Shared Ownership Resources welcomes the LUHC Committee’s Shared Ownership report; in particular, the call for: “urgent and significant action to reform how shared ownership schemes currently operate”.
A significant milestone
A key aim of the Committee’s inquiry was to establish:
“Whether shared ownership is genuinely an affordable route to owning a home?”
There was a stark contrast between evidence submitted to the Committee by shared owners and evidence submitted by housing providers. Some shared owners recognised benefits to the scheme, and many providers acknowledged problems, Nonetheless, the majority of shared owners clearly felt that shared ownership had failed to live up to their expectations. Whilst the majority of providers came across as broadly in favour of the scheme.
Housing provider responses tended to emphasise short-term aspects such as demand, access, and the proverbial ‘foot on the housing ladder’. Little, if any, evidence was presented for ongoing affordability or achievement of ‘full home ownership’. A lack of data was a recurring theme.
It is therefore welcome that the LUHC Committee has clearly taken full account of the “lived experience” reported by shared owners. Including the “sudden or unexpected nature of increases in costs”, and the “real-world impact” of the scheme. In fact, the Committee has not only acknowledged problems with the scheme, but has put forward some strong recommendations for meaningful reform. In this regard, the Committee’s report represents a significant milestone.
LUHC Committee recommendations
Shared Ownership Resources is pleased to note that a number of the recommendations made in the 2023 report, Shared Ownership: the consumer perspective, align with the Committee’s own recommendations, including:
- Review of initial affordability assessments, and Homes England’s Initial Affordability and Eligibility Calculator
- Proportionate liability for the costs of repairs and maintenance
- Update the Regulator of Social Housing’s new Tenant Satisfaction Measures (TSMs) to include shared owner satisfaction with repairs and maintenance
- Ensure that shared owners have the same statutory right to lease extension as other leaseholders
- Data on simultaneous sale and staircasing transactions, to enable assessment of meaningful achievement of ‘full home ownership’ and loss of social housing stock to the open market
- Monitoring and assessment of the new Right to Shared Ownership for social housing tenants, in order to properly evaluate its role in future iterations of the Affordable Homes Programme
- Assess merits of buyback
Shared Ownership Resources is also pleased to note that the Committee has included recommendations made by the campaign group, End Our Cladding Scandal, including:
- Take action to ensure housing providers are required to buy back shares from shared owners where they are trapped and unable to sell due to building remediation issues.
Implementing the recommendations
Joined-up legal and financial advice
Buying a home is generally the most expensive purchase most people will ever make, Shared Ownership Resources therefore welcomes the Committee’s recommendation to improve the quality and accessibility of guidance. Also their proposal for better signposting to existing services such as the Leasehold Advisory Service.
“It is unacceptable that shared owners are having to make significant financial decisions without appropriate advice being readily available.”
LUHC Committee
The Leasehold Advisory Service currently offers ‘free, summary legal advice to help you decide what to do next‘. However, the shared ownership scheme is complex from a legal and a financial perspective. Shared owners, and people considering the scheme, are likely to need detailed, independent, impartial financial advice as well as legal advice. In fact, given that multiple purchase transactions are an integral feature of the shared ownership scheme, they may require such advice on a number of occasions following the initial purchase.
The MoneyHelper website currently has no content specifically on shared ownership. (Despite the fact that DLUHC signpost to Money Helper – in their Right to Shared Ownership guide for tenants – as a ‘free and impartial service to help people make informed choices about managing their money’).
The report, Shared Ownership: the consumer perspective, recommended that: government should fund a specialist, independent and impartial shared ownership website including online guides and resources, alongside an impartial, free telephone advice service. (Could this, perhaps, be delivered via a joint initiative between the Leasehold Advisory Service and MoneyHelper?)
Consumer protection and joined-up regulation
Shared ownership generally falls between the gaps when it comes to regulation. This has been partially addressed in the LUHC Committee’s inquiry, report and recommendations. But much more remains to be done.
Regulator of Social Housing
The Committee’s report noted that – according to the Regulator of Social Housing (RSH) – shared owners are responsible for ‘Keeping properties in good repair’. Consequently, RSH currently excludes shared owners from its new Tenant Satisfaction Measures (TSMs) regarding repairs and maintenance.
It is revealing that RSH initially took the stance it did. Marketing ads explicitly state that housing associations are responsible for external repairs and maintenance. This is misleading. It doesn’t make clear that they are merely responsible for organising repairs and maintenance. Shared owners bear responsibility for payment via service charges (excepting the 10-year Initial Repair Period under the new model).
The Committee’s recommendation that RSH update their TSMs to include shared owners’ satisfaction with repairs and maintenance is welcome.
Regardless, it seems odd that the RSH do not collect satisfaction data on the objectives of the shared ownership scheme:
- affordability, and
- transition to full home ownership.
Housing Ombudsman
Shared Ownership Resources welcomes the Committee’s recommendation to improve signposting to the Housing Ombudsman. Likewise, the Housing Ombudsman’s statement that there may need to be “a fundamental rethink of how shared ownership schemes operate“.
There is also a strong argument for improved collaboration between the Housing Ombudsman and the New Homes Ombudsman. Such a collaboration could help ensure that purchasers of new-build shared ownership homes have the same rights and protections as any other new-build homebuyer. Shared ownership is currently excluded from the New Homes Quality Board’s Code. Even though “industry standards” for shared ownership homes are demonstrably lower than for other new-build homes.
Advertising Standards Authority (ASA) and Competition & Markets Authority (CMA)
Per oral and written evidence submitted to the inquiry, housing providers appear to place a great deal of reliance on Homes England’s Key Information Documents (KIDs) and on conveyancing solicitors to provide material information to entrants to the shared ownership scheme.
Shared Ownership Resources has commented on these topics, in detail, elsewhere on this site.
Additionally, housing providers undertake to ‘educate’ the general public about shared ownership via marketing campaigns. However, there is a mounting body of evidence that sellers are failing to act on the spirit – if not the letter – of obligations placed upon them by the CAP Code and the Consumer Protection from Unfair Trading Regulations 2008.
Although this topic was not touched on in the Committee’s report, Shared Ownership Resources would welcome scrutiny of shared ownership marketing by the Advertising Standards Authority (ASA) and the Competition & Markets Authority (CMA).
Two-tier markets
Shared Ownership Resources welcomes the Committee’s recommendations for addressing the emergence of a two-tier market: “The Government should encourage providers to voluntarily update the terms of their ‘old’ shared ownership leases…and consider offering financial incentives for providers to do so”.
It is, however, puzzling that proposals for retrospective reform do not extend beyond the prior 2016-23 Affordable Homes Programme. Long-term shared owners are likely to be amongst those facing the most intractable problems, perhaps particularly if they are retired or rapidly approaching retirement.
Barriers to meaningful reform
There are several barriers to meaningful reform:
- Lack of data
- Advocacy
- Funding
Lack of data
The shared ownership scheme clearly delivers good outcomes for some households. On the other hand, it is disastrous for others, with the Committee referring to the “unbearable reality” described by many shared owners who responded to the call for evidence.
There is an extremely urgent need for robust national data on long-term outcomes. In the absence of such data, it is impossible to know whether the scheme works out for more people than it fails, or vice versa. Does shared ownership work best when households purchase a share in a house or a flat? In an urban area or a rural area? For young people or for older people? For households with income at the upper thresholds of £80,000-£90,000, or low-income households where a one-off cash payment (perhaps enabled by sale of a family home after a relationship breakdown, or a small inheritance) allows purchase of a share with subsequent reliance on benefits to pay rent? Does shared ownership have different outcomes in different regions (with different economic environments and property markets)?
The tragedy is that we simply don’t know. And, in the absence of granular data on long-term outcomes and impact, it is all the more challenging to target shared ownership where it will have most benefit, not to target it to households for whom it is likely to produce poor outcomes, and to take a suitably nuanced approach to reform.
Advocacy
The social housing sector benefits from influential, well-resourced bodies to pursue their best interests:
- The National Housing Federation’s remit includes creating: ‘an environment where housing associations can deliver their social purpose’.
- The G15 wants to ‘deliver more affordable homes’.
- The Chartered Institute of Housing’s mission is to: ‘support housing professionals to create a future in which everyone has a place to call home’.
Recipients of social housing, including shared owners, are implicitly at the centre of these organisations’ respective missions. Yet the debate about shared ownership often feels polarised. As discussed above, this was reflected in written and oral evidence submitted to the Committee. It is also evidenced by an increase in direct action by shared owners (and social rent tenants): for example, protests outside award ceremonies or service charge strikes.
It is to be hoped that the Committee’s report and recommendations will act as a catalyst encouraging greater awareness of the need for advocacy for shared owners’ best interests, and a joined-up approach between regulators, and other bodies, to deliver this.
Funding
The cross-subsidy development model inevitably means that implementation of the Committee’s recommendations could have problematic knock-on effects. As the G15 pointed out in their evidence to the LUHC Committee’s inquiry: “Measures that make the shared ownership product more affordable to the buyer/owner (lower rents on unsold equity, lower shares purchased, £500 towards maintenance) have a negative impact on income to the housing association, and this means there is less to invest in new affordable homes.” Adding: “We would welcome additional grants / subsidies to ensure a strong supply of new affordable homes”.
The Committee’s report and recommendations raise a great many questions…. Would the shared ownership scheme hold any attraction for developers and social housing landlords if the proposed recommendations were implemented? Will additional grant funding and/or subsidy be forthcoming to enable implementation of all, or any, of the recommendations? And how can value-for-money to the public purse best be assessed, relative to investment in other tenures?
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