expressed Demand Model
The second calculation of demand not only draws on affordability calculations but draws on other responses to the survey to consider qualitative aspects of demand, not least the households attitudes to ownership and the environment they currently live in. Therefore it begins by again including a normative calculation. However, this time we have based this on age and economic activity of the head of household rather than income. Therefore in this case we have identified a potential pool of demand by selecting households which are:
1 person households where the householder is aged under 55 and in Full Time employment or self employed; or
include 2 or more persons where at least 2 people are in some form of paid employment (full or part time and including self employment) and the household reference person is under 55 yrs.
Using this method we capture households who are likely to be in a position to secure the necessary borrowing to buy at least a part share in the property and therefore the initial pool of possible purchasers through Social HomeBuy. Using this analysis there are 99 such households in the sample of tenants: 38 of these are already active in the Social HomeBuy scheme leaving 61 who have not expressed active interest in the scheme and can be seen as the strongest potential purchasers under the scheme. The distribution of these households by case study area is:
Table 2
London North East East
Midlands
South West North West
Proportion of Sample
conditions
Proportion able to
afford Method 1 35.0% 79.4% 76.3% 44.2% 61.6%
It is clear from this calculation (Table 2) that the pool of likely demand is already smaller that taking a income based calculation alone but that these figures are closer to the 30% average of social housing tenants whose income is not reliant on state benefits.
With this pool established, the next question considers households’ attitudes to home ownership. Affordability calculations have not considered this qualitative aspect and highlight the preoccupation with a desire to own rather than to rent. Table 2 presents data on the expressed intentions of our identified pool of possible purchasers with regard to ownership. The largest group were definite (38%) that they wanted to be a home owner in the future. And 17% expected to do this within the next year.
Table 3: Attitudes to buying among potential purchaser group (%) Want To Be A Home Owner?
Yes, Definitely 38
Yes, Maybe 20
No 30
Don't Know/Not Sure 13
When Are You Likely To Buy?
Within The Next 6 Months 10
Between 6 Months And A Year From Now 7
Between 1 And 2 Years From Now 20
Over 2 Years From Now 41
Don't Know 25
Base 61
Again, this data provides us with greater accuracy over the likely demand for Social HomeBuy. It has eliminated those households for whom home ownership is not being considered and those households who are not in a position to purchase in the short-term (i.e. up to 1 year). From this exercise we can identify that 35 households from our original sample of 501, 6%, are a more probable pool of demand for the product.
The subsequent question is related to the quality of the dwelling and location that householders currently live in. This element is often missed from affordability
calculations as it is assumed that economic rationality extends only to price and not to quality. This step of the calculation reveals that many householders do consider the qualitative aspects of the product offered to them. Table 4 indicates that 20 of the group of 35 potential purchasers expressing a desire to buy would buy a property other than the one they were currently living in. A slightly smaller group (19) would buy their current property but most of these would buy through the Right-to-Buy (100% purchase) rather than shared ownership.
Table 4: What kind of property would you buy? (%)
Current Property Through
Right-to-Buy/Right-to-Acquire 14 Current Property Through Shared
Ownership/HomeBuy 5 Another Property Through Shared Ownership 2
Another Property Privately 18
Base 35
Multi-response question. Percentage sum is more than number of cases.
Therefore, of the original sample a maximum of around 1% are likely to be able and want to purchase their existing home with fewer still considering a shared equity model. Interestingly when asked why they would not buy the property they currently lived in, responses tended to refer to negative aspects of the property (especially its size) or area. In contrast the responses of those who would buy their current property both referred to positive features of the property and area and to issues to do with affordability. This further highlights the differentiation within the market, within the social rented sector and the inability of uniform models to factor in these nuances sufficiently to provide a accurate strategic overview of demand.
The analysis of the survey data presented above do not succeed in quantifying or establishing any precise measures of likely uptake of Social HomeBuy or other home ownership schemes. The data has limitations for this purpose. However the analysis serves to highlight a number of factors:
Calculations of affordability based on income or employment alone are a poor guide to household attitudes and behaviour; there appear to be prior considerations before affordability is considered;
Some tenants who appear to be able to afford to buy under Social HomeBuy have no desire to become home owners
Others would buy but the property they are currently living in is not attractive enough to them for them to buy
Others would buy but the area they are currently living in is not attractive enough to them for them to buy
Where either the property or area is unattractive improving affordability seems unlikely to alter the judgement about whether to buy.
But affordability remains a barrier in high house price areas.
Whilst tenants want to buy a home, many recognise they are financially unable to do it and others cite the quality of the product that is available not meeting their aspirations.
This analysis provides a much clearer indication of demand for home ownership in general and LCHO products more specifically amongst a target yet marginal group of housing consumers. At each stage the likely pool of demand is reduced as each set of controls is applied. Unsurprisingly household characteristics, notably economic activity, are a limiting factor amongst social housing tenants to demand for home ownership. It has to be recognised that this is an increasingly marginal group of households as acknowledged by then Housing Minister Caroline Flint (2008b). Whilst her analysis failed to recognise the slow process of residualisation (of which the push for home ownership has been a contributory factor) the sector is both aging and becoming more impoverished through the processes of access. To expect a large demand for home ownership from this group is at best optimistic. At this point, products such as social homebuy are like a mangle attempting to squeeze the last possible drips from a towel.
Yet furthermore it illustrates that even at the margins households are not willing to accept any form of home ownership offered. These consumers do think about the product on offer and this can be split into two.
The property and the environment in which some of these homes are location is not a desirable investment for households. It is recognised that much of the better housing stock of local authorities has been sold under the Right-to-Buy and housing association properties are not always considered to be in
the best locations. This is a primary concern in the minds of potential purchasers.
The second element of the product is the scheme itself. With its various nuances around repairs responsibility and access to competitive mortgage finance, for all but those purchasing a 100% stake in the property, the scheme appears cumbersome and in the view of households second rate home ownership.
Therefore, whilst there is a pool of tenants who can afford to buy, they do not always want to buy and especially don not want to buy what is on offer. This suggests that in this case at least, home ownership in this form is not highly desirable.
What does this say about the limits of home ownership?
In this paper I have attempted to provide a critical lens on home ownership. I began by outlining why home ownership has grown, the importance of politics, economics and socialisation in this process and the subsequent role of research in underpinning this position and in reformulating the problem of housing need to one focussed on meeting the “needs” of the majority. What I hope to have demonstrated is the short-sighted focus of attempts to continue to push for further unchecked growth in home ownership. A number of conclusion emerge from this analysis.
The first relates to assessments of demand for home ownership and indicates that these cannot be based on income data alone. Affordability calculations do not adequately factor in the nuances of housing markets or the preferences of housing consumers. Much as social housing is criticised for its Stalinist approach to allocation of property size based on predetermined notions of space per person, so housing affordability calculations adopt a similarly rigid view of space. Nor do these calculations account sufficiently for preferences over the location of property. Housing consumers are perhaps more rational than we perhaps give them credit for and qualitative factors are important in their decision making process- quality and location do matter and analysis of need and demand does need to be factored into this process. If sustainable communities are to be realised, signals from and the role of the housing market need to be reconsidered.
Second, attempts at extending home ownership into the margins of the sector is limited. Although there are issues with the product itself, the evaluation of Social
HomeBuy indicates that income alone is not the determining factor in accessing home ownership. The evaluation showed that some tenants will stretch themselves economically in order to realise their dream whilst those in a more comfortable position to at least be part owners do not wish to buy what is on offer to them. This reinforces the point above about quality – Social HomeBuy and the dwelling/neighbourhood in which tenants currently live is not seen as offering value for money. For those who stretch themselves financially, they risk a dream turning into a nightmare. Arguably it is those who are at the margins who stand to lose the most. And a model based on shared equity still contains this risk as households maximise their equity stake.
At the same time as government makes these attempts to continue to grow home ownership, the efforts to address affordability problems through supply side measures as proposed by Barker further threaten the sustainability of home ownership and the gains which both households and politicians hope can be gained. Housing is sold as an investment for households. By increasing supply and aiming to reduce prices is government undermining the sustainability of home ownership – giving with the one hand and taking with the other. The policies lack coherence.
Ultimately this leads us to question the idea that home ownership is in fact ontologically secure. As lending tightens, house values fall and costs to households increase, is home ownership still the constant. And if choice is to really be offered, is it important to have a critical and full discussion of the options that can be offered. Home ownership is at its sustainable limits and if we are to logically address concerns over our future well-being (e.g. pensions and old age care) there needs to be a review of other parts of the welfare state not the housing market. To promote home ownership further forgets the perils of the dream and reinforces a myth first highlighted almost 30 years ago (Kemeny, 1981).
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