The Government want to make shared ownership a mainstream tenure. All tenants in new housing association properties will have the right to shared ownership of their home. ( https://commonslibrary.parliament.uk/research-briefings/cbp-8828/) There are approximately 157,000 households in shared ownership homes in England. The Government want to make shared ownership the fourth tenure.
This product is marketed as home ownership and often cheaper than full ownership or private renting. Shared owners acquire a minimum stake of 25 % interest in a property usually with the help of a mortgage and pay rent to the provider on the remaining share that they do not own. As their income rises, they can increase their share to 100%.
The legal reality is different. The shared ownership product is not based on statute law. It is complicated. In Midland Heart v Richardson in 2007 a Court held that a shared owner could be evicted on ground 8 due to rent arrears and unfairly lost all the equity that she had built up in the property. Ms Richardson was in fact an assured tenant with a long tenancy. The Court of Appeal in Ker v Optima Community Housing Association agreed with this legal analysis in 2013.
If a shared owner dies, the family relative who inherits cannot sub-let their property. The property must be sold to another person who qualifies for shared ownership. Shared ownership leases must run for at least 99 years. The scheme started in 1980’s. Some leases are now running out below the level at which mortgages can be obtained. If the shared owner does nothing when their lease expires, they become an ordinary assured tenant.
Shared owners must pay ground rent and services charges irrespective of the size of their interest. Permission fees are required to extend the lease, make improvements and to exercise the stair-case option. They are liable for repairs and may also be liable for expensive fire safety works. They are not allowed to keep pets and appear to be prevented of running a business from their home.
Any shared owner who wishes to reduce their interest in the property due to a change in economic circumstances will have no legal right to do so. This is purely at the discretion of the freeholder. They will be eligible to apply for housing benefit on their rent. Universal credit will only offer a loan after a waiting period towards any mortgage costs.
Housing lawyer Giles Peaker has described cases where the housing association has a sublease and are dependent on the freeholder to do the repairs to the communal parts. For more problems about shared ownership see https://www.leaseholdknowledge.com/shared-ownership-a-misnomer-that-can-be-worse-than-renting-and-worse-than-leasehold-says-solicitor/
In 2019 the Advertising Standards Authority upheld a complaint about a Genesis advertising claim that stated, “I own a 2 bedroomed apartment and pay less per month than my friends pay to rent a room in a flatshare!”.
The Government’s video appears on many housing association websites.
In the author’s opinion it does not comply with the Authority’s rules. It does not explain that a shared owner is in fact an assured tenant with a long lease. The disadvantages of shared ownership are ignored. It is contrary to the requirements of consumer legislation not to mislead consumers. The advert is not fully transparent. No evidence is produced to support a claim that monthly costs could be lower than full renting or private renting.
The Authority has been asked to investigate this video for non-compliance with paragraph 3 of the non-broadcast code. They Authority is not taking complaints by letter and require a screen shot of any relevant advert. They can be contacted on 020-7492-2222 for guidance on how to make a complaint. Any member of the public can complain. Complaints about adverts from the Home Office and the Department of Work and Pensions have been upheld by the Authority.
Shared ownership is very profitable. According to Savills, shared ownership sales have added a total of £5.9 billion to housing association turnover since 2016. Private firms such as Heylo who have the largest allocation in the current Government programme of £64 million, are now eligible to provide shared ownership.
The Greater London Assembly Housing Committee has met with shared owners in London. An inquiry was held. All-party representation was made to the Mayor for more help for shared owners. Local councils could follow this example.
Shared ownership does not appear to be very affordable. Owners must increase their share in a rising market. The scheme favours those with access to capital as there are no limits on the amount of capital, they can supply to support their application. Camden council in London have stopped doing shared ownership in their borough. The price of property is too expensive in North London.
Shared ownership would make an ideal issue for a parliamentary select committee inquiry. What are the views of shared owners themselves? Are the profits from shared ownership in fact recycled to provide extra homes for social renting? Is this at the expense of shared owners? How affordable is the product? Is the Government’s policy feasible? Will housing associations sign up to the proposed expansion if their development programmes are threatened by tenants wishing to exercise their shared ownership rights? Shared Ownership providers need to explain to Members of Parliament why the product they are providing differs from the facts.