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New inquiry into shared ownership will examine viability and service charge affordability
An inquiry into shared ownership that has been launched by the Levelling Up, Housing and Communities (LUHC) Committee will examine staircasing, reselling and the affordability of service charges.
MPs launched the inquiry on Thursday, which will look into the two available low-cost shared homeownership schemes in England.
The product, which sees buyers purchase an equity stake in a property and pay a reduced rent on the remaining share, is often marketed as a more affordable route into homeownership as it requires a smaller deposit and mortgage.
However, new research in May warned that the product risks becoming “financially unsustainable” for lower-income buyers over time due to its “upward-only” costs and a system that requires them to buy as much as they can afford at the outset.
The report by the Shared Ownership Resources platform, launched by former shared owner Sue Phillips, found that rising rents, service charges and ground rents chip away at the financial resilience of buyers who were required to take on as much as they could possibly afford at the start.
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This report followed a decision by the advertising watchdog in September last year that upheld two of three complaints of misleading advertising related to shared ownership.
These adverts were on a website that was owned by the National Housing Federation at the time.
One of the complaints upheld by the Advertising Standards Authority (ASA) was about a lack of information and detail relating to the cost and process of lease extensions on some shared ownership properties.
The website claimed that a shared ownership lease would provide the additional information needed to understand the renewal process, but the ASA described this as “unlikely”.
This is because the model lease published by Homes England, which landlords are strongly recommended to adopt, contains no provisions on the process and cost of a lease renewal.
For their inquiry, MPs will examine the challenges associated with the product, including barriers to achieving full homeownership, explore challenges around reselling, and affordability issues such as service charges and maintenance responsibilities.
It will also look into how mortgage availability and the limited range of providers, with varying costs between them, affect the experience of the product.
The inquiry will focus on two areas. The shared ownership scheme – first established in 1980 – and the Right to Shared Ownership, which provides an alternative pathway to homeownership in England and is delivered through the Affordable Homes Programme 2021-2026.
Clive Betts, chair of the LUHC Committee, said: “Affordability of housing and homeownership is a key policy area, especially for first-time buyers during a cost of living crisis. Shared ownership has in the past been hailed as an answer to the housing crisis for younger people, offering the cheapest way to get on the housing ladder.
“We want to examine some of the barriers to homeownership through the shared ownership schemes in England and also look at issues such as the challenges faced by people in reselling these properties.”
He added that the committee will also examine whether shared ownership is providing the right answer for those people locked out of traditional homeownership at a time of rocketing private rents.
The closing date for submissions to the inquiry is 14 September, with evidence sessions expected to begin in October.
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