Shared ownership traps house buyers in ‘unbearable reality’

Home ownership

MPs have criticised the Government’s flagship affordable homes scheme for trapping buyers in an “unbearable reality”.

So-called shared ownership – which allows people to part-buy a property – has been promoted as a way for struggling first-time buyers to get their foot on the housing ladder.

But in a report published on Thursday, MPs said the scheme was “drastically failing” to help buyers achieve full home ownership because of rising rents, uncapped service charges and unfair repair costs.

More than 200,000 people have joined shared ownership schemes, according to the most recent figures, often with the hope of purchasing more shares in the property until they own it outright, a process called “staircasing”.

However, the extra costs of shared ownership mean many buyers never save enough money to own their property in full.

Only 3pc of shared owners staircase up to 100pc each year, according to research by estate agency Savills.

Thursday’s report, published by the Levelling Up, Housing and Communities (LUHC) Committee, said the main issue is service charges. These cover the cost of repairs and maintenance. Unlike rent rises, service charges are uncapped.

One shared owner, Rosie Hall, told the Committee her service charge had soared 39pc in two years to hit £4,589.

Another, Sue Phillips, told the Committee: “We have now been in the property for almost 29 years and still have only 25pc. The costs of running a large family and the running costs of the property […] strained our income to the limit, leaving no opportunity to raise money for a further share.”

The report said some people were inheriting service charges from deceased relatives who had Older Person’s Shared Ownership (OPSO), a form of the scheme available to over-50s.

Shared owners are liable for 100pc of repair and maintenance costs despite owning only a small proportion of the property.

In 2021 the Government changed the lease terms for shared ownership homes so that new buyers get up to £500 in repair costs covered by their landlord every year for the first decade.

However, those who part-bought homes delivered under the 2016-2023 Affordable Homes Programme get no help with repair costs.

The MPs warned this could lead to a “two-tier market, where older, less attractive shared ownership properties become more difficult or even impossible to sell.” They recommended the Government look into extending the 2021 improvements to older leases.

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Clive Betts, Labour MP and Chair of the LUHC Committee, said: “Shared ownership was hailed as an answer to the housing crisis especially for first-time buyers.

“However, we have found that for too many people shared ownership becomes an unbearable reality, where a blizzard of charges and an unfair burden for maintenance and repair costs means that they are unable to afford full homeownership.”

Once the costs become unaffordable, shared owners can then find it impossible to sell up, the MPs said, due to high costs, a lack of support from landlords and the need to remove cladding.

The Committee suggested providers should be required to buy back shares if the shared owner had persistently struggled to sell up due to, for example, delays getting cladding taken down.

The Government should “as a matter of urgency” explore changing the terms of the leases, the MPs said, so homeowners would only be responsible for the costs of repairs proportionate to their share of the property.

Mr Betts said: “Rising rents, hefty service charges, complex leases, disproportionate repairs and maintenance costs are experienced by too many people who take the shared ownership route. The Government needs to take clear and urgent action to tackle these issues and ensure shared ownership genuinely delivers affordable homeownership.”

A spokesman for the Department for Levelling Up, Housing and Communities said: “Shared ownership has a vital role to play in helping people on to the property ladder, and since 2010 we have delivered 156,800 new shared ownership homes.

“We are taking action to ensure that the scheme provides best value for shared owners, including proposals in the Leasehold and Freehold Reform Bill to give the right to extend their leases by 990 years.”

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