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Shared Ownership: why we deserve far greater transparency

Glossy ads present a rosy picture of shared ownership. But some first-time buyers are discovering the reality doesn’t live up to the rhetoric. Why are shared owners demanding greater transparency from housing associations and the National Housing Federation? This article breaks down some home truths about shared ownership, and what one housing campaigner is doing about it.

Shared ownership isn’t shared and it isn’t ownership. It’s arguable to what degree it constitutes affordable housing. Yet housing associations market this complex tenure with the same degree of levity with which a company might sell, say, comic books or whoopee cushions. The National Housing Federation (Nat Fed) marketing campaign promotes shared ownership schemes with slogans including: ‘Painting every wall luminous green’ and ‘Cooking in your pants on Sundays’.

My younger self would have enjoyed the jocular tone of Nat Fed advertising. My older self thinks the campaign does home buyers a great dis-service by failing to live up to laudable claims of ‘myth busting’ and ‘explaining what shared ownership means’. Taking out a mortgage could be one of the most expensive decisions first-time buyers will ever make. And, if they get it wrong, the consequences can be catastrophic.

An advertorial published during Shared Ownership Week 2020 included a quote from first-time buyer, Laura: “I think a lot of people don’t understand it, they think there’s a catch. There isn’t.” And there’s the problem in a nutshell… It’s perhaps a moot point exactly what constitutes a ‘catch’ but there’s no shortage of possibilities.

For a start, shared owners are often surprised to discover they don’t ‘own’ their home in any meaningful sense. The ‘part buy, part rent’ slogan is widely used in promoting shared ownership. But legal experts suggest that such terminology is potentially misleading as it misrepresents the legal form of the tenure. One law firm, Walker Morris (in a 2017 article ‘Shared Ownership: Risks and Rewards for Lenders’) say: ‘It is incorrect, and therefore misleading and potentially an offence in contravention of the Consumer Protection from Unfair Trading Regulations (2008) for housing associations, landlords, developers or lenders to advertise or refer to shared ownership schemes as ‘part buy, part rent’, or indeed by using any other terminology or slogan which suggests that the customer purchases anything other than an assured tenancy leasehold interest at any time prior to the 100% staircasing stage’.

The Nat Fed campaign appears to confuse a marketing strategy (defining ‘it’s yours’ as ‘not sharing’) with the legal reality (it’s not ‘yours’ and there are therefore risks of forfeiture, possession, and loss of or reduction in equity).

Shared ownership isn’t even that good an investment. The Homes England model contract specified a minimum lease length of 99 years for flats up until 2016, and 125 years thereafter. Shared owners have been shocked to discover a need for expensive lease extensions with no benefit other than to maintain the market value of their home. And, of course, some simply can’t afford to do so, and find themselves in possession of a devaluing asset. The London Mayor recently addressed this issue by unveiling a plan to ensure all shared ownership homes built in the capital as part of the new Affordable Homes Programme are sold with a 999-year lease as standard. But this doesn’t address problems faced outside London and also by legacy owners, many stranded with an increasingly unsuitable and undesirable housing product.

It gets worse. Shared owners have no statutory right to lease extension unless they’ve staircased to 100%. I contacted Mike Shone, Homes England’s Monitoring and Reporting Manager, in 2019 to ask what percentage of shared owners achieve full staircasing. The response: ‘Unfortunately this is not something that is recorded by Homes England or the Regulator of Social Housing’. But Parliamentary Research briefing CBP-8828 reports: ‘The increasing costs of shared ownership have made it more challenging for households to progress to full ownership. Around 4,000 households staircased to 100% ownership in 2018/19, equivalent to 2.3% of all shared-equity homes owned by housing associations’.

What about much vaunted affordability claims? These appear reliant on comparison with private rental or open market purchases over a relatively short timescale. They don’t factor in whole life cycle costs such as lease extension; rents that increase annually regardless of whether average market rents are increasing, static, or even declining; and full 100% liability for service and management charges regardless of the % share purchased. (Fire safety remediation costs are too complex to go into here but are self-evidently a source of huge emotional and financial distress for affected shared owners).

Housing sector professionals appear to believe that lawyers should provide information on such issues. Wanda Goldvag, chair of the Leasehold Advisory Service (LEASE), interviewed on Radio 4’s consumer affairs programme You and Yours in January 2019 said: “lawyers have an absolute duty to explain complex clauses to people”.

But it’s hard to understand such reliance on lawyers. Research funded by the Leverhulme Trust (Exploring experiences of shared ownership, 2015) found that: ‘Modern conveyancing practice is not equipped to provide information to buyers about the specifics of shared ownership leases. […] That increases the onus on providers to provide relevant, simple and clear information to buyers’.

Shared ownership is pitched as the ‘affordable’ route into housing. Marketing rhetoric implies that ALL buyers benefit from shared ownership as a ‘step onto the housing ladder’. But this is over-simplistic and fails to recognise that the wider housing market creates both winners and losers.

Moreover, a rapidly rising property market will benefit buyers who interpret ‘a step onto the housing ladder’ as obtaining a first property as an investment generating a gain to help buy their next property, but will disadvantage buyers who interpret it as an opportunity to purchase their forever home in staircasing instalments (the original intention of the scheme per the 1979 Conservative election manifesto). And the converse is equally true.

Whilst risks and opportunities arising from property markets are clearly not restricted to first-time buyers purchasing shared ownership homes, this demographic is particularly vulnerable to financial difficulties and poor outcomes arising from inadequate information and advice.

Housing associations have a dilemma; too much transparency could compromise achievement of sales targets. It’s pragmatic to assume housing associations will continue to place emphasis on short-term benefits to shift units. And, unless there are fundamental changes to the shared ownership model, many shared owners will continue to discover that shared ownership isn’t anywhere near as affordable as those glossy ads suggest.

Could the shared ownership model be improved? Could it be made more affordable? To some degree perhaps… A sector-wide commitment to cease taking advantage of the 2019 Zucconi precedent (a discretionary change in the method for calculating leasehold extension premiums which creates a windfall for housing associations, but pushes lease extension even further out of reach for many shared owners) would help some. Widespread adoption of the London Mayor’s proposal for 999-year leases as standard would render lease extension costs obsolete (except for increasingly disadvantaged legacy owners, of course!).

But here’s the rub… housing associations’ overall funding model has historically depended in part on profits arising from shared ownership schemes (for example, the receipts from staircasing shares sold at current market value rather than original market value) to generate cross-subsidy for social rented homes. So the financial interests of individual shared owners are directly in conflict with the wider objectives of housing associations. Shared owners are discovering they are, in many respects, the benefactors of affordable housing rather than the recipients they thought they were. It’s complicated!

If I had to choose one key policy reform…? “To stop using the term affordable for housing that isn’t” (a phrase I’ve stolen from Tom Murtha). To stop using the term ‘shared’ for housing that isn’t. And to stop using the term ‘ownership’ for housing that isn’t. Though that may not happen anytime soon. First-time buyers, shared owners and leaseholders deserve better. Which is why I’ve created a Crowdfunder project to raise funds for an independent shared ownership website with comprehensive information, analysis, and signposting to sources of professional expertise and advice. The Crowdfunder ends at 2.52pm on 9th February 2021.

Click here: https://www.crowdfunder.co.uk/shared-ownership-resources

<strong><span class="has-inline-color has-accent-color">Sue Phillips</span></strong>
Sue Phillips

Sue Phillips is an accountant (ACCA) who spent much of her career working in the not-for-profit sector. She is now semi-retired. She says she never expected to become a housing campaigner! 

She purchased her own flat via a shared ownership scheme in 1999, staircased to 100% in 2013, and completed a lease extension in 2020.

Her own experience of shared ownership led her to start campaigning in 2019, with a particular focus on greater transparency on potential long-term costs and risks of shared ownership. She campaigns under the moniker Shared Ownership Resources.

23 replies on “Shared Ownership: why we deserve far greater transparency”

This blog strikes at one of the big issues around shared ownership and which providers have still not owned up to. The niggardly provision of information by sales dominated providers does not enhance the reputation of housing associations or the NHF. It is time to do better!

Thank you so much for a clear and simple read.I am a retired nurse who bought “shared ownership” flat in London 2007. 77 years on the lease left.in dec 2020 metropolitan charge me £420 for a valuation only to tell me the lease extension would cost £24,000+ . As a pensioner paying 1,000 a month rent/mortgage this is way out of my reach. Thank you for what your doing I will share your crowdfunding page. Please keep me informed many thank.

Thanks for your comment, Rosaleen, and for sharing my Crowdfunder page. I am so sorry to hear about your experience. It’s, unfortunately, all too common a story. I’ll be posting updates on Twitter and Facebook (@ResourcesShared).

Thanks for the great article. You mention Wanda Goldvag commenting on solicitors as Chair of LEASE. But, when she made the broadcast in 2019 she was Chair of the Legal Ombudsman which puts the import of what she said into a different context.

Hi Sue
Excellent summary. Here are some further thoughts.
1. According to the HOC Library briefing, shared ownership is almost entirely delivered by English housing associations. The NHF needs to engage with the issues raised in your article and elsewhere. It’s not simply a case of stopping misleading marketing. NHF needs to engage with shared owners and help develop a solution to the structural issues set out in your article. Failure to do so suggests that it’s flagship initiative Together With Tenants is hollow. Perhaps the NHF doesn’t appreciate that these ‘customers’ are, in law, assured tenants until they staircase up to 100% equity?
2. The NHF chief executive had no answer to the question posed by Panorama as to why, according to HouseMark (jointly owned by NHF), leaseholder satisfaction (most being shared owners) is consistently year-on-year around 10% lower than housing association rented tenants. This systemic level of consumer dissatisfaction ought, one hopes, to be of interest to the newly consumer-focused Regulator.
3. One important point that you didn’t make is that if the courts follow case law precedent, shared owners who are evicted for non-payment of the rental element stand to lose all of the equity they have purchased in the home.
4. Housing associations need to explain the nature of the lease at the first sit-down/Zoom meeting with prospective shared owners. There is no financial incentive for any conveyancing solicitor to raise questions in the minds of applicants. This ‘immediate transparency’ approach then needs to made a contractual requirement with marketing agencies such as JLL, who many associations depend on to sell their shared ownership property. This is the approach adopted by the London housing association of which I am a Board member, so it can be done.
5. Shared ownership receipts, according to the G15 group of London associations, no longer provide sufficient cross-subsidy to meet the gap between available grant and the cost of building a new rented home, at an ‘affordable’ or a social rent. The government’s decision to lower the entry threshold from 25% to 10% initial equity purchase, and the proposed landlord liability for structural work in the first 10 years of a new shared ownership lease further weakens the economic value of and thus the business case for shared ownership provision.
6. A friend has recently been decanted from an unsafe estate in West London and has agreed to sell her home back to her landlord association. Unlikely to meet the needs threshold for social housing, she has been forced to buy another shared ownership property. Her only other option is a short term assured tenancy in the private rented sector. It can be hard to escape the tenure. In advising her on the move, I have noticed the following.
7. There are over 1,000 available shared ownership properties available in London at this moment, with many more new developments coming on stream. She was spoiled for choice! This suggests to me that there is a major over-supply of housing association shared ownership property in the capital. Moreover, housing association or council tenants who might previously have given up their tenancy to ‘buy’ in a new development will shortly be able to apply to become shared owners of their existing home, thus further weakening demand for new developments.
8. Most of the available property is new build but there are a sizeable number of shared ownership properties available for resale. If you ring a housing association about a newly built shared ownership home you will get a swift reply. If you call about a resale, you may not get a reply at all. This only adds to the ‘resale challenge’ of shared owners who have purchased 50% or 75% of the equity as this means a higher sale price which few applicants can afford. Sure, the rental cost will be lower, but the capital required to buy, say 75%, the equity will be out of reach for many applicants.
9. A significant proportion of new shared ownership developments are being marketed by new private sector housing associations, such as RESI – either directly or in partnership with established housing associations.
10. Pulling together these points, it seems distinctly possible that supply will exceed demand and developing associations will face future commercial problems in addition to the consumer concerns that you have detailed so well. It won’t be long before associations will be asking the Regulator to repurpose the accommodation as rented accommodation.
11. The Leasehold Knowledge Partnership, a charity, has an excellent website which you may find a useful resource
I hope these observations are helpful

Thanks Ross, for your extremely comprehensive and useful response. Would you be interested in writing a Guest Blog post for the Shared Ownership Resources website once it’s up and running? Please contact me via DM on Twitter – @ResourcesShared.

I should have pointed out, obviously, that the Right to Shared ownership is not retrospective and will not apply to existing social tenancies. This weakens my point about the impact of an alternative route to shade ownership on demand for new provision. Over time, however, that potential ‘competition’ may well grow.

A very well argued Blog Sue and well informed, incisive comments from Ross Fraser too.
I agree – shared ownership these days is generally not a good buy for residents. There is a glaring gap between the rosy rhetoric in adverts and the stark reality for residents.
I recently wrote an article in Housing Today suggesting housing associations could do more to help shared owners unable to sell & struggling with the cladding crisis by ‘buying back’ their properties for example.
See following link to Housing Today article on 2 February 2021
https://www.housingtoday.co.uk/comment/lets-buy-back-to-help-victims-of-the-cladding-crisis-now/5110025.article
and another article I did for the Times here https://www.morehousing.co.uk/
I’ll share and support your crowdfiund. Very best of luck with it.

and I’ll .

Many thanks, Maureen. Your articles on housing associations buying back shares from shared owners are interesting and informative. I’ll share within my own networks.

All excellent points raised by Sue, Ross, Maureen and others. I’ve always seen the shared ownership model as enabling in that it allows a household to live in a location and property that they could not otherwise afford to.

However, this only works where we have a dysfunctional housing market focused on home ownership and the growth of an unsecure private rented sector.

Also, underlying the shared ownership model is a leasehold system that is not fit for purpose and despite the many reforms and tinkering still very much favours the ‘professional’ landlord. The latest reforms announced recently by government are only again tinkering with the system and are a reaction to the ‘storm’ created by the unscrupulous private developers with their ground rent lease clauses etc…

I very much welcome your project to provide an independent shared ownership website. From my experience there is still very much a lack of understanding of what people are purchasing and the responsibilities that come with this.

There’s another angle all together and that is the thousands of families who, ironically, can afford the mortgage payments, but cannot save the deposits required for shared ownership. Rentplus-uk tenants tell us that they are unable to save event £100 a month, so to save even 5% of a £250,000 home is untenable. But with Rentplus you don’t need t hat initial deposit. Our tenants are largely key and essential workers – they move in to a brand new home and rent for 5-20 years before buying 100% of their home – and our first tranche of tenants are going to do that this year – no staircasing or additional fees or moving costs to find. And at the point of purchase, Rentplus gifts tenants 10% of the value of their home towards their deposit. It’s been adopted by councils across the country and we are looking for new councils and housing associations to come on board and offer this affordable rent to buy option for families.

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