Social Housing Speed Read – Government consultation on Shared Ownership reform
2nd September, 2019
In recent years there has been a rise in the popularity of shared ownership schemes, with many first time buyers, looking to housing associations who offer these schemes to help them onto the property ladder.
The popularity of these schemes has been influenced by the affordability barriers present in many big cities across England and Wales. Various governments have pledged to increase housing supply and with this has come an increase in the different types of homeownership available. In response, the Ministry of Housing has subsequently published a consultation paper entitled, ‘Making home ownership affordable’. The consultation paper seeks responses from those in the social housing sector, on a proposed national model for shared ownership, to enhance affordability and utilise the flexibility the scheme is designed to offer.
The paper begins by recognising the benefits associated with shared ownership, particularly the lower deposit and the ability to increase the overall ownership of the property with staged payments. However, it moves on to acknowledge that the housing sector has developed since the adoption of this scheme with inflation making Staircasing in increments of 10% more and more difficult. The paper subsequently proposes adopting a single preferred model which would enhance clarity and competitive mortgage finance. The new model would allow homeowners to buy further shares at smaller, 1% increments, opposed to the 10% shares currently available. It is acknowledged that for this to work, a new process would need to be adopted to speed up the valuation process and incentivise consumers to take up further equity in their property through these small increments. The paper therefore seeks the view of those in the industry as well as current homeowners, as to whether smaller increments would be appropriate and what products could be developed to support this process.
Shared ownership homes are not always immediately sold on the open market. Shared ownership leases tend to include a pre-emption clause giving the landlord exclusive rights to market the property for the first eight weeks of sale. Therefore, social housing providers of grant funded shared ownership properties are able to buy back the property or nominate a new purchaser. This results in great uncertainty for the homeowners who do not have control over the process. In response, it is proposed that a time-limited right of first refusal is introduced. Therefore, removing the pre-emption clause and ensuring that the property remains affordable and available for shared ownership where appropriate.
The papers concluding remarks, seek views on whether a new standardised shared ownership product would help improve mortgage availability and cater for the business need of both private and social housing providers. Currently homes in rural Designated Protected Areas have different shared ownership leases to those properties residing in towns and cities. This difference has results in confusion for all involved and impacts upon the attractive nature of this form of homeownership.
It is evident that through the consultation, the Government are seeking responses on three main principles to improve shared ownership for all involved in the scheme. This comes at a time when the Government have announced a range of new measures to tackle the spiralling housing crisis. If anyone wishes to provide a response to this consultation, the consultation closes on 29th September 2019 and is open to response at this link.
If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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