Building societies for people
Building societies have a long and proud tradition of helping people to save and buy a home. The UK’s 43 building societies have over 25 million members between them and the sector is continuing to grow year on year.
As customer owned financial institutions building societies, alongside other financial mutuals, like credit unions, contribute to a diversity of ownership in financial services. This is important because it increases financial resiliency within the system and increases consumer choice.
The sector continues to innovate, combining the human touch and the digital in mortgage lending, with video interviews and paperless applications. In addition to its culture of putting members first, the sector offers flexibility in its product offering; mortgages for older borrowers, those in the gig economy and helping families to support younger generations, as well as for shared ownership and self and custom build properties.
How Modern Methods of Construction can help build more homes
As the housing sector innovates to meet the challenge of demand for housing, Modern Methods of Construction (MMC) is playing an important role in increasing housing supply.
The term MMC covers a range of different techniques, which allow all or part of a property to be built off-site in a factory. It is often used in self and custom built properties – which building societies specialise in.
MMC has a number of advantages. It minimises disruption by the wonderful British weather and allows greater precision in construction techniques. It also allows more energy efficient materials and building techniques to be used. With the UK Government’s legal target of reaching net zero carbon by 2050, all parts of the economy need to contribute to this target.
For MMC to become mainstream a number of actors need to play their part, from surveyors and valuers, to warranty providers and mortgage lenders. Everyone needs to focus on facilitating MMC, so that more people can have a good quality home of their own, whether it is rented or owned.
The Ministry of Housing, Communities & Local Government has been leading the way, with work on standardising terminology, but more needs to be done. The Housing, Communities & Local Government Select Committee in the 2015-17 Parliament recognised our three calls to help MMC grow. These are:
- the introduction of digital logbooks for MMC-built properties as construction methods are not always evident to buyers, repairers or extenders
- the gathering of durability data, critical for mortgage lenders when making 25-40 year lending decisions, and
- the standardisation of warranties to ensure all methods and elements of an MMC property are covered.
The new Government can encourage MMC to achieve its target of building more new homes. That support is vital to encourage investment in skills and the development of technologies.
Shared ownership
Shared ownership has a role to play in helping people into a home, particularly in parts of the country where affordability is stretched. A number of building societies are specialists in shared ownership mortgage lending, enabling people to part-buy and part-rent a home, while providing security of tenure and a foot on the property ladder.
The costs of buying a property, such as valuation and legal work, remain when purchasing a shared ownership home or buying more equity through staircasing. We support a review of these costs so they are proportionate and not prohibitive for people wanting to buy a bit more of their home.
There are also other steps that Government can take to support shared ownership. The Lifetime ISA is already helping people buy their first home with Government support. Allowing the Lifetime ISA to be used to save and buy a greater share of a shared ownership property could incentivise and help people to staircase up through use of the bonus.
While housing associations have traditionally been the main specialists in shared ownership, more private providers are now seeking to enter the market. Growing the market means more consumer choice, but the lease must be standardised across both private and social providers to provide clarity for consumers, mortgage lenders, and conveyancers. It would also help prevent issues of unfair terms and conditions, like the toxic clauses in the leasehold sector and on private estates.
Reaching net zero carbon in housing
The UK’s Committee on Climate Change reports 14% of the UK’s carbon emissions stem from home energy usage. As the new Government prioritises building more new homes, these need to be carbon neutral. It is also imperative that existing homes are decarbonised to meet the UK’s net zero carbon target. Building societies have come together to form a Green Finance Taskforce, to promote and potentially finance energy efficiency improvements in the existing housing stock.
In our recent Property Tracker (December 2019) we asked the public about their views on home energy efficiency. 77% said the property’s energy efficiency rating was important when buying a home. When it comes to who is responsible for improving a property’s energy efficiency, 42% said it was the homeowner, 25% the government and 17% said energy companies. But improving a property’s energy efficiency rating can be complex. Knowing what measures to take and who to trust to do the work are challenges. The costs involved can also be a significant barrier for homeowners. When asked 54% of homeowners said lower council tax would be the biggest incentive to make energy efficiency changes to their home.
Reliable consumer information and an education campaign would go a long way to addressing these issues and help consumers navigate the challenges we all face.
The role of Government
MMC, shared ownership and decarbonising housing all have a crucial role to play in increasing our housing supply and ensuring it is of a high standard for future generations. Government, along with their advisors and regulators, need to consider how they respond to these issues and incorporate them into their policies. Only then will we have enough housing for all.
