Poor transparency by housing associations and consumer confusion are just two of the problems with shared ownership identified by the Government and the Greater London Authority (GLA). For example, many first time buyers are shocked to encounter unexpected shared ownership admin fees after purchasing their ‘affordable’ home.
The Conservative Manifesto 2019 included a commitment to making the shared ownership scheme fairer and more transparent. Something perhaps easier said than done! Nonetheless, CEOs of G15 – a group of London’s largest housing associations – convened a working group to respond to the Government’s 2019 manifesto pledge.
‘We will reform shared ownership, making it fairer and more transparent. We will simplify shared ownership products by setting a single standard for all housing associations, thereby ending the confusion and disparity between different schemes.‘‘https://www.conservatives.com/our-plan, 2019
Amongst other tasks, the G15 working group set about reviewing shared ownership admin fees. They were aware of a perception of unfairness around charges to shared owners, including admin fees. They were also aware of a wide disparity in charges for apparently similar activities across their member organisations. And they were, no doubt, aware of increased scrutiny of such fees by the Mayor of London and the Greater London Authority (GLA).
‘The GLA is aware that some housing providers publish a schedule of fees on their website which can help to improve transparency, however this is not consistent across the sector, and the information can be hard for prospective and current owners to find. One option to improve this would be to require all housing providers who are in receipt of GLA funding to clearly publish a schedule of additional fees related to shared ownership properties on their website, to ensure that there is transparency, and to enable prospective purchasers to compare the level of fees required from different providers to inform decisions about their purchase.’Consultation on Intermediate Housing, Greater London Authority, August 202
Admin fees should simply cover administrative costs, rather than generate a profit. But it’s actually fairly challenging to set charges at a level which covers direct costs and overheads (rent, utilities, support staff, etc) whilst avoiding either making a loss or generating a surplus. So it was intriguing to note that the G15 group set up to discuss this issue didn’t include any housing association accountants….
Regardless, it quickly became apparent that there could be any number of explanations for differing admin fees. Some housing associations might be more skilled at full cost recovery calculations. Alternatively, different fees might reflect different interpretations of a specific administrative service. For example, some housing associations charge admin fees for leasehold extension, whilst others include those fees in the premium itself. Some housing associations might charge admin fees on an individual service by service basis, whilst others might simply cover fees off in an overall generic management charge. Which might appear unfair, but the time and effort involved in apportioning costs at a detailed individual service level could actually cost more than the benefits would warrant. So a proposal to calculate G15 members’ average fees and apply them across different housing associations in the pursuit of consistency seemed likely to result in more unfairness rather than less.
Differing levels of admin fees are not necessarily a problem, so long as those fees can be clearly explained and justified. The more significant issue is that first-time buyers may be oblivious to the mere existence of admin fees for commonplace events such as remortgaging and home improvements. This could be easily rectified via sector-wide provision of up-to-date lists of admin fees in sales materials, and on housing association websites. But housing associations appear to find it challenging to collaborate on meaningful reform in the best interests of shared owners.
The National Trading Standards Estate and Letting Agency Team (NTSELAT) are currently reviewing what constitutes ‘material information’ on property portals. Here’s hoping that National Trading Standards, and other regulators, will take a stand to push housing associations to a level of transparency on admin fees (and other charges) which they have so far been reluctant to embrace.