You’ve got to feel for Angela Rayner. She’s trying to build as many homes as possible, but it must seem like everything is against her. The latest setback is a national shortage of bricks. Already experts are telling her to use all manner of weird and wonderful alternatives to bricks. Have we forgotten the lessons of the Three Little Pigs? Come on Bridget Phillipson, get that salutary tale back on the curriculum.
A big part of Angela’s plans will likely be to boost shared ownership. But it’s getting a bad press as service charges rocket and satisfaction drops.
Cometh the hour, cometh the man. Leeds Building Society sent for the legendary housing professor Peter Williams to look independently at the costs of shared ownership. He tested out whether or not shared ownership was cheaper than private renting. That’s a good question. If it’s not cheaper, shared ownership falls at the first hurdle – it’s just not affordable housing.
Overall, shared ownership passes the test. Across 294 council areas, shared ownership is cheaper than private renting in 77% of locations in year one rising to 93% by year 10. Shared ownership does better in high rent areas where it’s cheaper than renting privately across 90% to 98% of areas over 10 years.
On top of that Peter says that shared owners will be on average £29,000 better off due to equity growth. Now that’s a big plus. But will this always happen? The Times reports that 60% of McCarthy Stone flats lost money on resale. The owner was worse off by £41,000 on average. Why does this matter? Homes England have given the firm £94million to move into building shared ownership homes. Let us hope that these new flats buck the trend and don’t fall in value. It’s a high stakes game. The Times headline was – “Families lose ‘life savings’ on developer’s retirement flats.”
If you are struggling to pay service charges in flats the idea that shared ownership is a bargain might not ring true for you. So is the answer to restrict shared ownership to houses. Running costs will be lower and satisfaction is usually much higher. The obvious problem is that we need greater density in higher value areas. Sadly opting for houses only isn’t the solution everywhere. What else could we try?
“We have to move on from mutually assured destruction…No one in their right mind will want to buy a flat where the association or agent is slated day in and day out on socials. That hits sales of new homes by the association and resales by shared owners with equal force”
How about shaking things up? What about a bit of disruptive innovation? It has worked wonders in personal banking. New players like Chase, Monzo and Starling top the satisfaction charts. They lead the best of the old guard, Nationwide, by at least 10%.
Thanks to the RSH’s Tenant Satisfaction Measures we can see how the new players are doing on shared ownership. It’s not great. Only L&G scrape into the top 10 for satisfaction. Sage (now Sparrow) come in at 15, with Heylo lagging behind at 21.
Why is it that Chase, fresh out of NYC, has come in and blown away the opposition? Blackstone (who back Sage) and Blackrock (who back Heylo) have got to take a long, hard look at themselves. They’re just not doing what they need to do. The big bosses in NYC will rightly be demanding action. But until then, the stimulus of competition isn’t helping shared ownership.
Perhaps the answer is to change the legal set up for managing blocks. I’m often told that things are so much better in Scotland. Yet, the papers up here carry tales of huge bills and mistakes by managing agents (or factors as we call them).
So, there are no quick and easy fixes. How would I start to get shared ownership back on track?
“Thanks to the RSH’s Tenant Satisfaction Measures we can see how the new players are doing on shared ownership. It’s not great. Only L&G scrape into the top 10 for satisfaction. Sage (now Sparrow) come in at 15, with Heylo lagging behind at 21”
We have to move on from mutually assured destruction. Campaigns against particular associations and agents can backfire. No one in their right mind will want to buy a flat where the association or agent is slated day in and day out on socials. That hits sales of new homes by the association and resales by shared owners with equal force. For the avoidance of doubt, I don’t disagree with the complaints. It’s the case that some associations have bitten off more than they can chew, and all too often blame everyone but themselves for the problems. The associations must look lively to defuse the criticism and get to a point where shared ownership enjoys a better reputation.
I’m happy to report that the CEO of one of the most heavily criticised associations is reaching out to residents and campaigners. He’s certainly saying all the right things. So, I’ve high hopes for glasnost. But he’s going to have to reverse years of unhappiness. And a group of MPs will be keeping a beady eye.
In the here and now the acid test is to get the bills down. That means taking on the managing agents more vigorously. Or at least trying a bit harder than some do.
Long term, we must never let development departments rule the roost again. Too often they drove around like wee pretendy entrepreneurs spending other people’s money on towers of Babel. Such blocks are a trial for the housing managers and repair staff who must pick up the pieces. More importantly, they cause nothing but misery for the residents who dread the bills, aka a tax on complexity.
Let’s look before we leap as landlords and work out what a block will cost to live in before we pounce. And do some stress testing to allow for the unexpected.
Alistair McIntosh, Chief Executive, HQN
One Response
Mr M – I agree with all you say. Development teams have been charged with delivery. But in many cases that’s been at the expense of residents , sales and customer service staff. The latter pick up the pieces. However – it’s not development directors ‘fault’ – it’s a corporate governance failure. Too much focus on numbers and not enough on customers has led to appalling satisfaction.
Oh, and the serial under investment in asset management.
Over the decades I’ve seen CEOs who wanted the biggest development programme, the lowest management costs , the largest grant funding etc None in my experience wanted the best customer satisfaction KPI.
When I was CEO of a subsidiary delivering shared ownership I had a board fit for purpose. Estate agent, developer, regen and management specialist,CML lawyer, surveyor etc – and two shared owners. Our satisfaction was 93%. Complaints were few – and those that were received were overseen and discussed by the exec team. Minutes of that meeting were shared with staff to show we were non defensive and customer focused. If something needed putting right and it cost us money – we dealt with it. We were the only SO RP to be awarded 3 stars from the audit commission.
The ‘problems’ we had was interfacing with our group parent where we were asked to sign up to poorly designed high density schemes – which I refused to do. That may be one of the several hundred reasons I was given the opportunity to leave the group…..
I was one of only a couple of exec directors wholly responsible for SO. Most other RPs had third tier directors in charge of operations. That in itself bred a culture of no power – leading to poor decisions, inadequate resourcing and average customer satisfaction. A classic example of poor governance. Good governance should protect the organisation from poor decision making.
So for me the issues that have arisen could mostly have been avoided by better choices and decsion making. Few board members fully understand SO or leasehold or the inadequate level of resourcing for asset management and customer service. CEos have invariably kept boards away from detail.
The fish rots from the head. Time for a rethink. The sector could easily put future schemes in with a good shout of good customer service. They could even make solid attempts to put right existing wrongs – although that would cost money. I maintain the sector should do the right thing. No matter the cost.