Trick to shared ownership is being clear about what is being sold, says Clarion boss

In August, the Financial Conduct Authority warned landlords against providing financial advice related to loans and pension contributions to prospective shared owners during the sales process.

The warning came after Inside Housing spoke to one shared owner who bought a Notting Hill Genesis property in 2014 on Limasol Street in Bermondsey, London. She was advised to cancel a loan taken out to cover travel expenses and cancel her pension contributions in order to meet affordability criteria for the purchase.

Ms Miller also responded to questions about the affordability of shared ownership and why satisfaction with the tenure often dips after the sales process.

The Clarion boss explained that the recent “turmoil” with regards to mortgage rates was obviously impacting affordability.

But on the issue of the rising rent and service charge elements, Ms Miller described their increases as “largely predictable because as it’s defined within the lease, and service charges are the passing on of costs for services to the building that the occupier is in”.

She added: “The same things apply to any tenure where there are communal services being applied.”

The affordability of shared ownership was the subject of a report in May that found that the model 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.

Called Shared ownership: the consumer perspective, it revealed that more than a third of shared owners display indicators of financial vulnerability, with lower financial resilience and lower financial capability compared with other homeowners buying with a mortgage.

The report was published by the Shared Ownership Resources platform, launched by former shared owner Sue Phillips, and looked into the longer-term experience of buying a home under the model. 

While giving evidence in the earlier committee session as part of the inquiry, Ms Phillips highlighted 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 was about a lack of information and detail relating to the cost and process of lease extensions on some shared ownership properties.

Ms Phillips said there was not enough data on staircasing and affordability and that it can often become more expensive than buying a home on the open market due to the cost of staircasing.

For her part, Ms Miller said she understood that the product “sometimes frustrates” and is “little understood”, but she believes it has potential and that comparisons with outright market sale are unfair.

She added: “I just don’t think outright ownership is a realistic prospect for most people going into shared ownership. The real comparator is being in the private rented sector versus being able to own a proportion of a home and to start your journey, if your economic circumstances allow you to do so.”

As the inquiry continues, the Housing Ombudsman has outlined what the watchdog expects from landlords in the administration of service charges in a new report this week.