Does the Shared Ownership Council Code achieve what it set out to do, and is it sufficiently ambitious?
In Part One of this 2-part feature, we gave an overview of the Shared Ownership Council Code. In Part Two, we respond to the Code, by asking:
- Does the Code achieve what it set out to do?
- Is the Code sufficiently ambitious?
- What next?
Does the Code achieve what it set out to do?
The Shared Ownership Council describes the Code as: ‘a cross-industry initiative designed to standardise best practices and consumer protection for shared ownership‘. The Code aims to: ‘ensure transparency, fairness and improved support for shared owners in marketing, purchasing and management of homes’.
In this section, we explore these aspirations.
Standardisation
Shared ownership is complicated at the best of times.
“Housing Ombudsman Richard Blakeway said the “inherent complexities” of shared ownership presented challenges to landlords and residents.”
Weak standardisation can make it more challenging for prospective shared owners to understand what they’re getting into, and for current shared owners to navigate their way through making vital decisions about their home (whether and when to staircase and/or extend a short lease, how and when to sell, and so on).
At worst, standardisation can end up as a race to the bottom if housing providers prioritise their own interests over those of shared owners.
One example is L&Q’s ‘Black Friday’ promotion, with the housing provider explaining to the advertising watchdog that: “by giving consumers a two-day cooling-off period, they gave prospective buyers more protection than the industry standard”. (For context, the New Homes Quality Board (NHQB) Code requires a 14-day cooling off period. However, the NHQB Code excludes shared ownership.)
On the other hand, too much standardisation could lead to a ‘business as usual’ approach on the part of housing providers, with limited opportunity or incentives to innovate and improve.
Standardising best practice
A focus on standardising best practice is welcome. However, standardising best practices from within the social housing sector may not be sufficient to drive meaningful improvements to shared owners’ experiences of shared ownership.
Uniformly low satisfaction rates across the sector, per new Regulator of Social Housing Tenant Satisfaction Measures (TSMs), suggest that learning from outside the sector might be beneficial.
For example, in an assessment of a draft Homes England Key Information Document (KID), Shared Ownership Resources suggested a benchmarking exercise with the pensions sector and prescription medicine sector, both of which excel in providing detailed yet understandable information on complexity, risk and benefit.
The Code should be a live document seeking not only to share best practice but also to encourage and support continual improvement.
Consumer protection
Consumer protection is a wide ranging term. Broadly speaking, consumer protection aims to safeguard buyers of goods and services from unfair practices, fraud and misleading information.
It might seem odd to use the word ‘consumer’ in relation to ‘affordable homes’ (or, indeed, any homes). Shared Ownership Resources has concerns about such terminology, particularly as it interacts with a prevailing ‘caveat emptor’ culture. Nonetheless, shared ownership homes are delivered via leasehold contracts, as a housing ‘product’. And, consequently, there are some important (albeit limited) rights and protections under consumer protection guidance and legislation, which this Code conveniently collates in one document.
Fairness and transparency
The Shared Ownership: the consumer perspective report explains that whether or not shared ownership is ‘fair’ is important for two reasons:
- Government claims ‘fairness’ as one of the qualities of the scheme
- The Digital Markets, Competition and Consumers Act 2024 (which replaces the Consumer Protection from Unfair Trading Regulations 2008) prohibits unfair commercial practices
The report pointed out that, in practice, the cross-subsidy development model creates conflicts of interest between shared owners and government, housing providers and their agents which, at worst, can militate against the best interests of shared owners. This makes regulation, and meaningful routes to redress, critically important for shared owners.
Is the Code sufficiently ambitious?
Standardisation and best practice
Service charges
Under the Code housing providers must adhere to the principles and overarching themes of the GLA Service Charges Charter:
- Transparency – ensuring leaseholders are provided with the information they need to understand their service charges
- Affordability – ensuring that the affordability of service charges is a key consideration when setting or reviewing service charges
- Design – encouraging design approaches for new build developments that minimise service charges while ensuring high-quality design
- Challenge and redress – ensuring that leaseholders are aware of how to challenge their service charges and the routes to redress that are available to them
This requirement is welcome. However, it also raises questions about enforcement. Respondents to a London Assembly Housing Committee survey on leasehold charges told the committee that, while they support the Service Charges Charter, it needs “more teeth”. However, Deputy Mayor Tom Copley told the Committee that, although the Charter was about “driving best practice”, it was difficult to see how the GLA could, as a non-Regulator, give it teeth in reality.
As a Regulator, the Housing Ombudsman cannot consider: ‘whether someone is paying too much in rent or service charges or reasonableness of a charge‘. Shared owners can take complaints to the First-Tier Tribunal (Property) but there are substantial costs and risks associated with this route to redress.
In the absence of meaningful routes to challenge and redress, the requirements relating to affordability inevitably carry less weight. (This is not a problem that can be solved within the Code).
Defects and repairs
Currently, the defects period for shared ownership properties can commence on the date a developer hands over those properties to a housing provider, rather than the date the shared owner completes their purchase and moves in.
The requirement that the defects period must last for 12 months from when the shared owner buys their home, with an aspiration to increase the defects period to 24 months, is welcome.
Lease extensions
The Code offers three options for lease extension:
- Charging a nil premium
- Charging a premium which reflects the shared owner’s % share (not the total market value)
- Classifying the lease extension as an ‘improvement’, with subsequent staircasing valuations being based on the market value had lease extension not been undertaken
New model shared ownership leases provide a 990-year term, so this particular requirement applies to previous versions of the model lease.
Elsewhere, Shared Ownership Resources has argued that: ‘Government, Homes England, the Greater London Authority and housing associations should consider options to fund lease extension to at least 250-years at an affordable flat fee for all shared owners whose lease term was originally 125-years or less‘. It is therefore welcome that the Code includes a nil premium option.
It is problematic and unfair that whilst some housing providers calculate lease extension premiums based on the value of the shared owner’s share, others use the total market value. The third option offered by the Code allows a lease extension premium based on total market value, with the proviso that it is classified as an ‘improvement’. But this offers no benefit to shared owners who do not go on to purchase further shares in their home.
Subletting
The Code requires that housing providers must take a flexible and supportive approach to subletting requests, particularly where shared owners are facing increased costs due to building safety issues.
The Code is perhaps constrained by Homes England and GLA guidance on subletting. However, Shared Ownership Resources is aware of instances where it’s hard to describe housing association practice as anything other than needlessly obstructive when it comes to, for example, career development, family circumstances and maternity leave.
It is to be hoped that Homes England and the GLA will review and improve their own guidance to allow shared owners the same right to sublet (perhaps subject to an initial period of residence) that is available to any other home owner.
Fairness, transparency and consumer protection
Marketing and promotion
The 2023 report, Shared Ownership: the consumer perspective, made a total of 19 recommendations, including a recommendation for an enforceable Code of Practice for marketing and promotion.
‘Government, Homes England, the GLA, the CMA, the ASA and CAP should support an independent review into shared ownership marketing, consult on options to prevent mis-selling and deliver an enforceable Code of Practice for shared ownership marketing and promotion.‘
Whilst the Shared Ownership Code is voluntary, it makes the point that housing providers are bound by the advertising watchdog’s UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code).
Until recently, the Advertising Standards Authority (ASA) appeared oblivious to claims of misleading advertising by shared owners, some of whom felt that they had been mis-sold their homes.
However, the advertising watchdog has been more responsive in recent years, upholding four complaints about shared ownership marketing and promotions (including two from Shared Ownership Resources) and publishing updated guidance.
Undoubtedly, the social housing sector response to ASA rulings has been disappointing to date.
However, a robust working relationship between those managing complaints about failures to adhere to the Shared Ownership Code and the advertising watchdog could help drive up standards and eliminate misleading ads and promotions.
New Build Homes
Things are a little more complicated when it comes to new build homes. There are three main Codes for new homes (all referenced in the Shared Ownership Code):
As HomeOwners Alliance point out: ‘the lack of a single, mandatory Code for homebuyers, including shared owners, can create confusion‘.
The Shared Ownership Code requires compliance with the fundamental principles of the New Homes Quality Code. Under the NHQC Code, homebuyers can refer complaints to the independent New Homes Ombudsman Service (NHOS). But this option isn’t available to shared owners. They are required to make their complaints to the Housing Ombudsman. Who doesn’t operate a new build Code!
(Given that regulation and enforcement appear to be critical to any Code having ‘teeth’, there seem to be three potential options. First, incorporation of shared ownership into the NHQC and New Homes Ombudsman Service. Second, a reciprocal arrangement between the New Homes Ombudsman Service and the Housing Ombudsman. Third, and perhaps the preferable option, that government appoint a statutory New Homes Ombudsman and ensure that shared ownership isn’t excluded from the scheme.)
Pre-contract information
The Code requires a new Service Charge Information Document (SCID) for new and resale shared ownership homes, to include:
- Illustrative scenarios for service charge increases
- Block ownership, management and arrangement for the provision of services
- Initial service charges and details of any planned changes
The London Assembly Housing Committee’s report, following an investigation into leasehold charges, makes a similar recommendation.
‘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.’
What next?
Having developed the Code, the Shared Ownership Council is currently underway with the process to appoint a body to operate it. Whoever is appointed will be responsible for: ‘running and implementing the Code, supporting its continued development, and helping to maintain high standards across the sector’.
Some shared owners have expressed doubt that a voluntary Code will have any meaningful impact. There is concern that it will simply become a tick-box marketing exercise, aimed at increasing demand for shared ownership but insufficient to resolve the problems shared owners face down the line.
Much will depend on exactly who is appointed to operate the Code, whether the focus is predominantly on the best interests of housing providers or shared owners, and on the role of Regulators when it comes to compliance with the requirements of the Code and appropriate action and redress in the event of non-compliance.
Featured photo: Freepik
Additional Resources
Shared Ownership Resources – Shared Ownership Council Code: Explainer
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