National home ownership support schemes often fail to meet their full potential in rural and island areas as they do not recognise that the circumstances surrounding housing are different to those in urban areas.
Open Market Shared Equity (OMSE) is one such scheme. It helps eligible buyers, on low to moderate incomes, buy a home that is for sale on the open market. It is administered through agents on behalf of the Scottish Government. Buyers fund 60 to 90 per cent of the purchase price and the Scottish Government holds the remaining share under a shared equity agreement.
There are strict threshold levels on the amount for which someone using this scheme can buy a home, based on the local housing market. For example, the maximum threshold price for a 3-bedroom home in Argyll or the West Highlands is £135,000. For someone looking to buy a house in remote parts of these areas, finding a home at this price is almost impossible for two reasons: local house prices are higher because of increasing demand for holiday/retirement homes and secondly, there simply aren’t that many houses which come up for sale. In Tobermory, just one 3-bedroom house was sold in the last year that would have been eligible for purchase through the OMSE scheme.
Scottish Government data demonstrates the lack of traction this programme has had in rural areas. In 2019/20, the total OMSE expenditure was £53.706M and the total number of homes bought with this money was 1,145 – an average expenditure of £46,905 per home. Of these, just 32 homes were bought in remote rural areas. This is equal to 2.79% (£1,500,960) of the total expenditure.
In 2019, 316,166 people lived in remote rural communities which is 5.8% of the population. This means that a fair share of expenditure would be 5.8% (£3,095,730) or 66 homes. Remote rural areas received only half the amount of expenditure through OMSE that they should have and were therefore underfunded by £1.5M per year.
If schemes such as Open Market Shared Equity were adapted to meet the specific needs of rural and island areas, they could be far more effective in helping to tackle the rural housing crisis. For example, by allowing OMSE to help finance self-build projects in rural areas, like the now discontinued Rural Home Ownership Grants once did, as opposed to open market purchase, there would be more opportunity for people in these areas to benefit.
The Scottish Government is proposing an ‘Islands Bond’ worth £5M over 5 years and providing support to help 20 people a year build or buy a house. This is a welcome initiative, but the above figures show that this investment only goes part of the way to compensating remote rural areas for the annual under-investment in housing.