Is shared ownership a better financial option than staying in the private rented sector? A recent report, commissioned by Leeds Building Society, claims to provide evidence that it is. However, a flawed service charge assumption suggests that caution should be exercised in placing over-reliance on this claim.
To: Andrew Greenwood, Deputy Chief Executive, Leeds Building Society
Date: 30 June 2025
Dear Andrew Greenwood,
I am writing to draw your attention to concerns regarding a report commissioned by Leeds Building Society, Taking the Longer View: Shared ownership, costs and opportunities – an independent assessment.
Is shared ownership a better financial option than the private rented sector?
In your foreword to Taking the Longer View, you describe the report as: “A thorough and objective study which explores an important question: When is shared ownership a better financial option than staying in the private rented sector?”
This is a vital question given the private rented sector is a key driver for entrants to the shared ownership scheme.
The report asserts that: ‘Even when using conservative assumptions, the findings are clear and provide unambiguous evidence of shared ownership’s contribution to extending home ownership to more people’.
There are three key findings:
- Shared ownership forecast to cost less than renting in 93% of areas after 10 years
- Shared owners to benefit from 10 year equity growth of up to £42,000
- Extends home ownership to low and medium income
The authors state that their report provides: ‘proof of the relative merits of shared ownership compared to private renting, based on conservative estimates (sic) and irrespective of whether or not owners have undertaken any staircasing’.
But is shared ownership really cheaper than the private rented sector, and is likely equity growth as high as claimed?
Does Taking the Longer View provide ‘unambiguous evidence’ that SO is cheaper than the PRS?
The report’s conclusions regarding affordability – in comparison to the private rented sector – rely on an assumption that initial service charge is typically 0.25% of the market value of the property. The basis for this assumption isn’t specified.
‘Information on service charge has been hard to obtain. While we are aware that service charges often do not apply to houses and vary a lot across flats, with potentially significant charges in place for some high-rise properties, we have adopted a blanket approach. We test a range of different values between 0.25% and 1.0%. Our default value is 0.25%. We assume the service charge inflates by CPI+1% each year.’
However, sales listings suggest a different picture. A ‘quick and dirty’ review of 13,567 Share to Buy sales listings in May 2025 raises doubt that the 0.25% assumption holds true in practice. Additionally, as reported in Inside Housing, shared owners in one-bedroom homes could be particularly susceptible to high service charges.
‘At the time of the review, 1-bedroom homes accounted for just over one-fifth of Share to Buy listings (2,955 homes). Average service charges for 1-bedroom apartments (new-builds and resales) were over 0.25% in all English regions. And they were 1% or above in just under one-third of regions. Moreover, new-build houses may not be exempt from service charge problems, as is sometimes assumed, given sales listings showing average annual service charges at 0.5% or higher in 50% of regions.
‘For context, the authors of Taking the Longer View found that with a 1% service charge assumption the number of local authorities where shared ownership is cheaper than renting drops to only 34 (12%). And with a service charge assumption of 0.5% the number of local authorities is still only 87 (30%).’
Shared ownership: do high service charges undermine the affordability promise?
The authors’ sensitivity analysis demonstrates that the affordability of shared ownership, relative to private renting, drops significantly as service charges increase. So the finding that service charges on one-bedroom properties could be closer to 1% than 0.25% in around one-third of regions, raises important questions about the degree to which Taking the Longer View actually provides reliable evidence that shared ownership is cheaper than the PRS to the degree suggested.
Does Taking the Longer View provide unambiguous evidence regarding rates of equity growth?
Similar concerns about differences between working assumptions and real-life experiences arise with regard to assertions about asset accumulation. Undoubtedly, some – perhaps many – shared owners will make a gain on sale of their interest in a shared ownership home.
However, the report fails to adjust estimated equity gains for unavoidable costs of sale (conveyancing fees, disbursements, housing association’s legal fees, valuation fee(s), EPC, housing association marketing fees, and assignment fees or estate agent fees). Thereby making precise comparisons with potential gains in a savings account less meaningful.
Given that anyone selling a shared ownership home is liable for 100% of selling costs, regardless of the size of their equity share, such costs could eat disproportionately into any gain – perhaps particularly for one-bedroom homes or where the shared owner has only a small share.
And, coming back to the point about service charges frequently exceeding the 0.25% assumption specified in this report, some shared owners report difficulties selling at all due to high service charges making the property unattractive to mortgage lenders.
Why does this matter?
As stated in the Taking the Longer View report: ‘informed, evidence-led conversations lead to better decisions – for buyers, lenders, policy makers and everyone involved’.
Informed decision-making is particularly important for prospective shared owners given a prevailing ‘caveat emptor’ culture if gaps between expectations and lived experience arise post-purchase. It is vital that shared owners can place reliance on the professionals they engage, including mortgage intermediaries.
It is therefore of concern that Leeds Building Society is promoting the findings of the report as ‘significant evidence of the benefits of buying a shared ownership home compared to renting privately’ to mortgage intermediaries. Quite possibly, this would constitute unhelpful or worse, misleading, advice – perhaps particularly in the case of prospective shared owners considering a one-bedroom property.
All in all, there is a clear need for further research into both initial and longitudinal costs for different demographics: (a) to ensure that the shared ownership model offers meaningful affordability and value for money, and (b) to avoid misleading marketing claims.
I hope this is of interest, and look forward to your response.
(One of the aims of the Shared Ownership Resources project is to provide greater transparency on complex issues to assist shared owners and prospective shared owners in making informed decisions. I will therefore publish your response as and when it is received.)
Kind regards,
Sue Phillips
Founder
Shared Ownership Resources
UPDATE 7 August 2025
The Leeds Building Society responded saying: “We share your commitment to improving outcomes for shared owners and believe there’s real value in continuing the conversation, to work towards common goals”.
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