First Home Fund Shared Equity Scheme: qualitative evaluation

2. Study Approach

This chapter sets out the research approach, considers the research-related challenges encountered and provides an overview of the profile of research participants.

Research design

The key stakeholder groups for the study were:

• Those who applied and have gone on to complete a home purchase using the First Home Fund.
• Those who applied but have not completed a home purchase using the First Home Fund.
• Independent Financial Advisors (IFAs), with a particular focus on those providing mortgage-related advice to first-time buyers.
• Lenders that offer a mortgage product available to customers using the First Home Fund.
• Housing developers and Homes for Scotland (a membership based representative body for the home building industry).

All research was carried out by semi-structured interview, with all interviews conducted by telephone or video call from late October to December 2020.

Lenders

All the lenders who offer mortgages for the First Home Fund were invited to take part in the study. Five interviews were carried out - spanning UK wide banks or building societies and local credit unions.

Independent Financial Advisors

A range of IFAs were approached with the sample based on information provided by the administering agent for the First Home Fund and web search. The sample included larger, national companies through to smaller independent financial advice providers, including those connected to legal practices and covered a range of locations across Scotland.

Eight interviews were carried out. Three of the interviewees worked for the same company but covered different areas of Scotland or different types of sale (new build or resale). The other interviews included those working for larger companies through to a sole trader and worked across a range of urban and rural locations.

Developers

In addition to direct approaches to a sample of developers, Homes for Scotland invited members to take part in the study.

Six interviews were carried out, with five developers and Homes for Scotland participating.

Each of the five developers is also involved with the Scottish Government's Help to Buy scheme.

Applicants to the First Home Fund (buyers and non-buyers)

A purposive sampling approach was used to recruit study participants.

Someone was considered to be a buyer if they had completed the purchase of a home with support from the First Home Fund at the point the samples were drawn (the first sample was drawn in October 2020 with a second sample drawn in November 2020).

A non-buyer was someone who had either not completed their purchase at the point the sample was drawn, but who might still be going ahead with a purchase using the First Home Fund, or who had applied but for some reason had not gone on to use the First Home Fund.

A cross-section of buyers and non-buyers was drawn, taking into account:

• Characteristics of the applicant (including age, household type and ethnicity).
• Type of location in which a property was being purchased - whether city, other or rural.
• Whether new build or resale (for buyers only).
• Price point (for buyers only).
• Date of application or purchase.

The study team drew an initial sample of around 400 buyers and 125 non-buyers from anonymised records supplied by Link Housing. Link Housing then supplied contact details for those within the sample and the Scottish Government issued an email invitation to participate in the study. Those interested in taking part were invited to contact the study team (via email, telephone or through an online expression of interest form).

Based on the numbers of applicants from the first round of recruitment who expressed an interest in taking part in the study, a second sample of around 650 buyers and 250 non-buyers was drawn up and a second round of email invitations issued.

In total 55 interviews were carried out: 39 of these interviewees were classified as being buyers and 16 as non-buyers, according to the data set from which the sample was drawn.

Profile of Buyer and Non-buyer interviewees

Summary information on the profile of Buyer and Non-buyer interviewees is set out below.

Although 16 of those who took part in interviews were from the Non-buyer sample, ten of these had gone on to access the First Home Fund and complete a purchase by the point of interview. This meant that 49 interviewees had bought with support from the First Home Fund, and six interviewees had not.

Of these six interviewees who had not:

• One had an active application with the Fund and, at the point of interview, was still expecting to access funding and complete their purchase.
• One had bought with support from the Help to Buy scheme.
• Two had bought without using another Scottish Government shared equity scheme.
• Two were waiting for the First Home Fund to reopen (for reasons discussed further in Chapter 6).

Further information is set out below about the interviewees for this study, both in terms of their profile and the property purchased. Not all information was available for all interviewees^[6], hence the base number for the information may vary.

Image description:

Bar graph showing the age of the interviewees and their proportion by gender (female to male)

18 to 25 year olds were 9:1 female:male , 26 to 30 year olds 9:11, 31 to55 6:7, 36 to 40 3:7 and 41 to 45 was one male.

Image description:

Bar chart showing the property price for new build or resale properties.

Of those under £100,000 the 7 were all resale properties

8 out of ten were resale in the £100 to 150,000 bracket (2 being new builds)

2 out of 9 were resale and the rest new build in the £150 to 200,000 bracket

2 out of 10 were resale in the £200 to 250,000 bracket

And there was one resale property and one new build property in the final over £250,000 bracket.

Image description:

Bar chart comparing household incomes for single or joint purchasers

There were 4 single purchasers earning under £20,000 and 12 earning between £20,000 and £29,000. No joint purchasers incomes were below £30,000.

2 joint purchasers had an income of £30,000 to £39,000 as did 6 single purchasers

5 single purchasers and 7 joint purchasers had an income between $40,000 and £49,999

3 Single purchasers and 14 joint purchasers had an income above £50,000

Relative to all applicants to the First Home Fund^[7], the interviewees for this study were:

• More likely to fall within the 31-35 and 36-40 age groups and in particular were less likely to be in the 41-45 age group.
• Much more likely to have purchased a new build property.
• More likely to be single rather than joint purchasers.
• More likely to live in a city or other type of area and less likely to live in a rural area.
• More likely to have an annual household income £40,000-£49,999 or £50,000+).

In terms of ethnicity, 42 interviewees described themselves as White, with the majority of these describing themselves as White Scottish. Six interviewees described themselves as Scottish or British Asian, three as African or Scottish African and one as of mixed ethnicity (Black African and White Scottish).^[8]

Of the 55 interviewees, 21 had completed a First Home Fund-supported purchase prior to the start of the first COVID-19 lockdown on 24 March 2020.

Research challenges

This study draws on primary qualitative research data gathered between October – December 2020. Due to COVID-19, the study approach was designed to be delivered within the context of social distancing and worked well.

Study participant numbers were broadly as planned, albeit there were some challenges with recruiting sufficient numbers of professional stakeholders to take part. Those who did take part sometimes noted that changes to working arrangements, combined with high levels of demand across the financial services and development industries may have played a role in others being unable to participate.

In terms of applicants to the First Home Fund, the original intention had been to interview 55 people in total, with around 40 of these being those who had bought a first home using the Fund and the remaining 15 being those who applied to the Fund but had not gone on to make a purchase.

Although 16 of the interviewees were recruited from the Non-buyer sample (as outlined above), most had gone on to complete a purchase using the First Home Fund. The experiences and views set out within this study, therefore, very much represent those for whom their application to the First Home Fund led to the expected and hoped for outcome i.e. a First Home Fund-supported first-time home purchase.

It should also be noted that the study has not sought the views of those who may have considered a shared equity approach but did not go on to make an application to the First Home Fund. However, IFAs and other professional stakeholders were able to shed some light on the experiences of this group of potential buyers.

The impact of the COVID-19 pandemic has clearly been central to the experiences of many of those participating in this study. Although some Buyers had already completed their home purchase before the first national lockdown began, many others did so very firmly within a COVID-context.

However, although the impact of COVID-19 has at times been significant, in other respects the experiences and views of study participants draw on, and are pertinent to, a context which is not dominated by a global pandemic.

Report

The remainder of this report is structured as follows:

Chapter 3 - The Shared Equity Approach. This chapter considers interviewee awareness of the range of shared equity approaches available currently in Scotland and their impressions about the concept of shared equity. It also reports on lender perceptions of the factors that influenced their decisions to offer a First Home Fund-compatible mortgage product and developers stated reasons for promoting the First Home Fund to potential buyers.

Chapter 4 - Awareness of the Fund and Ease of Understanding. This chapter considers how interviewees became aware of the First Home Fund, lenders' and developers' decisions to be involved with the First Home Fund and how easy the range of stakeholders found the Fund to understand.

Chapter 5 - Key Eligibility Criteria for the First Home Fund. This chapter sets out interviewees' views on the main eligibility criteria for the Fund, focusing on those most likely to have been raised by Buyers and other stakeholders.

Chapter 6 - Impact on Buyers and Other Stakeholders. This chapter focuses on the main impacts that Buyers and other stakeholders identified as having stemmed from the First Home Fund.

Chapter 7 - Application Process. This chapter considers some of the issues raised in relation to the application process and the administration of the First Home Fund.

Chapter 8 - Conclusions. This final chapter returns to the research questions for the study and draws overall conclusions to those questions based on the views expressed by the range of stakeholders who took part in this study

Throughout the report, we use the terms "stakeholders" to collectively refer to buyer, non-buyers, lenders, developers and IFAs who took part in the study. We use the term "professional stakeholders" to refer to lenders, developers and IFAs.

Other points to note about the report are:

• When referring to interviewees for the study, Buyer or Non-buyer is capitalised to indicate that the reference is to study participants (as opposed, for example, to buyers more generally).
• Non-buyers are only referred to specifically when the distinction is relevant. Otherwise the group of 55 interviewees are referred to as Buyers.
• The chapters include anonymised verbatim quotations and pen portrait stories to illustrate the views of various stakeholders discussed in the main text.
• The stories draw on the experience of Buyer interviewees or examples provided by IFAs. Details have been changed to ensure confidentiality, but any quotes are real and provided by a Buyer in similar circumstances or by the IFA who provided the example.

The findings presented in the following chapters reflect the views and perceptions of stakeholders that participated in the programme of interviews. Consistent with the remit for the study, this qualitative data has not been triangulated with other evidence.