HCLG Committee: affordability of home ownership

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Shared Ownership Resources written evidence is provided below.

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This written evidence responds to questions 1 and 10.

1. What are the main barriers first time buyers face to owning their own homes, particularly those on lower incomes? (Q1)

1.1. Barriers to home ownership: access

1.1.1. Undoubtedly, one of the barriers to people owning their own homes is the affordability of a mortgage deposit. Other costs of purchase, including Stamp Duty Land Tax (SDLT), also play a role in determining whether or not access to home ownership is affordable.

1.1.2. However, access is not the end of the story for entrants to the ‘shared ownership’ scheme.

1.2. The difficulties of defining home ownership in a shared ownership context

1.2.1. The barriers first time buyers face to owning their own homes are more complicated in a ‘shared ownership’ context. Answers depend on whether it is more accurate to say that ‘home ownership’ arises on purchasing a share, or on staircasing to 100%

1.2.2. This written evidence takes the approach that ‘home ownership’ in this inquiry means full home ownership.

1.2.3. This is a common sense approach as ‘shared ownership’ is often described as a transitional tenure or as a stepping stone to full home ownership. It also reflects a legal actuality that current legislation provides ‘shared owners’ – as assured tenants or assured shorthold tenants – with fewer rights and protections than leaseholders more generally; rights and protections that they acquire on staircasing to 100%.

1.3 Partial permanent home ownership

1.3.1. Some suggest that ‘shared ownership’ can play a useful role as a form of ‘permanent partial home ownership’. Others view the term ‘permanent partial home ownership’ as an oxymoron.

“On the one hand, they say: “It’s your property so you have to pay for everything”. But, on the other hand, I need permission to do anything, so it’s not really my property.” (My SO Home: No. 26)[1]

2. Do existing routes to affordable home ownership such as Shared Ownership, provide genuinely affordable routes to owning homes, and how could they be improved in the new Social and Affordable Homes Programme? (Q10)

2.1. Barriers to full home ownership: is the staircasing pathway a genuinely affordable route to owning a home?

2.1.1. In evidence to the London Assembly Housing Committee in 2020, Dr Alison Wallace, Emeritus Professor, said:

“The issue of staircasing is hugely important, and one of the reasons it is really important is the sales material … the promise of full ownership hangs over the purchase”.

2.1.2. How many ‘shared owners’ achieve full home ownership via staircasing to 100%? There is a widespread consensus that the numbers are low.

‘The vast majority of shared ownership leaseholders will never staircase to 100%.’ (Law Commission, 2020)^[2]

2.1.3. There are a number of factors that interact to make it challenging for many ‘shared ownership’ households to staircase to 100%. These include: the current market value staircasing model, costs associated with staircasing, and challenges to saving for staircasing if housing costs (rent, service charges, and estate service charges (if applicable)) rise faster than household incomes.

2.1.4. A key barrier to full ownership via 100% staircasing is that property prices tend to rise faster than wages. Matthew Bailes, Chief Executive of Paradigm Housing Group, has put forward some suggestions in this regard:

‘This problem could be addressed if shared owners were allowed to buy additional shares at a more affordable price. This could be the day one price, or a price linked to inflation or earnings growth.’ ^[3]

2.1.5. It is also possible that the costs associated with staircasing transactions create a barrier for some households. These include: RICS valuation, mortgage arrangement fees, Stamp Duty Land Tax (SDLT) on transactions which leave the occupier owning 80% or more of the equity in their home (assuming a full market value election was not made at the point of purchase), legal fees and disbursements, administration charges and any additional fees required ((for example, to rectify legal defects via a Deed of Variation in order to obtain a mortgage). Whereas people purchasing homes on the open market pay such costs only once (and are not required to pay for a RICS valuation), ‘shared owners’ encounter the same costs each and every time they staircase (excepting the 1% staircasing model).

2.1.6. Florence Eshalomi, Chair of the Housing, Communities and Local Government (HCLG) Committee poses the question: “How can you be expected to save up for a mortgage when more and more of your income is going on rent?” This question could apply as much to ‘shared ownership’ as it does to the private rental sector (PRS).

“No one explained how much our rent could increase over time.” (My SO Home: No. 27)^[4]

2.1.7. The relationship between initial rent and sales price is possibly problematic. Initial rent is set as a percentage of the sales price, creating a perverse incentive for housing providers to sell ‘shared ownership’ homes at prices that are higher rather than lower. Shared Ownership Resources has seen correspondence from a RICS chartered surveyors firm to a housing provider advising them to try values described as ‘testing the market’.

2.1.8. High service charges, and high estate service charges (if applicable), also create barriers to achieving full home ownership by making it harder for people to save.

“Staircasing was never really on the cards. The property value went up 
so quickly as did the service charge; 
I would have had to be earning a significant amount more than I was to afford staircasing”.^[5]

2.1.9. Measures to help ensure that service charges don’t act as a barrier to staircasing and/or contribute to increased unaffordability include: designing down costs, competency in drafting head leases and ‘shared ownership’ leases in complex ownership arrangements, and improved transparency in marketing and information materials prior to sale.

2.1.10. Transparency on estimated future service charges is vital to allow potential entrants to make informed decisions as to whether ‘shared ownership’ is likely to offer an affordable route to full home ownership, and to support them in planning a pathway towards their desired goals.

2.1.11. However, enforceability of best practice is an ongoing issue. In evidence to the London Assembly Housing Committee, Deputy Mayor Tom Copley, said:

“The Service Charges Charter is about driving best practice. It is very difficult for us, because we are not a regulator, to be able to actually enforce it… That is why transparency is so important. It is difficult to see how we could, as a non-regulator, give it teeth in reality. We are not really set up to do that.”^[6]

2.1.12. The Shared Ownership Council’s new Code includes a requirement for a Service Charge Information Document (SCID) with information on block ownership, management and arrangements for the provision of services; initial service charges and details of any planned changes; and illustrative scenarios for service charge increases.^[7]

2.1.13. In their “Worry and stress”: life as a leaseholder in London report the London Assembly Housing Committee made a recommendation that:

‘The GLA should amend the Service Charges Charter to state that potential buyers should be provided with estimated service charge and rental increases, by raw numbers and by percentage increase, for each of the first 10 years of ownership. The example Key Information Document for shared owners at point of purchase should be updated to reflect this. This should be done by the end of 2025.’

2.1.14. However, it is vital that service charges are not underestimated, providing false reassurance to potential entrants to the scheme. This is particularly important given that the Housing Ombudsman cannot consider: ‘whether someone is paying too much in rent or service charges or reasonableness of a charge‘.^[8]

2.1.15. Do housing providers, their agents and partners underestimate service charges? In evidence to the London Assembly Housing Committee’s inquiry into service charges in London, Deputy Mayor Tom Copley expressed some concerns:^[9]

“There is a drive certainly to keep the level of service charges down at the beginning, because, of course that makes properties more attractive to sell. That is the sort of thing that needs to be pushed out of the system.”

2.1.16. In addition to requiring transparency on estimated service charges, it would also be beneficial to require information on staircasing statistics and tenant satisfaction measures to be published in all marketing and information materials – online and hard copy content. The Competition and Marketing Authority (CMA) requires banks and building societies to display satisfaction survey results prominently both online and in-branch, so their customers can see how their bank is faring – and consider whether they could get a better experience elsewhere. Why shouldn’t the same apply to marketing of ‘shared ownership’ homes?

2.1.17. Complex ownership structures can result in high service charges or poor value for money for ‘shared owners’. It is vital that head leases and ‘shared ownership’ leases are drafted and scrutinised with a high degree of professional competence, to avoid flaws that are difficult to resolve retrospectively.

2.2. Barriers to ‘full home ownership’: is the gain on sale pathway a genuinely affordable route to owning a home?

2.2.1. A Parliamentary report (Cromarty, 2021) identifies some issues with resales.[10]

‘The process for selling a shared ownership property is not straightforward.’

2.2.2. It seems probable that ‘shared owners’ face greater hurdles than homeowners more generally in making sufficient gain on sale to enable transition to full ownership in a subsequent property. Factors to consider include: new-build premiums, overvaluation of initial shares, property market movements, full liability for the costs of sale, bearing the full impact of price reductions, short leases, high service charges, weak advice on liability for Stamp Duty Land Tax (SDLT), weak market demand and sales risk.

2.2.3. If the initial share was overvalued,^[11] it will be more challenging to achieve a gain on sale.

“The usual market mechanisms which help regulate property prices may not work as well in the case of shared ownership. Because the market is made up of buyers purchasing part shares, differences in value may have less effect than in the wider property market. For example, someone buying a 25% share in a flat worth £400,000 might be tempted to pay £20,000 extra. But in the open market buyers might never pay £480,000 for that property.“

2.2.4. If ‘shared owners’ are selling a small share (perhaps 10%), the associated costs may substantially erode any gain on sale.

2.2.5. If a ‘shared owner’ can only find a buyer at a lower price than the RICS valuation they may be required to take on the full shortfall, not just on the percentage share they hold. Homes England has amended its guidance^[12] to encourage housing providers to avoid ‘significant financial detriment’ to ‘shared owners’. However, this guidance applies only to homes that have been grant funded by the agency, and is not mandatory.

2.2.6. The new model lease offers a 990-year term. However, many ‘shared owners’ purchased their home under previous iterations of the model lease, which specified a 99-year term. As lease terms run down, this can result in challenges to making a gain on sale.

“I bought a 50% share in 2008. Lease length was 79 years at the time and both the HA and solicitor failed to
advise me the implications of buying with a lease below 80 years. It was only when I sold it that the issue arose as 
my buyers couldn’t get a mortgage. It cost me £12,800 for the lease premium to add 90 years. I also had to pay: £600 survey costs, £950 for the HA’s solicitor and a £350 permission fee to the HA to extend, plus my own legal fees. It was
 a horrendous process. I lost best part
 of £17k in all to extend the lease and walked away with less for my share than I’d paid.” ^[13]

2.2.7. High service charges can create a barrier to the gain on sale pathway to full home ownership. Andrew Bulmer, CEO of the Property Institute (a membership body for managing agents), explained the problem to the London Assembly Housing Committee in February 2025.^[14]

“As the service charges go up, we are already seeing some mortgage lenders now declining mortgages on some flats where service charges are perceived to be high.”

2.2.8. Some ‘shared owners’ are being incorrectly advised by their solicitors to pay Stamp Duty Land Tax (SDLT) on simultaneous sale and staircasing transactions, despite the fact they can claim ‘sub-sale relief’, in some cases resulting in unnecessary costs when selling.^[15]

2.2.9. It may be more challenging to sell larger shares. The larger the share
, the less affordable it will be 
for prospective buyers meeting Homes England’s eligibility criteria. Or potential buyers may find purchase of a home on the open market more appealing than, say, purchase of an 75% share.

2.3. What if ‘shared ownership’ doesn’t provide a genuinely affordable route to owning a home or, even, becomes increasingly unaffordable for some households?

2.3.1. There is an urgent need for independent, robust data and research on long-term outcomes – for ‘shared owners’ – to better understand value-for-money and opportunity costs (on a full life cycle cost basis), the demographics for whom ‘shared ownership’ is most likely to have good outcomes as an affordable route to full homeownership, and those for whom it is most likely to have adverse outcomes.

2.3.2. There is an equally urgent need for viable exit routes, a topic explored by the LUHC Committee in their 2024 inquiry into ‘shared ownership’.^[16]

2.4. A joined up approach

2.4.1. The ‘shared ownership’ landscape is increasingly complex, and correspondingly challenging for entrants to the scheme to navigate. Yet there are significant gaps in regulation and enforcement to protect ‘shared owners’ as consumers. Any reforms to Homes England’s Affordable Homes Programme should be extended to ‘shared ownership’ homes delivered via other funding and development mechanisms, and be delivered alongside effective and enforceable regulation.

[1] https://www.sharedownershipresources.org/my_so_home/no-26/

[2] Law Commission (2020) Leasehold home ownership: buying your freehold or extending your lease. Ref: ISBN 978-1-5286- 2061-1, HC 584 2020-21.

[3] https://www.insidehousing.co.uk/comment/is-shared-ownership-worth-reforming-84804

[4] https://www.sharedownershipresources.org/my_so_home/no-27-retire/

[5] https://www.sharedownershipresources.org/my_so_home/no-11-moat-homes/

[6] https://www.london.gov.uk/who-we-are/what-london-assembly-does/london-assembly-work/london-assembly-publications/worry-and-stress-life-leaseholder-london

[7] https://www.sharedownershipcouncil.org.uk/shared-ownership-code

[8] https://www.housing-ombudsman.org.uk/centre-for-learning/fact-sheets/charges/

[9] https://www.london.gov.uk/who-we-are/what-london-assembly-does/london-assembly-work/london-assembly-publications/worry-and-stress-life-leaseholder-london

[10] https://commonslibrary.parliament.uk/ research-briefings/cbp-8828/

[11] https://www.sharedownershipresources.org/need-to-know/valuations/shared-ownership-valuation-buying-selling/

[12] https://www.gov.uk/guidance/capital-funding-guide/1-shared-ownership

[13] https://www.sharedownershipresources.org/campaigning/reports/what-do-shared-owners-want-part-3/

[14] https://www.london.gov.uk/about-us/londonassembly/meetings/documents/b30552/Minutes%20Appendix%201%20Housing%20Committee%20Transcript%20February%202025%20Wednesday%2026-Feb-2025%2014.00%20Housing%20.pdf?T=9

[15] https://www.sharedownershipresources.org/an-expert-on/stamp-duty-selling/

[16] https://committees.parliament.uk/work/7833/shared-ownership/publications/