According to a report from the Levelling Up, Housing and Communities (LUHC) committee, the government must “take urgent and significant action to reform how shared ownership schemes currently operate”.
The report stated that one of the main issues faced by shared owners was “uncapped service charges”, which can limit their ability to staircase over time and achieve 100% homeownership.
“This is exacerbated by the fact that shared owners are unfairly liable for 100% of the repairs and maintenance costs of their property despite owning only a proportion of it. Many of the repairs and maintenance services shared owners then receive are not done in good time and are often of poor quality,” it added.
The LUHC committee noted that shared ownership was a “unique product with often complex leases”, but there was a “lack of a single, specialist source of independent and impartial advice for shared owners”.
It said that there was support for improvements made to such leases in 2021, but these did not cover shared owners who own properties delivered in the previous Affordable Homes programme between 2016 and 2023.
“There is a risk this will result in the emergence of a two-tier market, where older, less attractive shared ownership properties become more difficult or even impossible to sell,” the LUHC committee warned.
It continued that shared owners can have difficulty selling their share where properties are impacted by building safety remediation issues, so many become trapped in properties they can no longer afford.
The LUHC committee said that the government should “better understand and assess what role shared ownership should have” within the Affordable Homes Programme, and there was a “significant and concerning data gap when it comes to shared ownership, which hinders this assessment and that must be addressed”.
The report called on the government to explore how it can extend improvements to shared ownership leases to cover properties delivered under the prior Affordable Homes programme and explore how shared owners are only ever liable for repairs and maintenance costs “proportionate to the size of the share they own”.
The LUHC committee added that the Regulator for Social Housing should update its tenant satisfaction measures to include satisfaction with repairs and maintenance for shared owners, ensure Homes England “improves accessibility and quality of guidance” and urge providers to “offer flexibility for shared owners in situations where they are unable to sell due to building remediation issues, and exploring the potential for requiring providers to buy back shares in such situations”.
The report stated that Rent to Buy may “represent a better-value-for-money product” but that there was “insufficient evidence” to come to a firm conclusion.
It noted that, as a “matter of urgency”, the government should begin collecting evidence in liaison with mortgage lenders and providers to “to assess the viability and affordability of Rent to Buy relative to shared ownership”.
Clive Betts, chair of the LUHC committee, said: “Shared ownership was hailed as an answer to the housing crisis, especially for first-time buyers. However, we have found that for too many people shared ownership becomes an unbearable reality, where a blizzard of charges and an unfair burden for maintenance and repair costs means that they are unable to afford full homeownership.
“Rising rents, hefty service charges, complex leases, disproportionate repairs and maintenance costs are experienced by too many people who take the shared ownership route. The government needs to take clear and urgent action to tackle these issues and ensure shared ownership genuinely delivers affordable homeownership”.
Shared ownership owners feel issues are ‘systematically overlooked’
Sue Phillips, founder of Shared Ownership Resources, said that the government and social housing sector “often take an overly short-term perspective, focusing on the affordability of a smaller initial mortgage deposit and relatively low ‘year-one’ costs at the expense of longer term outcomes and impact”.
She continued: “However, evidence submitted to this inquiry illustrates why it is vital to understand value for money over the longer term. Shared owners may end up spending considerably more, in total, to buy their home than had they been able to purchase on the open market in the first place.
“Or, perhaps, find that they are simply priced out of staircasing. Of course, not everyone wants to staircase to 100%. But it’s essential that people who enter the shared ownership scheme with the aspiration and expectation of an affordable pathway to full homeownership don’t end up finding that reality fails to live up to the marketing rhetoric.”
Phillips said that she welcomed the LUHC committee’s call for improved data, and eligibility criteria and affordability assessments ensure that people don’t commit more than 45% of their income to housing costs at the outset.
“But, with many shared owners reporting that monthly housing costs rise faster than income, it’s vital to understand whether the scheme pushes some households into financial precarity,” she noted.
Paula Higgins, CEO of the Homeowners Alliance, said: “It’s beyond an injustice that shared owners, who are in many ways more disadvantaged than other leaseholders, do not have the same statutory rights. Leaseholders were granted the statutory right to extend their lease 30 years ago.
“Shared owners rightly feel that the significant issues they face are systematically overlooked; especially as they do not seem to benefit from initiatives to strengthen consumer redress for buyers of newly built homes, for those owning leasehold properties and for renters with council and housing association landlords.
“The tragedy is that the issues shared owners experience are the same as all three groups, yet they end up in the ‘too difficult box’ for regulators. As a minimum, the Leasehold and Freehold Reform Bill should be amended to give shared owners the statutory right to a lease extension.”
The mortgage sector recently created a Shared Ownership Council to offer a “clearer, more transparent and consistent service offer” for consumers in the shared ownership sector.
