An investigation by the BBC’s Panorama programme has given an insight into some of the potential pitfalls of shared ownership.
Giulia Trovato moved into her former show home flat in 2007 using the shared ownership scheme. She bought a 45% share of the property and paid rent on the remainder to the L&Q housing association, that owned the flat. Using the scheme enabled Ms Trovato to buy a property in a good area independently, without relying on family members for assistance.
However, the flat came with a range of issues and within three years of moving into the building, the basement was found to be flooding with waste water, and black mould and damp began to appear in the flat.
Ms Trovato moved out of her flat for six months in 2017 so that L&Q could effect repairs. However, she was surprised to find on returning to the property that she was wholly responsible for the cost of the repairs – a £20,000 bill to pay for repairs to the pipework.
People in shared ownership properties are often responsible for 100% of repairs. Unlike a full tenant, who can expect the landlord to pay in full for essential repairs, people in shared ownership are expected to take on the full cost of repairs, regardless of the percentage share they own
The government has recently revised its guidelines on shared ownership so that housing associations, as the chief provider of shared ownership housing, have a ten-year obligation for essential repairs for new shared owners. The revised scheme will only cover shared ownership property built between 2021-2026.
Other tenants have been stunned by rapidly increasing service charges for shared ownership property. One housing association, Clarion, increased the annual service charge for one shared ownership occupier to £4,300 from £2,270 per year after just four years. They said they had ‘underestimated the service charge’ and gave the shared owner one year to pay the balance.
Unexpected rises such as these can quickly make shared ownership unaffordable. Currently, all shared ownership properties are leaseholds, which means the housing association has been able to choose whether to extend the length of the lease and dictate the price paid for it. They are also entitled to charge other fees, including their own legal fees.
The Panorama programme found that one housing association, The Guinness Partnership, stood to gain £20 million in lease extensions in coming years, from its 1,500 shared ownership homes with leases shorter than 80 years. Many mortgage lenders will not consider lending on a property below 80 years, so shared ownership sellers had no choice but to pay to extend the lease.
The National Housing Federation, which represents housing associations, defended the practice, saying that shared home buyers should make themselves aware of the potential costs before purchase. It said that housing associations provided ‘good quality, affordable homes’ for lower income home buyers, but were not for profit, charitable organisations.
Housing associations have said that the ten year responsibility under the government’s revised scheme may make shared ownership nonviable for them, which may deter them from bidding for grant under the new 2021-2026 Affordable Homes Programme. All homes built with grant under this scheme must give tenants the right to shared ownership.