David Montague, Chief Executive at L&Q, gives us the low-down on Shared Ownership and the London housing market.

How can Shared Ownership help buyers in the London housing market right now?

As housing costs in the capital soar, it becomes even more important to offer a variety of affordable products which cater to all different types of people. There is clearly a demand for ownership products which provide security as well as an investment. However because of high house prices owning a home has never been more difficult.

The average median house price to median earnings ratio in the London boroughs has risen from 6.63 in 2000 to 13.30 in 2014. Even in Outer London as of 2014 this figure sits at 10.60.

High prices also require a higher deposit, a key barrier to first time buyers. The average first time deposit in May 2015 was £29,894 – 82% higher than the £16,400 it was in 2007.

Shared Ownership enables customers to access home ownership through reducing the deposit required and the income to sustain a mortgage as they can purchase a share of the property. The remaining unsold equity does carry a rent charge but this is a subsidised rent – usually set at 2.75%.

How can developers and housing association ease the housing crisis?

L&Q developed over 2,000 homes in London and the South East last year and houses a total of around 125,000 people therefore playing a sizeable role in the housing market. We’re committed to increasing this development pipeline to 5,000 units a year by 2020. Only through increased supply can London’s acute housing crisis be alleviated.

The supply of affordable housing is clearly crucial to this issue. L&Q will continue to deliver a subsidised rental product alongside other options such as Shared Ownership. As well as this we’re is expanding our Private Rental Scheme portfolio offering high quality and service rental accommodation at market rates – PRS is set to grow across the capital.

Are we building enough family homes?

We need to make sure we create truly mixed developments in London which offer homes for the full spectrum of London’s housing needs. Many families in London may privately own or rent small, inappropriate flats for growing families but are unable to make the leap to a privately owned family home due to the high value of some of these homes in London. This is why Shared Ownership can provide that important first step to owning a family home. At L&Q we are creating developments in central London which include three and four bedroom properties as part of the mix and this year we will deliver 120, three and four bedroom shared ownership properties across London. We’re currently selling three bedroom apartments at Thurston Point in Lewisham, from £147,500 for a 25% share. This side of Christmas we will also have seven, three bed houses at Chobham Manor in Stratford.

Who buys using Shared Ownership?

Years ago these types of home ownership options were seen purely for key workers, but with increasing house prices and lack of new build housing, attitudes towards property ownership have changed.

Nowadays the profile of a Shared Ownership buyer is varied and appeals to a much wider range of Londoners. We help young couples, families and single households of all ages join the housing ladder with this home ownership option. It’s safe to say however that the majority of our customers are young professionals and first time buyers, desperate to purchase their first home. Families are equally in need as they struggle to make the leap to a three bed home. Shared Ownership is simply the only way for some people given the sky high deposits needed to buy a home in the capital and competition out there from other buyers and investors.

What are the biggest challenges for Housing Associations right now? How are they trying to tackle them?

Times are challenging – for both housing and housing associations. As well as the acute housing crisis many challenges are posed by government policies that both hit the sector or our customer through welfare reductions. The social rent reduction of 1 per cent a year will reduce housing associations’ income by 12 per cent. Right to Buy, whilst not yet fully defined, will create another challenge for the sector to try and maintain the levels of affordable housing the capital needs as we will have to sell off our stock.

Pay to Stay is likely to cause affordability issues for many families near but above the threshold. It will also be another administrative burden and drive people toward right to buy. Welfare reforms have been increasingly difficult for many of our customers. Freezes in the Local Housing Allowance, the Bedroom Tax, and sanctions make it more common for customers to fall into rent arrears.

Despite all of these challenges – L&Q is committed to tackling the crisis and finding positive solutions. We launched our L&Q2020 Vision this year and through it we’ve committed to building 5,000 new homes a year and trebling our pipeline to 50,000 over the next decade. This is the most ambitious development programme ever undertaken by a housing association.

L&Q is one of London’s leading residential developers and is involved in 20% of all the capital’s development output in some capacity. L&Q started building homes for the open market a decade ago. Starting with small developments. L&Q now develops entire mixed communities and has won many awards for its open market homes. We are committed to doubling its output of new homes for private sale over the next 5 years.

Selling homes on the open market not only cross-subsidises the affordable homes we build: it also maximises our capacity to tackle the housing crisis head on.  However we know we can only succeed – and compete with other developers – if people make L&Q homes their first choice. That’s why we’re so focused on the right locations, award-winning design and quality service, all backed by L&Q’s long-term commitment to every place we create.

Click here for more information about Shared Ownership and how it works.