This content applies to England only.

Over the last decade, dramatically rising house prices have made home ownership unaffordable for the majority of potential first-time buyers in most parts of England. The rate of home ownership has been dropping since 2003.

In response to this affordability crisis, the previous Government introduced several low-cost home ownership schemes in an attempt to get more people on to the property ladder.

What are low-cost home ownership schemes?

Low-cost home ownership (LCHO) schemes are government-backed or privately-run schemes offering help to people who cannot afford to purchase their own home on the open market. Alongside social rented housing and intermediate rented housing, LCHO is another way of providing affordable housing.

Priority is given to:

• existing council tenants 
• existing housing association tenants  
• people on the housing register, waiting for a council or housing association home to rent.
  

But other groups in housing need are also eligible to apply, including: 

• key workers (eg teachers, police officers and nurses)
• first-time buyers who can't afford to buy a property
• households with an income below £60,000 a year.
  

What types of low-cost home ownership are available?

There are two different forms of LCHO schemes – discount schemes and shared ownership.    

Discount schemes

These are offered by social landlords (local authorities and housing associations) to their tenants, giving them the chance to buy their homes at a discount.

The two main discount schemes are:

• Right to Buy: this applies to council tenants
• Right to Acquire: this applies to housing association tenants
  

Shared ownership

With shared ownership schemes, a buyer part owns and part rents their home from what is known as a HomeBuy agent – usually a housing association. The buyer can then buy additional shares over time, this is known as ‘staircasing’.

Shared equity

Shared equity schemes effectively allow people to buy a property with the help of a low- interest or interest- free equity loan on top of a traditional mortgage borrowed from a private lender. The equity loan provider will take a share of the property in relation to the loan they have provided, which will increase or fall in value depending on whether the property prices go up or down.

Shelter's view

Shelter supports low-cost home ownership as an alternative form of affordable housing, alongside social rented housing. However, we believe the most acute need is for an increase in the supply of social rented units to tackle the current housing crisis, and we are concerned that resources for developing the social housing sector should not be diverted away to LCHO schemes.

Evidence suggests that, even though they account for around half of new ‘affordable’ homes, LCHO schemes are not helping low-income households, despite taking up a large amount of government subsidy. We believe that the Government should focus more attention on the ‘forgotten households’ – people who cannot afford LCHO schemes but are also unable to access social housing.

Shelter is also concerned that the range of different schemes and lack of vision for LCHO has resulted in a confusing and complex picture for consumers. Evidence suggests that there is little mobility within the sector, and that some LCHO buyers are stung by hidden costs.

Shelter is anxious that advice on suitability and affordability of LCHO schemes is improved to prevent households taking on financial commitments that they will be unable to sustain in the long run. We do not think that promoting home ownership should be the dominant driver of government policy and would like to see more equal tenure choices.

Finally, Shelter is keen to ensure that the money generated from Right to Buy and Right to Acquire, which have decimated the supply of social housing stock, is fully reinvested to provide more social housing.