Announced yesterday, the income eligibility caps will be raised from £80,000 to £90,000 outside of London, and from £90,000 to £110,000 for buyers in the capital.
Matthew Pennycook, Housing Minister, said that, thus far, shared ownership enabled many to get on the property ladder who would not have been able to do so otherwise.
However, he highlighted that the government wanted to ensure shared ownership remained accessible to borrowers on lower-to-middle incomes.
Pennycook (pictured) stated: “Despite improvements made to the model over recent years, the government is fully aware that shared owners continue to struggle with a range of serious affordability, transparency, management, staircasing and resale challenges.”
Service charges were rising for leaseholders across the country regardless of management or freehold arrangements, said Pennycook.
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He said that because shared ownership was aimed at lower and middle-income households, “sharp increases in service charges often create acute financial pressures for shared owners”, despite them only owning a partial equity stake in their home.
Phase two announced
The minister announced that the first phase of the goverment’s housing improvement plan included disallowing the reappropriation of fees for shared owners for profit, and retaining the provision that permits rents to increase by CPI+1 each year, until 2036.
Pennycook announced that the next phase had begun.
At a minimum, Pennycook said it would include the following:
- Considering measures to reduce existing barriers to staircasing such as upfront and ongoing transaction costs.
- Exploring options to support resales including an assessment of the efficacy and reasonableness of nomination periods and the fees charged by providers.
- Developing better information and guidance to help existing shared owners understand and navigate the options available to them.
- Undertaking a comprehensive review of the functioning of buybacks (or leasehold repurchases) as an exit route for shared owners who, through no fault of their own, find themselves unable either to afford to remain in their home or to sell it.
A sensible decision
Rob Barnard, intermediary relationship director at Pepper Money, said: “This is a welcome and sensible decision. The shared ownership income caps had been frozen since 2016, while house prices rose by 37% and earnings by 42%. That left a growing number of working households earning too much to qualify, yet still unable to buy a suitable home on the open market.
He added: “Raising the caps opens the door to many of those households, but it needs to be reviewed regularly. This is an important step, but there is more to do.”
