Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 19
19
Acknowledged
Paragraph: 100
New shared ownership leases create unfair two-tier market for older properties.
Conclusion
The changes brought to leases for shared ownership properties delivered under the 2021–2026 Affordable Homes Programme, while well-intended, risk creating an unnecessary and unfair ‘two-tier’ market where shared ownership homes delivered under the previous Affordable Homes Programme are considered less attractive properties, making them harder to sell. It is unfair that the more generous minimum terms of the ‘new’ lease do not also apply to shared ownership homes delivered under the 2016–2023 Affordable Homes Programme.
Government Response Summary
The government acknowledges the concern about a two-tier market, stating it encourages providers to voluntarily offer new model terms but recognises significant practical barriers to broad application. It highlights that the Leasehold and Freehold Reform Bill will provide a statutory right for shared owners to extend leases, offering a more effective solution.
Paragraph Reference:
100
Government Response
Acknowledged
HM Government
Acknowledged
47. For shared ownership homes delivered through the 2016-23 AHP after April 2021, we have encouraged registered providers to offer those homes on new model terms on a voluntary basis, and we know that some have chosen to do this to ensure greater consistency across their portfolios. Where there are shared ownership homes still to be delivered through the 2016-23 AHP, we will continue to ensure that registered providers have the flexibility to deliver these homes through the new model of shared ownership. 48. The Government is happy to encourage registered providers to consider if they would like to vary the leases of shared ownership homes delivered through the 2016-23 AHP to new model terms. We recognise, however, that there are significant practical barriers to achieving this at scale. 49. For example, the initial repair period lasts for ten years following the start of a new model shared ownership lease. It is not renewed if the lease is assigned to a new purchaser. As a result, mirroring these arrangements for homes delivered through the 2016-23 AHP would only affect homes for the first ten years of their life. For homes delivered early in the Programme, its application would be limited to perhaps one or two years. This could render the cost of making the necessary variations to leases – and any new financial incentive provided by government to do so – disproportionate to the benefit to shared owners. 50. The Leasehold and Freehold Reform Bill introduces a new statutory right for shared owners to extend their leases by 990 years at a peppercorn ground rent on payment of a premium. The value of this premium can be calculated according to the new standard valuation methodology implemented by the Bill, with the ‘reversion’ value of the lease set in proportion to the size of share owned. This will be the most effective means for those with existing shared ownership leases to extend their term to 990 years and – as a statutory right – will not require any new financial incentive from government to support its delivery.