Publication - Research and analysis

The Evaluation of Low Cost Initiative for First Time Buyers (LIFT)

Published: 21 Jan 2011
Part of:
Research
ISBN:
9780755999316

This is the final report of an Evaluation of the Low Cost Initiative for First Time Buyers. It evaluates four schemes: Open Market Shared Equity; New Supply Shared Equity; Shared Ownership; and GRO Grants.

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Contents
The Evaluation of Low Cost Initiative for First Time Buyers (LIFT)
2. MEETING HOUSEHOLD NEEDS

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2. MEETING HOUSEHOLD NEEDS

Introduction

2.1 This chapter explores how LIFT has met the housing needs of the households which have participated in the schemes. It also explores the role of LIFT in meeting particular housing needs, including the needs of disabled people.

Purchaser Characteristics

2.2 Between 2005/06 and 2009/10, purchasers of shared equity and GRO properties had an average household size of just over two. Our survey of shared ownership households also highlighted an average size of two.

2.3 Although household sizes are, on average, very similar, OMSEP has a significantly higher proportion of one person households than NSSE and GRO. The average age of the primary purchaser was 29.6 for OMSEP, 32 for NSSE and 33.3 for GRO.

Table 2.1: Household composition of LIFT purchasers

Scheme

Single Person

Couple

Single with Children

Couples with Children

Other

No.

%

No.

%

No.

%

No.

%

No.

%

NSSE

503

35.5

464

32.8

134

9.5

286

20.2

29

2.0

OMSEP

677

45.4

295

19.8

133

8.9

344

23.1

41

2.8

GRO

17

23.9

22

31.0

6

8.5

22

31.0

4

5.6

Source: LIFT Sales Log Database & GRORE Returns

2.4 Approximately two per cent of NSSE purchasers were disabled (3), and 15 per cent of OMSEP purchasers (157) 4. Information on disability is not available for GRO or shared ownership purchasers.

2.5 Information on the ethnic origin is also available through sales log records 5. Unfortunately, there is a single category for 'white', which can include many people from ethnic minorities. The records show the following proportions of households with purchasers of 'non white' ethnic origin:

  • 2.8 per cent of OMSEP households (41 households)
  • 2.0 per cent of NSSE households (28 households)
  • 5.7 per cent of GRO households (4 households).

2.6 Although these are small numbers of households, there are clear differences in the ethnic origin of ethnic minority purchasers:

  • OMSEP - the largest proportion of ethnic minority purchasers were black African, Caribbean or other black (32%).
  • NSSE - the largest proportion of ethnic minority purchasers were 'other' (29%), Chinese (21%) or other Asian (21%).
  • GRO - of the very small sample, half were Pakistani, and half were of unknown ethnic minority origin.

2.7 Information on ethnic origin is not recorded for shared ownership purchasers, but our interviews found that two out of 22 purchasers were from ethnic minorities.

2.8 Analysis of the economic status of the first named purchaser for each sale shows that the vast majority were working full or part-time (at the time of purchasing the property). GRO purchasers were most likely to be working full time. Slightly more NSSE purchasers were retired or unemployed 6.

Table 2.2: Economic activity of LIFT purchasers

Scheme

NSSE

OMSEP

GRO

No.

%

No.

%

No.

%

Working full time

1267

89.9

1377

92.8

67

94.4

Working part time

65

4.6

71

4.8

2

2.8

Sick or disabled

11

0.8

8

0.5

0

-

Unemployed

16

1.1

11

0.7

0

-

Retired

34

2.4

6

0.4

2

2.8

Other

17

1.2

10

0.7

0

-

Source: LIFT Sales Log Database & GRORE Returns

2.9 Information on household income is available for a sample of OMSEP, NSSE and GRO purchasers 7. It highlights that the majority of purchasers had a household income of between £15,000 and £25,000, across all schemes. NSSE household incomes were slightly higher than OMSEP, perhaps reflecting the high proportion of younger, single person households within the OMSEP scheme. GRO purchasers tended to have a higher income level, with most having a household income of £20,000 plus. In comparison with the shared equity schemes, a considerably higher proportion of GRO purchasers had household incomes of over £30,000.

2.10 No information is collected nationally on the household income of shared ownership purchasers.

2.11 Analysis of the previous postcode of purchasers shows that 35 per cent of GRO purchasers previously lived in the 15 per cent most deprived areas in Scotland 8. This is much lower for OMSEP and NSSE purchasers, with around 15 per cent of purchasers for both schemes previously living in the 15 per cent most deprived parts of Scotland. This demonstrates that GRO properties were strongly targeted at purchasers from the 15 per cent most deprived areas in Scotland. No information is available on where purchasers of shared ownership properties previously lived.

Previous Circumstances

2.12 Information is available on the previous housing circumstances of GRO and shared equity owners, for a sample of owners 9.

Table 2.3: Previous housing circumstances of LIFT purchasers

Scheme

NSSE

OMSEP

GRO

No

%

No

%

No

%

Living with parents/relatives

585

42.0

629

43.1

16

22.9

Living with friends

20

1,4

26

1.7

2

2.9

Renting - privately

409

29.3

541

36.2

17

24.3

Renting - Council

89

6.4

101

6.8

2

2.9

Renting - RSL

133

9.5

103

6.9

1

1.4

Renting - Other

39

2.8

34

2.3

1

1.4

Owned house/flat

89

6.4

39

2.6

30

42.9

Other

30

2.2

20

1.3

1

1.4


Source: LIFT Sales Log Database & GRORE Returns

2.13 This highlights that for both shared equity schemes, the majority of purchasers were previously either living with parents or relatives, or were renting privately. This was also evidenced through our survey of shared equity purchasers, demonstrating that a large proportion of young people and young couples were setting up home for the first time through shared equity.

2.14 The vast majority of shared equity purchasers were first time buyers - 88 per cent of NSSE purchasers and 93 per cent of OMSEP purchasers. In contrast, 43 per cent of GRO purchasers were moving into a GRO property from another owned property. In addition, our interviews with seven GRO purchasers showed that just under half had previously owned a home. This will be influenced by the fact that many GRO schemes intended to stimulate demand for owner occupation in an area, rather than specifically targeting first time buyers. GRO purchasers also tended to be slightly older than shared equity purchasers. NSSE and OMSEP purchasers were much more likely to have moved from social rented accommodation than GRO purchasers.

2.15 Information on shared ownership purchasers is not collated nationally, but our interviews with a small sample of shared ownership purchasers showed that over half had previously owned a home. Our survey of 22 shared owners found that:

  • a third had moved into shared ownership directly from outright ownership;
  • a third had moved from social rented accommodation;
  • a fifth had moved from private rented accommodation; and
  • less than a fifth had been living with parents.

2.16 The shared equity sales logs and GRORE also record whether purchasers previously lived within the same local authority area, or moved from a different area 10. This demonstrates that the vast majority of purchasers (over 80 per cent) across all three schemes moved within their local authority area. OMSEP purchasers were slightly more likely than others to have bought their new home outwith their existing local authority area.

Housing Needs

2.17 The sales logs record why shared equity and GRO purchasers wanted or needed to move home. For NSSE and OMSEP, the opportunity for purchasers to buy their own home was the most important factor, followed by consideration of value for money and the size of the house. This is likely to reflect the high proportion of first time buyers and new households within the shared equity schemes.

"We were instantly attracted as it gave us access to home ownership which wouldn't have happened otherwise."
NSSE purchaser

2.18 For GRO, the main reason was that the property was good value for money, followed by considerations about the size and location of the house. The small sample of GRO purchasers highlighted that they were attracted to GRO due to affordability, location, ability to purchase at a fixed price, and ability to buy new build property.

"I was attracted because of the price and that it was in (x), which I could never have afforded otherwise."
GRO purchaser

2.19 The principle attraction of all LIFT schemes was the opportunity to own a property, in an affordable way. Many purchasers - across all schemes - indicated that they would not have been able to purchase a home without the LIFT schemes, while others indicated that it made purchasing more affordable. The lack of requirement for a deposit (at that time) was also a factor for a small proportion of purchasers.

2.20 Our discussions with OMSEP, NSSE and GRO purchasers found that the main reason for moving was to access home ownership - often away from private renting, or to become independent of parents. Other factors included to obtain larger accommodation or to move to a more desirable area. Relationship breakdown was also a factor.

2.21 The sales logs show that over a third of NSSE purchasers needed to move because their home was unsuitable. This fell to a quarter for OMSEP purchasers and less than a fifth for GRO. However, our interviews with LIFT purchasers showed that OMSEP purchasers had the most significant issues with their previous housing circumstances. The key housing needs arising were:

  • Lack of security of tenure - Shared equity and GRO purchasers raised issues of lack of security within the private rented sector. A small number of OMSEP purchasers had problems as their home was to be sold (if living with parents) or demolished. A small number were living with friends, and one had been living in a caravan, in poor quality accommodation.
  • Formation of a new household - Individuals and young couples often needed to set up home for the first time, and required the independence offered by a home of their own.
  • Property quality - A small minority of OMSEP purchasers mentioned that their home was in poor condition, meaning that they required to move.
  • Financial concerns - NSSE, OMSEP and shared ownership purchasers raised financial pressures, particularly of rented accommodation.
  • Occupancy - A number of purchasers raised issues of overcrowding (generally if sharing with parents) and under occupancy.

"I was attracted by the security offered, which you don't get in rented accommodation."
OMSEP purchaser

2.22 Data on the reason for moving home is not collated for shared ownership purchasers. However, our interviews highlighted that many purchasers were moving from outright ownership - with reasons including marriage breakup, bankruptcy, business problems, desire for larger property or the prospect of freeing up money for retirement. For shared ownership purchasers who had not previously owned their home, the main motivations for moving were:

  • to move to an area which they would otherwise be unable to afford;
  • to move to an area in which they would not be able to obtain social rented housing;
  • to obtain a bigger house than they would otherwise be able through renting or buying.

"Shared ownership offered me the chance to get back on my feet. It was far less financially demanding than owning a house outright."
Shared ownership purchaser

2.23 In a small number of cases, shared ownership was seen as a route to obtain a home quickly, in comparison to the length of social rented housing lists. It was seen as a quick route into desirable areas and a route out of poor areas or living conditions.

"Shared ownership offered me the only and certainly the quickest way to get out of my terrible living conditions."
Shared ownership purchaser

Housing Options Considered

2.24 The sales logs show that almost half of all NSSE purchasers were on a housing list for social rented accommodation at the time of purchase, compared with just under a third for OMSEP and GRO purchasers 11. However, our interviews found that only a small minority of purchasers felt that they had a realistic chance of being housed.

2.25 The majority of shared equity purchasers had considered purchasing a home outright, but found that it would be too expensive or could not access a mortgage for the amount required. Very few GRO or shared equity purchasers had considered private renting, if not already within the sector - although OMSEP purchasers had considered this option more than others.

2.26 Our interviews with shared ownership purchasers highlighted that only half had considered any alternative housing options. Of those who had considered other options, two-thirds had considered buying a property outright. A minority had considered renting from a social landlord, but were put off by the length of social landlord housing lists

"We considered buying a house but realistically we couldn't afford to buy so it (shared ownership) was our only option really."
Shared ownership purchaser

2.27 Our discussions with purchasers explored what would have happened if shared equity, shared ownership, or GRO had not been an option. GRO purchasers were most likely of all LIFT purchasers to say that they would have bought another house.

2.28 Almost all OMSEP and NSSE purchasers said that they could not have bought their property at the time without shared equity. However, a minority stated that they would have purchased another property without shared equity, although this would have been smaller or in a less desirable area. Most would have rented a house privately or tried to obtain social rented housing. A minority stated that they simply did not know what they would have done, feeling that they had no other options.

"Without shared equity I would still be renting. I could never afford to purchase outright."
OMSEP purchaser

"I would probably only be able to afford a smaller house if I was going to get a mortgage outright now."
NSSE purchaser

2.29 A small proportion of shared ownership purchasers indicated that if shared ownership wasn't available they would have purchased a smaller or cheaper house. A third said that they would have remained on or applied for social housing waiting lists, and a third would have remained in or obtained private rented accommodation.

Concerns about LIFT

2.30 Our interviews also explored whether purchasers initially had concerns about any aspect of the LIFT schemes. The level of concern varied. OMSEP purchasers exhibited the highest level of concern, and GRO the lowest. The main concerns for shared equity purchasers were:

  • Mobility - Concerns about not owning the whole property, and not being financially able to increase their share - potentially leading to difficulties if they wanted to move on and purchase elsewhere.
  • Confusion - Confusion about the equity proportions, and the practicalities of how and when to buy more equity.
  • Government share - Concern about the Government benefitting from any improvements that the purchaser made to the house, when it came to be sold.
  • Home ownership in general - Concerns that they felt "any home owner would face" including what would happen in a declining housing market and concerns about the responsibilities of home ownership.

"I really didn't have any worries about the scheme, which I thought met my needs, apart from a slight worry that any increase in the value of the property as a result of improvements will also benefit the Scottish Government."
OMSEP purchaser

2.31 Generally shared equity purchasers felt that the written information provided helped to reduce these concerns. There were varied views on the quality of verbal information and advice on the schemes.

"We were concerned what would happen if we wanted to move on. But the information booklet they (the RSL) provided answered this query and we now feel happy with the situation."
OMSEP purchaser

2.32 Shared ownership purchasers had different concerns. Affordability was raised as an issue, with a minority being concerned that they would not be able to afford their mortgage. Shared ownership purchasers also raised specific concerns about responsibility for maintenance. These purchasers had not always had concerns about maintenance from the outset, but these had become apparent throughout the purchase and subsequent liaison with social landlords. These concerns are explored in more detail below.

Satisfaction

2.33 Our interviews with LIFT purchasers explored whether their home met the household's needs; wider views on location and neighbourhood; and views on whether overall the LIFT scheme was the right option for them.

2.34 Generally, OMSEP purchasers were happiest with the quality of their home. OMSEP purchasers in particular often talked of managing and adjusting their expectations, as they saw what they could afford on the open market. Some purchasers were not entirely satisfied with all aspects of their home, and highlighted things that they would change if they could. Purchasers generally took responsibility for improving their property themselves, and often explained that they would invest in their property once they had saved enough money. Only a small minority of OMSEP purchasers were very unhappy with the quality.

"The home is very poor quality. I didn't do a complete survey (just the basic one). After two months I found that the flat was not connected to the mains water supply."
OMSEP purchaser

2.35 Most sharing owners were happy with their property, but just over a third of sharing owners felt that their home had been poorly built and cited problems with snagging, plumbing and structural problems. And almost half of NSSE purchasers had concerns about the quality of their property. These ranged from issues around finishing and snagging, to major structural issues. There was a general sense that owners had not received any help in dealing with the snagging issues. Similarly, over half of GRO purchasers interviewed had either snagging issues or were unhappy with the quality of the build.

2.36 NSSE purchasers raised specific concerns about the support offered by RSLs in dealing with property defects. Some purchasers indicated that the RSL would not provide any support in dealing with problems, even where the issue was significant and affected a number of owners.

"I am unhappy with the quality of workmanship and defects remain three years after completion. In my view I've had to deal with these issues without any support from the RSL."
NSSE purchaser

2.37 Others NSSE purchasers raised issues about factoring and ongoing maintenance of common parts of the building. A particular concern was the level of services charges being considerably greater than they had anticipated at the time of purchase.

2.38 The majority of LIFT purchasers were happy with their neighbourhood.

"We love our home. It is on a nice street, with good neighbours who are friends. It is pretty safe and we have had no problems."
OMSEP purchaser

2.39 However, a minority viewed their neighbourhood negatively, or had mixed views - such as having concerns about one or two households in the area. A third of GRO respondents mentioned issues around mix, lack of community spirit or lack of integration of affordable housing within schemes. Almost half mentioned that GRO properties were being sub-let, creating a high turnover of tenants in the neighbourhood. Issues around integration and mix were also mentioned by NSSE and OMSEP purchasers. These issues are explored further in Chapter Seven.

2.40 Overall, almost all OMSEP, NSSE and GRO purchasers felt that LIFT was the right option for them. A minority mentioned that their circumstances had changed, or that they felt shared equity was their only option.

"The scheme has been brilliant for me. It has allowed me to get back on my feet and re-enter the housing market."
NSSE purchaser

"It was the right housing option and has been a good buy."
GRO purchaser

2.41 However, only half of shared ownership purchasers felt that it was unequivocally the right option for them. A further quarter felt that it was the right option, but had some reservations - such as the costs. Just under a quarter said that shared ownership was categorically the wrong option for them. This was due to feeling that shared ownership was not a good deal financially, and some concerns over the 20 year rule.

"Shared ownership is absolutely not the right option for me. I wish I'd never done it at all and would not recommend it to anyone. It is an awful arrangement for people on low income."
Shared ownership purchaser

Meeting Particular Housing Needs

2.42 The available data shows that at least 160 households in which one or both purchasers are disabled have purchased their home through LIFT. Almost all (157) have purchased through OMSEP. Information is not available for the shared ownership or GRO households. Information on the profile of disabled shared equity purchasers shows that the household composition of purchasers is broadly similar. The table below compares the profile of disabled purchasers with all OMSEP and NSSE purchasers.

Table 2.4: Comparison of NSSE & OMSEP disabled purchaser characteristics

Disabled Purchasers

All OMSEP Purchasers

All NSSE Purchasers

Average Age

31.5

29.6

32

Average Household Size

2.2

2.1

2.1

% Minority Ethnic

5

2.8

2.0

% First Time Buyers

89

93

88

% Plan to Increase Equity Stake

85

87

80

% In Full Time Work

86

93

90

% Unemployed

3

0.7

1.1


Source: LIFT Sales Log Database

2.43 There is strong evidence that LIFT has contributed to meeting particular housing needs which could not otherwise have been met. Evidence from qualitative interviews with disabled purchasers and/ or their families found that LIFT could contribute through supporting people to:

  • move out of unsuitable accommodation - with issues around access, quality of life and mobility within and outwith the home;
  • stay in the same area meaning that relationships with existing carers and support network could continue;
  • establish independent living - providing longer term security than private renting or living with parents, and allowing establishment of flexible and suitable care arrangements; and
  • achieve a better quality of life - for disabled people, their families and carers.

OMSEP - A purchaser's perspective

Mr C has a learning disability and is bipolar. He lived at home with his parents, but wanted to live independently. His parents helped him to review options. He applied for a Council flat but thought he had limited chance of being housed, and really needed to live near his parents and in a familiar area. He was reluctant to rent privately, and he really needed a routine and security. It was "impossible" for him to purchase a house without shared equity as his only income was benefits.

His parents applied to the OMSEP scheme on his behalf. It was greatly stressful going through the process. It was also very difficult to get a mortgage, despite having a good deposit. There was a particular difficulty as the scheme didn't work with a guarantor mortgage, but they worked with the housing association to change this in this instance.

They found a suitable fixed price property. They didn't have to compromise and "exceeded expectations" in the house they were able to buy. The property has made "a huge difference" to Mr C's quality of life. He is now more independent and is preparing for the future, giving his parents peace of mind. If shared equity wasn't available, Mr C would probably have stayed at home until his parents died - and they don't know what would have happened after that. Overall, shared equity was a very good deal.

OMSEP - A purchaser's perspective

Mr E and his family have very specific housing needs as a result of a disability. They needed a property with all rooms on the level, with an extra room for storing medical equipment. Mr E's previous housing situation meant that he was confined to one room, and did not have access to adequate sleeping and bathing facilities. He was also unable to leave the property without considerable assistance.

Mr E applied to the OMSEP scheme and was accepted. The family identified a suitable home, and negotiated with the Scottish Government to obtain a higher limit to enable the purchase of this home. This took into account the average price of homes in the area, proximity to care and support structures, cost of adapting alternative properties, and impact on quality of life.

The new home means that Mr E can access all parts of his home, and can enter and leave the property more easily. This has been a positive and life changing experience, and has significantly improved his mental wellbeing.

2.44 OMSEP is a preferable option to NSSE, as it can be very responsive to an individual's needs, and can allow them to purchase a property where it is needed.

"Location is very important...it's not just about bricks and mortar".
Support organisation

2.45 However, six of the eight disabled purchasers we interviewed indicated that they had no particular housing needs as a result of their disability. It is therefore important not to overestimate the impact that the scheme is having.

2.46 There are also some practical issues. Firstly, the funding available for shared equity was used up very quickly, meaning that there was limited opportunity for disabled people who required support to access the scheme. Secondly, the three month limit on passports places additional constraints on disabled people, who often have very specific housing requirements. A home which meets these requirements simply may not be on the market during these three months. Finally, while one RSL has been pro-active in using the scheme, there is anecdotal evidence of disabled people receiving inaccurate information from RSLs suggesting that if they are not first time buyers, the scheme is not available to them.

2.47 Some stakeholders raised issues around value for money, suggesting that some OMSEP homes purchased by disabled people were expensive. Stakeholders felt that while it was positive that the Scottish Government was flexible in increasing the price limits for OMSEP for disabled people, it may also be useful to have an upper limit for purchases by disabled people and considering social rent as an alternative. However, as we discuss in Chapter 7, we found the average subsidy provided for the top ten per cent of properties acquired by people with disabilities was around 20 per cent less than the average subsidy provided for a social rented property.

Enabling Home Ownership

2.48 A core aspect of each of the LIFT schemes is to support purchasers to obtain a home that they own. Our qualitative interviews with purchasers indicated that most felt that they could not have purchased a property without assistance through LIFT. However, almost a third of GRO purchasers, a fifth of shared ownership purchasers and a small proportion of NSSE and OMSEP purchasers said that they could have purchased another property - although this may have been smaller or in a less desirable area.

2.49 To test this, we compared average house prices at the lower end of the market 12 for each local authority, with purchasers' income brackets. We then used average lending multiples to establish whether purchasers could have accessed a mortgage for the lower end house prices on the open market. We have classified those who could have accessed a mortgage to cover the full purchase price as being able to afford to purchase on the open market.

2.50 The overall figures for Scotland suggest that almost half of NSSE purchasers could have afforded to purchase on the open market and a quarter of OMSEP purchasers. Income data for GRO purchasers is only available for a very small sample (53 households). However, these figures show that it is likely that 51 per cent of GRO purchasers could have bought on the open market.

2.51 However, this is a relatively crude calculation. Firstly, it suggests that purchasers could have afforded to buy at the lower end of the market (the most affordable 25 per cent of properties in the area). It does not take account of purchasers with specific housing needs, for example due to disability, who may require a more expensive house. It also does not take into account pressured housing markets within the local authority area. This would be a particular issue in rural areas where travelling and relocating is not always a feasible option, and would also be an issue for disabled people requiring to be living near support networks.

2.52 Secondly, affordability has been calculated using income bands (of £5,000), rather than exact incomes. This is the way in which income information is gathered from purchasers. It is therefore likely that a proportion of those assessed as able to afford to purchase on the open market would be on the very margins of affordability, or would not actually be able to do so due to being at the lower end of the income bracket.

2.53 Thirdly, the calculation does not take into account the need for households to provide a deposit. It simply shows whether a household could have achieved a mortgage for the entire property price. This means that there will be some households who did not have a deposit available and would therefore not have been able to access a mortgage. However, there will be others who did have a deposit and would therefore have required a mortgage for less than the full property price, meaning that more households could be assessed as able to afford to purchase on the open market. The general lack of a requirement by lenders for mortgage applicants to provide a deposit (at that time) was mentioned as a key attraction of the LIFT schemes by a small proportion of purchasers interviewed.

2.54 Finally, the ability to purchase on the open market varied significantly by local authority area. Only two per cent of NSSE and OMSEP purchasers could have bought on the open market in Edinburgh. Other areas in which NSSE and OMSEP purchasers would have found it particularly challenging to purchase on the open market were:

  • East Lothian - Just three per cent of OMSEP and 11 per cent of NSSE purchasers could have bought on the open market;
  • East Renfrewshire - Just 10 per cent of OMSEP and 12 per cent of NSSE purchasers could have bought on the open market; and
  • Aberdeenshire - just six per cent of OMSEP purchasers could have bought on the open market. However, 25 per cent of NSSE purchasers could have. It is important to note, however, that property prices vary across Aberdeenshire, and it may not have been feasible for people to relocate to the more affordable areas of this large rural authority.

2.55 A table setting out ability to purchase by local authority area is included as Appendix 4. A breakdown of property prices by local authority area is provided in Appendix 5.

2.56 Another test of whether it would have been possible for households to buy a home without LIFT is a comparison of the purchaser's financial contribution with the average house prices at the lower end of the market. Overall, for NSSE this shows that the average purchase price for a property at the lower end of the market was £85,000, and the average purchaser contribution was £74,106 13. For OMSEP, the figures show that against the average price for a property at the lower end of the market of £85,000, the average purchaser contribution was £64,918. The average NSSE purchaser contribution was 13 per cent below the top of the lower quartile price, and it was 24 per cent below the top of the lower quartile price for OMSEP. As purchasers are required to borrow as much as reasonably possible, this indicates that in general, purchasers could not have afforded to purchase a property outright without the help of NSSE or OMSEP.

2.57 None of the purchasers interviewed mentioned that they had considered a shared equity scheme operated by a private developer. These schemes were often introduced as problems arose in the housing market, so this option would not have been available to most LIFT purchasers we interviewed as part of this study.

2.58 Consultations with private sector house builders would suggest that developer shared equity schemes are likely to be time limited, linked to market conditions. A number of house builders suggested that they would withdraw schemes if funding became more accessible to prospective purchasers.

Housing Aspirations

2.59 Since 2008 shared equity purchasers have been asked at the time of purchase how long they planned to stay in their home. However, less than half of purchasers provided this information in 2008/09 and 2009/10. The information should therefore be treated with caution. This information was not gathered from GRO purchasers.

2.60 The available information shows that over half of NSSE and OMSEP purchasers planned to stay for five to ten years. OMSEP purchasers exhibited a trend to plan to stay for slightly less time than NSSE purchasers.

Table 2.5: Length of time LIFT purchaser plans to stay in home

Scheme

<5 Years

5 - 10 Years

11 - 20 Years

>20 Years

%

%

%

%

NSSE

3.8

55.7

21.4

19.1

OMSEP

5.4

56.8

22.1

15.6

Source: LIFT Sales Log Database

2.61 Shared equity purchasers were also asked whether they planned to increase their equity stake. The available information shows that the vast majority of NSSE and OMSEP purchasers indicated, at the time of purchase, that they intended to increase their share. Overall, 87 per cent of OMSEP purchasers intended to increase their share, and 80 per cent of NSSE purchasers.

2.62 Information on whether shared equity purchasers have actually increased their share is limited. The information gathered by the Scottish Government suggests that just one NSSE and 15 OMSEP purchasers increased their stake between 2005/06 and 2009/10. The changing economic climate during this time is likely to have considerably influenced this. It is also likely that owners have become more realistic about their aspirations, having lived in their home for a period. Our consultations with RSLs also suggest that there is less incentive for owners to acquire additional equity where a 'golden share' exists and an owner can never acquire the full equity outright.

2.63 In our interviews with purchasers, we found:

  • Although over three quarters of shared owners said that they would still be in their property in five years time, a very small proportion said that they planned to increase their share of the property in the next five years.
  • A higher proportion of OMSEP purchasers (a quarter) than NSSE purchasers (a fifth) planned to move in the next five years. OMSEP purchasers were also more likely to anticipate moving up the property ladder, while NSSE purchasers were also considering other options. Around a fifth of OMSEP and NSSE purchasers planned to increase their share of the property in the next five years. Only one had definite plans to increase their stake in the very near future.
  • All of the GRO purchasers anticipated moving in the next five years, often from a flat to a house. There were, however, some issues about mobility within the housing market for GRO purchasers.
  • More than a third of shared ownership purchasers planned to move in the next five years - and most of these hoped to move into social rented housing, supported housing or move in with family members. A very small minority planned to stay and increase their equity stake.

2.64 The main factors influencing the decision to staircase among shared equity purchasers were: future income; current housing market conditions; the barrier of not being able to staircase in smaller increments; and the administrative and legal costs. Most said that their financial circumstances would have to change in order to increase their stake.

"I would like to buy more equity... I think that the option to buy smaller increments should be available as it is financially restrictive and a bit risky to have to commit to increasing your mortgage by such a large amount."
NSSE purchaser

2.65 Our consultation with other stakeholders found that there was some demand for the Scottish Government to take a more proactive approach to managing its shared equity property portfolio. A number of stakeholders suggested that it would be useful to introduce more regular contact with purchasers, ensuring that they are fully aware of their housing options.

2.66 Information on whether shared ownership purchasers have increased their share is available for a sample of purchasers, from a Scottish Government survey of RSLs. Approximately three per cent of sharing owners have increased their share (129), a very low level over the life of the scheme. However, between April 200 and March 2010, a total of 1,489 sharing owners purchased their home outright. This indicates that purchasing outright is a more popular option for sharing owners than increasing their share gradually.

Summary

Household Characteristics

2.67 The characteristics of the households accessing LIFT varied between the four schemes. Shared equity purchasers tended to be younger, newly forming households, with the vast majority being first time buyers. Almost half previously lived with parents or friends. In contrast, almost half of GRO and shared ownership purchasers were not first time buyers.

2.68 GRO purchasers were almost all working full-time, and tended to have higher household incomes than NSSE and OMSEP purchasers. OMSEP household incomes were lower than NSSE, perhaps reflecting the high proportion of single person households within the OMSEP scheme. However, OMSEP is also offering more flexibility in house size, allowing some larger households to purchase.

Previous Housing Circumstances

2.69 Although around a third of shared ownership purchasers moved from the social rented sector, relatively few GRO and shared equity purchasers did so. About half of all NSSE purchasers had applied for social rented property, compared with about one third for OMSEP and GRO. However, most people who had applied for social rented housing felt that they had very little or no chance of being offered a property.

Meeting Particular Housing Needs

2.70 There is strong evidence that OMSEP is contributing to meeting particular housing needs that it would be difficult to meet through other routes.

Satisfaction

2.71 OMSEP purchasers appeared happiest with their property. OMSEP purchasers have had to manage their expectations through considering what is available on the open market, and felt a strong sense of responsibility and ownership. NSSE, GRO and shared ownership purchasers had more issues with the quality of their home. Many NSSE purchasers were surprised at the lack of support from RSLs in dealing with defects, and had concerns about quality of factoring services. In some cases purchasers had limited information about factoring charges (particularly in relation to services) and maintenance responsibilities prior to purchase.

2.72 Although almost all NSSE, OMSEP and GRO purchasers felt that the scheme had been the right option for them, less than half of shared ownership purchasers felt this. Costs and value for money were the main factor.

Enabling Home Ownership

2.73 A simple calculation of affordability based on lending multiples suggests that almost half of NSSE purchasers could have afforded to purchase at the bottom end of the open market and a quarter of OMSEP purchasers. However, this does not account for the requirement for a deposit, particular housing needs, or local variations in house prices.

Aspirations

2.74 Most purchasers thought that they would still be in their home in five years, but few planned to increase their equity stake. OMSEP and GRO purchasers generally planned to move on more quickly than NSSE purchasers, and were most likely to plan to move up the property ladder. Shared ownership purchasers were often considering other options - like social rented or supported housing.