First Home Fund Shared Equity Scheme: qualitative evaluation

1. Introduction

This report presents the findings from a qualitative study of the effectiveness of the Scottish Government's pilot shared equity home ownership scheme, the First Home Fund.

The Scottish Government commissioned Craigforth to carry out the research, and this study draws on primary qualitative research data gathered by them between October and December 2020. It complements quantitative analysis conducted in-house by Scottish Government analysts, and together this work will form an overall evaluation of the First Home Fund.

Due to COVID-19, the study approach was designed to be delivered within the context of social distancing.

This chapter gives an overview of the First Home Fund and sets out the research aims and questions. The following chapters set out the research approach, followed by the findings of the study.

Overview of the First Home Fund

The First Home Fund is a £200 million pilot shared equity scheme to help first-time buyers buy their first home. The scheme has the following objectives:

• To help first-time buyers that may be struggling to put together a deposit for house purchase.
• To help first-time buyers purchase a home that meets their needs and is located in the area where they want to live.

The First Home Fund provides a contribution of up to £25,000 towards the purchase of a property under a shared equity agreement, with other key features of the First Home Fund that:

• It can be used to purchase a new build or existing property.
• All applicants must reside in the property as their main residence.
• No means testing is applied.
• Buyers need a deposit of around 5%, subject to lender requirements.
• The minimum mortgage on the property is 25% of the purchase price.
• There are no property price caps but any amount paid over valuation cannot be covered using the First Home Fund.
• The Scottish Government equity stake cannot exceed 49% of the property value or purchase price, whichever is the lower.
• No interest is charged on the Scottish Government stake at any point.
• The Scottish Government's share in the property should normally be repaid when the property is sold. However, buyers have the option of increasing their share beforehand (with some conditions).
• The First Home Fund cannot be used in conjunction with other Scottish Government shared equity schemes.^[2]

A first-time buyer is considered to be someone who does not own, nor has previously owned, a dwelling in Scotland, the rest of the UK or the rest of the world. If a joint purchase is being made, only one of the purchasers needs to be a first-time buyer in order to apply to the First Home Fund.^[3]

Link Housing is the Administering Agent for the First Home Fund^[4] and there are currently twelve^[5] mortgage lenders participating in the scheme.

Research aims and questions

The aims of this qualitative component of the wider evaluation were to provide a deeper insight into:

• The extent to which the First Home Fund is meeting its objectives.
• Aspects of the First Home Fund that are working well or less well in terms of helping first-time buyers to purchase a home.
• Any limitations or barriers that are affecting the effectiveness of the First Home Fund, including affordability.
• Any other outcomes of the First Home Fund.
• Other types of support that were considered by First Home Fund applicants.

The six research questions for this study are set out below.

Research Questions

1. What are stakeholders’ experiences and views about the First Home Fund?

2. Why are buyers using the First Home Fund?

3. What are the barriers, if any, to using the First Home Fund for purchasing a home?

4. What effect, if any, has the £550 application fee had on applications?

5. What effect, if any, has the First Home Fund had on stakeholders’ business?

6. In what way, if any, has the First Home Fund affected the other shared equity schemes?

The next chapter summarises the research approach used to address these questions.

As noted above, this qualitative study will complement in-house Scottish Government quantitative research looking at scheme administrative data, buyer survey responses and housing market data.