‘It’s unethical’: Shared ownership tenants face 13% increase in rents

People living in shared ownership properties are struggling to cope with inflation-linked rent increases of up to 13.1 per cent, as some housing associations fail to sign up to a pledge to keep prices low.

The large annual rent increases come at a difficult time for many shared ownership residents, who are also grappling with rising mortgage payments and the roll back of Government energy bill support.

Shared ownership is a scheme that allows people to own a share of a property and pay rent on the remainder, typically to a housing association.

Most shared ownership rents are tied to inflation, which has proved a problem for many residents after UK inflation hit a 40-year-high last autumn.

Katie Lewis, a 39-year-old single mother of two who bought her house in Shrewsbury under a shared ownership scheme, was recently informed that her rent will increase by 13.1 per cent in April from £335.19 per month to £384.90.

This is on top of her monthly mortgage payments, which recently increased by £50 per month to £270 per month, both of which she has to pay out of her £21,000 annual salary as a trainee nurse with the NHS.

“Where am I going to get all this extra money from?” she told i.

“My money goes on my kids basically. My kids and bills and food – there’s nothing left over. So I don’t really know what we’re going to do. It’s going to be a case of cutting back on more food I suppose because that’s the only thing we can cut down on. I’m kind of just stuck.”

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Most shared ownership contracts include a clause that allows the housing association to raise rents each April in line with the previous September’s Retail Price Index figure plus 0.5 per cent, which is 13.1 per cent.

Many housing associations have signed up to a voluntary pledge to limit shared ownership rent increases at 7 per cent, however not all of the social housing providers have signed up.

Ms Lewis said it was “completely unethical” that her housing association, Homes Plus, has increased her rent by the maximum amount.

“I feel like they’ve got us completely over a barrel because there’s nothing we can do about it,” she said, explaining that she feels “stuck” as she can’t afford to buy outright and there is a shortage of rental properties for families in her local area.

Tim McKeever, who owns a 35 per cent share in a flat in Southall, west London, has also been informed that his monthly rent will be increasing by 13.1 per cent from £458.77 to £527.87.

On top of that his monthly service charge, which is not covered by any rent caps, is increasing by 18.7 per cent from £122.23 per month to £145.13.

Overall it means Mr McKeever is paying £92 extra per month to live in his shared ownership property, which is classed by the Government as a form of affordable housing.

This is on top of his rising energy bills, which have doubled from about £60 to £120 per month, while his monthly mortgage payments are also set to increase when he renews in October.

As a result, Mr McKeever is looking “to move out as soon as feasibly possible” after he gets married later this year.

Roger Edwards, a 77-year-old pensioner, saw the rent on his shared ownership property increase by 11.7 per cent in October from £271 to £298.

He said he has “managed” to meet the increase with his private pension, but is worried how he will make ends meet now that the Government is also rolling back its energy bill support.

At last week’s Budget, the Government confirmed that it would extend its energy price guarantee, which caps average energy bills at £2,500.

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However, households still face a significant scaling back of Government support, as winter discounts come to an end. This means most people will be receiving £67 less support per month.

“That’s going to take a sizeable chunk out of my available income,” said Mr Edwards.

Suz Muna, a member of the Social Housing Action Campaign group that supports housing association residents, said: “We are hearing about increasingly desperate finances from our members, who are already laden with debt and there’s no sign of prices falling.”

She added: “People are falling hard into poverty and there doesn’t seem to be any clear strategy from housing association executives or Government for how they are going to stop this becoming a huge crisis.”

Les Clarke, executive director of housing and care at Housing Plus Group, said: “We recognise that the rent increase for shared owners has been unusually high this year. This is because of the high level of inflation and the lease terms customers agreed when they bought a share in their property.

“Whilst social rents have been capped by the Government, shared ownership rents have not. This is, in part, a recognition that the value of the equity the customer has in the property is likely to continue to increase.

“We recognise, nevertheless, that the increase will cause a degree of difficulty for some people and we offer a range of support and advice to assist our customers through these difficult times.”

An Octavia spokesperson said: “We appreciate that right now there is a lot of pressure on household finances and that high costs of living are impacting us all.

“Octavia’s rents are reviewed annually by our board depending on several factors and this year we are facing significantly higher costs as inflation and interest rates are on the rise.

“Increasing rents for our residents is never an easy decision and we considered all changes this year very carefully.

“We encourage all Octavia residents to contact our support teams for help as we have funds set aside to support financial resilience for our residents at this time.”