Following an investigation into leasehold charges and their impact on Londoners (including shared owners), the London Assembly Housing Committee has published a report – “Worry and stress”: life as a leaseholder in London (June 2025).
This two-part feature takes a look at the report – particularly as it relates to shared ownership.
“I’ve met shared owners, initially overjoyed at finally being able to afford their own home, instead faced with unregulated service charges undermining the very idea of affordability this model was meant to deliver.
“A truly affordable housing system isn’t just about the price of a home – it’s about the total cost of living in it.“
Sem Moema, Assembly Member and Chair of the Housing Committee 2024-25
To start off with, we look at some key aspects of the Housing Committee’s report. In Part Two, we assess whether anything is missing from the report, and ask what would be required to implement the recommendations.
The Housing Committee’s investigation
The Committee carried out a survey of 912 Londoners and Invited campaigners, GLA representatives, consumer bodies and housing and property professionals to give evidence. Additionally, it asked whether rising service charges could lead to ‘affordable’ shared ownership homes becoming unaffordable.
Shared Ownership Resources founder, Sue Phillips, gave evidence to the Committee in December 2024, alongside Martin Boyd (Chair, Leasehold Advisory Service; and Chair of Trustees, Leasehold Knowledge Partnership), Harry Scoffin (Free Leaseholders), and Suz Muna (Social Housing Action Campaign).
Who do high leasehold costs affect?
There are 3.8 million homes in London. Around 2 million are either leasehold homes or social homes, including 52,000 shared ownership homes.
The Committee found that: ‘For many Londoners, their leasehold home is a source of complex problems and deep financial stress’. Their report focuses largely on service charges as this emerged as a key theme during their investigation.
Leasehold and service charges: key issues
The Committee identified three key areas of concern in London:
- High service charge costs
- Weak transparency / services delivered badly or not at all
- Claims of ‘fraudulent’ charges
High service charges
A number of respondents to their survey flagged concerns about high service charges.
192 of 912 (21%) survey respondents were shared owners, with an estimated average service charge of £3,600 per year. This is slightly lower than the overall average of £3,912. But the estimated average ground rent paid by shared owners was £391 per year – 42% higher than the overall estimated average of £275 per year.
Reasons given for high leasehold service charges included: VAT changes, increases in the cost of buildings insurance, the Building Safety Act, labour and material shortages, utility price rises, the war in Ukraine and the impact on energy.
However, Fiona Fletcher-Smith, Chief Executive of L&Q and Chair of the G15, acknowledged that: “None of us in my sector have been good enough at explaining that to residents”.
Weak transparency and low service standards
Everyone providing evidence on behalf of freeholders or managing agents agreed that transparency of leases and service charges is important. Yet, overwhelmingly, survey respondents told the Committee that charges were not transparent. Some reported bills for work carried out to a poor standard, or not done at all.
Fraud: ‘cock-up’ or conspiracy?
Some people claimed that inaccurate or unreasonable charges were intentional, and fraudulent. But representatives of freeholders said this happened by accident.
The Committee questioned Fiona Fletcher-Smith about examples of seemingly fraudulent service charges. For example, being charged for a lift when there was no lift. Her response – this was: “usually cock-up rather than conspiracy”. She explained that housing associations merging or unfit technology often caused these issues (appearing to confirm Martin Boyd’s claim of incompetence in the social housing sector).
Reassuringly, the Committee’s view was that: “We do not think that London’s leaseholders should be footing the bill for ‘cock ups’, errors or inadequate IT systems”.
Shared ownership: affordable home ownership gone wrong?
Shared owners reported similar issues to other survey respondents: service charges and affordability.
“A lot of people would say that the problems that shared owners face are the same problems that leaseholders face more generally. The problem with that argument is that shared owners come into the scheme on the promise that it is an affordable homes scheme and that it is a pathway to full home ownership.”
Sue Phillips, Founder, Shared Ownership Resources
The Committee were concerned that service charges can undermine the very point of shared ownership – that it is meant to be affordable housing.
Affordability testing
According to the London Plan 2021: ‘For dwellings to be considered affordable, annual housing costs (including mortgage, rent and service charge) should be no greater than 40% of net annual income‘.
Shared owners have to undertake an affordability assessment prior to purchasing a shared ownership home. However, it can be difficult to know how costs might increase, and this isn’t just because the future is inevitably uncertain.
Deputy Mayor, Tom Copley, told the Committee: “There is a drive certainly to keep the level of service charges down at the beginning because, of course, that makes the properties more attractive to sell. That is the sort of thing that needs to be pushed out of the system.”
“What is the point of affordability testing? I had to pass an affordability test with the housing association initially to see if I could afford to pay for the share of the flat and the associated costs, but now nobody cares if I can still afford it.”
Why does shared ownership become unaffordable?
Shared owners must buy the maximum initial share they can afford. However, this can lead to problems if housing costs rise faster than household incomes.
“Rents increase faster than inflation. There is a lot of evidence that service charges do rise faster than inflation. Household incomes tend not to increase as much. The logic of that is that people are probably going to end up paying more than 40% of their net income in their total housing costs”.
Sue Phillips, Founder, Shared Ownership Resources
Some shared owners will be able to absorb cost increases more easily than others. But a lack of data means no-one knows how many shared owners end up paying more than 40% of their net income in housing costs.
“The other point I want to make about that is that you have a really wide range of households coming into shared ownership. You have the £90,000 – in London – upper income threshold. If someone is coming in as an individual with a £90,000 salary, to a lot of people, that looks like somebody fairly affluent. You have the question not just of what percentage of their incomes is being spent on housing costs, but what is their residual income? How much do they have left after their housing costs for their basic needs?
“There is going to be a really wide range of households within the shared ownership scheme, some of whom may have quite a lot of income left after housing costs. People at the lower end, the people at whom probably it is really targeted, the people who were most in need of a secure, affordable home, may actually be the people who have the least residual income left.”
Sue Phillips, Founder, Shared Ownership Resources
Without reliable, detailed data, it is hard to know who the product is working for and who it is failing.
Selling shared ownership homes
High service charges can also create problems for selling homes.
“If you come into it expecting it to be affordable and then within two, three or five years suddenly it is not affordable and possibly, even though you cannot afford the costs, you may find that you do not have a viable exit route because it may be that those high service charges and other costs make it difficult to sell”.
Sue Phillips, Founder, Shared Ownership Resources
Andrew Bulmer, CEO at the Property Institute (a membership body for managing agents) commented: “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 too high”.
Designing down charges
The Committee discussed ‘designing down charges’ – i.e. design to minimise service charges over the lifetime of a building. Deputy Mayor, Tom Copley, expressed concerns that where developers scrimped on costs residents ended up paying for that down the line. Something that people impacted by building safety issues will understand only too well!
Designing down charges in future developments makes sense. But, of course, it doesn’t help current leaseholders, including shared owners, facing excessive charges.
Recommendations
The Committee made nine recommendations in total.
- The Mayor should work to improve transparency in leasehold service charges in London.
- The Government should legislate to give social renters the same rights as leaseholders in terms of access to full service-charge statements and invoices.
- The GLA should work with the G15 to understand the impact that mergers and acquisitions are having on service charges.
- More Londoners should benefit from the greater transparency outlined by the Service Charges Charter.
- 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.
- By the end of 2025, the GLA should amend the Service Charges Charter to state that investment partners should track affordability of shared ownership at specific intervals, such as years one, five, and 10. The GLA should work with housing providers to ensure that they have transparent, accessible policies for supporting shared owners whose housing costs have increased over 40 per cent of net household income. The GLA should collect data on affordability of shared ownership over time and use this to inform the next iteration of the product in the coming Affordable Homes Programme (AHP).
- The GLA should conduct research on potential models for capping service charges in its new- build shared ownership.
- The Mayor should include ‘designing down service charges’ in his new London Plan.
- The Mayor should run a pilot/research project on commonhold challenges in London.
In Part Two, we assess whether anything is missing from the report, and ask what would be required to implement the recommendations.
Additional Resources
LONDON.GOV.UK – “Worry and stress”: life as a leaseholder in London
Shared Ownership Resources – “Worry and stress”: life as a leaseholder in London – Response
Be First to Comment