The report from the National Audit Office (NAO) suggested that because there are complexities around service charges and the staircasing method to increase ownership, many users do not understand the longer-term financial risks.
Gareth Davies, head of the NAO, said the government also doesn’t understand how shared ownership is working for everyone who uses it, because of gaps in data. He said the government lacks essential data to help assess whether shared ownership remains an affordable and well-managed scheme over time.
“Shared ownership remains an important route into homeownership, but it is complex, and weaknesses in information, affordability, data quality and redress mean that government does not yet have a full understanding of how the model works for consumers,” he added.
Largest government scheme for new homeowners
Since the closure of the Help to Buy scheme and the introduction of new restrictions on Right to Buy, shared ownership is now the largest government-supported homeownership scheme for new owners.
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Over one in 10 new-build homes were sold on this basis last year.
Criticism and complexity
The report found that the transaction costs every time someone increased the proportion of a shared ownership property that they owned were making these transactions less affordable. It also noted that all shared ownership properties were leasehold, so leasehold issues overlap with other problems with the scheme.
Despite improvements in recent years, the report also said there was an “understanding gap” over the costs involved in shared ownership. Communication about service charges is often unclear, with no standardisation.
Rising service charges with little comeback are also an issue, the NAO found, with some increasing by 140-170% in two years. It also pointed out that despite being part owners and part renters, those with shared ownership face 100% of maintenance costs.
Lack of knowledge
The Ministry of Housing, Communities and Local Government collects (MHCLG) data about shared ownership, but the NAO report said this is not complete and that the ministry does not do anything about non-compliance from housing associations and local authorities.
The report cited issues with both response rates and data quality.
The ministry said last month it was considering improvements to the shared ownership model after data showing that fewer than one in 100 of those with a shared ownership property moved to 100% ownership last year.
