Any ol' silver?

I was recently “cold called” by an investor who wanted me to help him convince Housing Associations to sell their shared ownership portfolios. For an "introduction fee”. I said no, and here is why.?

?His logic was that Housing Associations are struggling with their backlog of repairs, building safety work and energy efficiency commitments. So far, I agree.??

?He claimed the obvious thing for them to do is to sell their “non-core” assets. This is when our views departed. As far as I know, providing homes for people who can’t afford to rent or buy is our core purpose. Shared ownership is a more aspirational product, but it is there for first time buyers, key workers, lower income couples and families, and for social tenants who want to move into ownership. Shared ownership is funded by government because they recognise that it helps to address the housing shortage.??

Most shared ownership is on the same sites as social housing and is often managed quite efficiently by one team. Having a long-term interest in the neighbourhood, taking care of the area and community is part of the reason why Housing Associations exist.???

While Shared Ownership is generally a good investment for the buyer, it is also a good investment for the landlord, which is why I would be very reluctant to sell off the portfolio so a private investor can benefit. As house prices rise the retained equity rises in value. And this has been faster than CPI in general. So when an Association builds a home for shared ownership it is making an investment in the UK housing market. And over time, when the shared owner is ready to sell, the benefit of the asset growth accrues to the landlord as much as the shared owner. Over the years, this asset growth has been vital to helping Housing Associations subsidise social homes (with declining grant) and is important today to address exactly those issues my cold caller mentioned, eg damp and mould. The reserves that have built up are being used to fix declining social homes.??

Some Housing Associations have already sold off their shared ownership homes to private investors, and are left to manage them on behalf of their investors. This is usually done when they feel their back is to the wall and they need a large cash injection to carry on. We evaluated one large transaction and found that the effective cost of the borrowing was 6% - at a time when it was possible to borrow money at less than 2%. You have to be quite desperate to accept a deal like that.??

?I will use next week’s blog to address better ways to find resources to carry out the legacy work.??