Shared Ownership — are affordable housing schemes fit for purpose?

While the Affordable Homes Programme 2021-26 was accompanied by a ‘new’ shared ownership model lease and Key Information documents which introduced a number of key changes to the previous model form of lease, there have been calls for further modifications. Some commentators have questioned whether the current scheme does indeed provide an ‘affordable’ means to home ownership for those who can’t otherwise afford to buy their own home on the open market.

Here, Lisa Robotham from our housing team explores the proposed changes and future of the shared ownership scheme.

Are affordable housing schemes fit for purpose?

The Government has committed to building 1.5m homes over the next five years and voiced its support for more new towns. Nationally, the Building Cost Information Service is reporting some small increases to the quarterly annual starts and completions, but reports that annual house building starts are down to pre-covid figures. 

Many housebuilders believe that the drop in demand is down to cost-of-living pressures, high mortgage rates and limited consumer confidence. From speaking to our clients, it’s clear that demand for shared ownership still outstrips supply in the North. Yet this doesn’t appear to be the case in the South — perhaps due to higher property prices.

While we expect that any changes to the Affordable Homes Programme will include the construction of more social housing, we also expect that support for shared ownership will be maintained.

25 recommended changes to the shared ownership model lease

The Ministry of Housing, Communities & Local Government (known as the Department for Levelling Up and Housing and Communities at the time) carried out a consultation and review of shared ownership and issued a report in May 2024 following responses received from individuals, housing associations, Councils and others. The report ended with 25 conclusions and recommendations that it urged to be considered and addressed by the Government.

It was disappointing that many questions couldn’t be determined with certainty due to data limitations, as information supplied by providers wasn’t sufficiently detailed. For example, information provided on staircasing didn’t distinguish between leaseholders’ simply wishing to acquire a higher share in their home or as part of a subsequent sale. Presumably, this will be rectified and more focused information will be required in the social housing lettings and sales data (CORE) submitted to the Ministry of Housing, Communities & Local Government.

The report led to some changes being introduced, including the change from RPI to CPI rent reviews — which was felt to be a less volatile index — and the introduction of new affordability guidance. However, the timing of the report — falling just prior to the general election and part way through the current funding stream — means that little progress has been made on implementing any further changes. 

In the next funding stream, we could see the following reasonable recommendations being addressed:

1. A more equitable share of the costs of repairs and maintenance

In the report, the Ministry of Housing, Communities & Local Government recommends that leaseholders should only be required to pay for repairs and maintenance proportionate to the size of their share in the property. 

Currently, a leaseholder holding a 25% share in a property is required to pay 100% of repairs and maintenance costs. Although the new shared ownership model lease includes a ten-year repair schedule to partly mitigate some of the costs, this isn’t the case for older leases. 

Many of the responses to the review felt that this scenario was unfair in respect of service charges — especially in flats, where some service charges exceeded rent. This may also partly explain the low demand for shared ownership in the South where leases of flats are more common and where issues around building safety, escalating rents and service charges have been widely reported. 

2. A fairer deal for leaseholders of older persons’ shared ownership (OPSO) leases?

A further recommendation was that (OPSO) leases should be amended. It was felt to be unfair that a leaseholder holding less than a 75% share in a property was still liable to pay rent on all of the landlord’s retained equity — even though the maximum share that could be acquired was 75% — whereas a leaseholder acquiring 75% wouldn’t pay rent on the remaining 25% share. 

The report called for no rent to be paid by any leaseholder on the top 25% of retained equity held by the landlord, regardless of the proportion they held. We can sympathise with this view and understand why it’s considered to be unfair. The report also highlighted the unfairness of family members inheriting service charges following an OPSO leaseholder’s death.

3. Avoiding a two-tier market — updating older lease terms?

The latest shared ownership model lease introduced some significant changes to the form of the lease and the report highlighted that this risked creating a two-tier market, resulting in homes delivered under earlier programmes being less attractive and harder to sell. 

The report suggested that the Government should encourage providers to voluntarily update the terms of the older leases, particularly the minimum 990-year term and ten-year repair period (if any of that period remained).

New Shared Ownership Code to address consumer experience

The Shared Ownership Council has also been particularly active in looking to ensure that consumers achieve a good experience of shared ownership and recently conducted a consultation of 1,700 consumers, lenders and housing providers. It has produced a new Shared Ownership Code which builds on the recommendations of the Ministry of Housing, Communities & Local Government and has the support of the National Housing Federation to introduce such a Code. 

The Council states that the Code aims to improve protections and consumer experience for leaseholders — ensuring that they have a clear understanding prior to purchase, during subsequent ownership and on a sale — and to ensure that best practice and consistency is adopted by providers in the information available, to improve transparency, fairness and awareness. 

A revised form of the Code is being tested by eight housing providers from December 2024 to March 2025. If it proves to be successful, the Code may also be introduced by Homes England to help combat the criticisms of shared ownership.

Talk to us

It remains to be seen which (if any) of the recommended changes included in the Ministry of Housing, Communities & Local Government’s report will be implemented and how shared ownership may evolve in the near future. Our housing team will be monitoring any changes to affordable housing schemes closely.

If you’d like support with navigating a shared ownership model lease or the Affordable Homes Programme, talk to us by sending an email to hello@brabners.com, calling 0333 004 4488 or completing the contact form below.