Fifth Report - Shared Ownership

Shared ownership products can often become unaffordable over time due to having to pay for 100% of repairs and maintenance costs despite only owning a proportion of the property. This is exacerbated by the fact that these service charges can increase over time, along with other costs such as rent. The 10 year repairs period only mitigates repairs and maintenance costs for those on the ‘new’ lease, and not those in properties delivered under the 2016–2023 Affordable Homes Programme. This, combined with the numerous and often unnecessarily expensive charges involved in the process of staircasing, makes it very difficult for many shared owners to complete their objective of staircasing to 100% and achieving their aspiration of full homeownership.

The Government should as a matter of urgency explore the implications of changing the terms of shared ownership leases delivered under current and previous iterations of the Affordable Homes Programme so that shared owners only ever have to pay service charges for repairs and maintenance proportionate to the size of share they own.

Rent to Buy may represent a better value for money product than shared ownership, but there is insufficient evidence to come to a firm judgement on this at present. Both Rent to Buy and Shared Ownership as affordable home ownership schemes need to be better understood in terms of their affordability and how far they enable 100% homeownership. The Government must as a matter of urgency begin collecting evidence, in liaison with mortgage lenders and providers, in order to assess the viability and affordability of Rent to Buy relative to shared ownership. It must also collect and publish data around staircasing trends over time within shared ownership. These data should then inform the proportion of shared ownership and Rent to Buy homes allocated within the next iteration of the Affordable Homes Programme.

Shared ownership as an ‘affordable homeownership’ scheme is predicated on shared owners being able to save enough money to staircase (eventually to 100%). However, its affordability appears to be so marginal for many shared owners that there is no guarantee that staircasing will be possible for them, and the guidance for Homes England’s Affordability Calculator does not explicitly recommend providers assess the likely affordability of future staircasing for prospective shared owners before the purchase is made. This puts into question the effectiveness of the product as a homeownership scheme.

Homes England should assess how fit for purpose their initial eligibility and affordability calculator is. As part of this, it should evaluate whether to include a ‘long-term’ function within the calculator to model affordability over 5-, 10- and 15- year periods which take into account the assumption that costs will rise over time for shared owners, through various scenarios. Homes England should also add a means Shared Ownership 39 of calculating how likely it is that shared owners will be able to afford to staircase, given projected costs, and not just assess affordability on the assumption that the shared owner remains on the initial share purchased.

It can come as an unpleasant shock during a difficult time to relatives of deceased shared owners to find out that they are liable to pay service charge costs when their relative living in an OPSO property has died, despite the fact that there is no longer anyone living in the property using the services paid for through the service charge.

The Government must make it mandatory for providers of OPSO to highlight the potential legacy costs of service charges being passed on to family members to prospective shared owners and family members in line to inherit the property upon the shared owner’s death, prior to initial purchase. Homes England could ensure this by specifying the need to include this information in the Key Information Documents. The Government should also give consideration to how it can encourage providers to better support those inheriting OPSO properties to sell the property upon the death of their relative.

It is unfair that OPSO owners with shares of less than 75% are liable to pay rent on the entirety of the landlord’s equity in the property, while those who own the maximum 75% share pay no rent at all.

As part of its report, the Older People’s Housing Taskforce must include recommendations for reform of OPSO, focussing on the potential merits of changes to ensure that no rent is charged for the top 25% of equity, regardless of the proportion owned by the shared owner. The Taskforce should publish these recommendations in its report in May 2024, as currently scheduled. (Paragraph 60) Affordable and Social Housing objectives

It is currently unclear what proportion of shared ownership housing stock is being lost to the open market. This makes it impossible to judge what impact sales of shared ownership homes to the open market are having on the overall supply of affordable housing in the UK. We welcome the data provided to us by Baroness Penn which shows the number of 100% staircasing sales for the previous three years, as well as the introduction of a question to the CORE platform on whether a staircasing transaction is part of a ‘back-to-back’ sale. This should help improve our understanding of the implications of shared ownership on affordable housing stock, although there is still no specific plan for how the Government will replace those homes which are sold on to the open market.

The Government must urgently review data it has from the CORE platform regarding the new question on whether staircasing transactions are part of a ‘back-to-back’ sale for 2023–2024, from which it must make an assessment of the extent to which shared ownership properties are being lost to the open market. The Government must then design and publish a plan on how it intends to replace all properties transferred to the open market from sales in the current and future iterations of the Affordable Homes Programme. (Paragraph 69) 40 Shared Ownership

There is currently an evidence gap around Right to Shared Ownership, as a new product. It is unclear what the level of demand for this product is; what sort of value for money it represents; and what the likelihood is of achieving 100% homeownership through it. The Government must develop a clear understanding of Right to Shared Ownership to properly evaluate its role in future iterations of the Affordable Homes Programme.

The Government should actively collect and analyse data on Right to Shared Ownership, to better understand supply and demand for this emerging product. This data should include: the level of take-up of the Right to Shared Ownership; the characteristics of those who have exercised their right in this regard; the average share owned through Right to Shared Ownership; and the proportion of users staircasing to 100%. (Paragraph 73) Shared ownership leases

It is clear that many shared owners lack access to advice and guidance which can explain to them clearly and impartially the complexities of leasehold tenure and their rights and responsibilities under their shared ownership lease, as well as advise them on lease extension. There is a lack of awareness among shared owners of the advice and guidance that is available to them from the Leasehold Advisory Service.

Homes England should ensure that providers include simple guidance on lease arrangements within the Key Information Documents distributed to shared owners, including information on how rights and responsibilities are allocated and guidance on how to extend the lease. It should also make sure it is clearly signposting to existing advice and guidance services that may be helpful to shared owners in understanding their leases, such as the Leasehold Advisory Service, in these documents. These changes to guidance should be introduced before the end of the 2024 calendar year.

It is unacceptable that shared owners are having to make significant financial decisions without appropriate advice being readily available, and we believe the Government must act to remedy this. We also believe that it is unacceptable that shared owners do not have the same statutory right to leasehold extension as other leaseholders.

We urge Homes England to update its Capital Funding Guide for shared ownership to specify that providers should only be selling shared ownership properties on the condition they set up and maintain specialist teams of professionals who can provide accurate, timely and accessible advice on leases and lease extension to shared owners. Homes England could help facilitate the establishment of these teams through, for example, convening forums through which experienced providers could share best practice.

Finally, the Government should ensure that any legislation passing through Parliament which has provisions to reduce the cost of, and simplify, the process of leasehold Shared Ownership 41 extension (for example, as in the Leasehold and Freehold Reform Bill) also applies to leaseholders in shared ownership properties, so that shared owners have the same statutory right to leasehold extensions as all other leaseholders. (Paragraph 94) Risk of a two-tier market

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.

The Government should encourage providers to voluntarily update the terms of their ‘old’ shared ownership leases (for properties delivered under the 2016–2023 programme), particularly the minimum 990-year lease length and the 10-years repair period, and consider offering financial incentives for providers to do so. (Paragraph 101) Repairs, maintenance and fees

Shared owners need a proper mechanism through which to feed back dissatisfaction with repairs, maintenance and other aspects of the management of their property. Based on the evidence we have received, many shared owners are clearly unaware of the option of escalating unresolved complaints to the Housing Ombudsman, suggesting that better signposting is needed. The evidence also makes clear that, in many cases, providers’ internal complaints mechanisms are not fit for purpose, with shared owners often experiencing significant delays in waiting on responses from the landlord to their complaints.

The Government should ensure that there is more effective signposting to the Housing Ombudsman for shared owners; it should make it clear that the Ombudsman is their port of call for resolving disputes with landlords once internal mechanisms have failed to resolve an issue. One option would be to do this by updating the Key Information Documents, so that this information is clearly spelled out.

We welcome the Government’s confirmation that the Regulator is preparing to introduce a new, proactive consumer regulation regime. However, for the next round of tenant satisfaction data collection, the Regulator must update the measures to include satisfaction with repairs and maintenance for shared owners. (Paragraph 116) Selling shares and building safety

Shared owners can face considerable difficulty selling shares in their property, which many are prompted to do once rising costs reach unaffordable levels. Many are still waiting on their buildings to be remediated, without which they are legally unable to sell their shares and so end up trapped in properties they can no longer afford. Providers currently have no obligation to buy back shares from shared owners or to allow shared ownership tenants to sublet. We welcome the Secretary of State’s recent 42 Shared Ownership intervention to allow providers more flexibility in allowing shared owners to sublet, and in buying back shares, but these decisions remain entirely at the provider’s discretion and more could still be done.

The Government should either require providers to buy back shares from shared owners in situations where they are trapped and unable to sell shares due to building remediation issues, or if not, set out the reasons why it has decided not to do this. It should also undertake an assessment of the potential merits of requiring provider buyback of shares as an automatic entitlement for shared owners. If this were to be implemented, the Government would need to increase grant funding to providers to cover the additional costs incurred. (Paragraph 134) Shared Ownership 43