The pitfalls of shared ownership are under the spotlight in a BBC Panorama documentary, The Home I Can’t Afford, focusing on the cost of so-called affordable housing and devastation of those trapped in unsellable homes due to the cladding scandal.
Shared Ownership has been widely touted as a way to help lower income buyers and those struggling to save for a large deposit to get on the housing ladder.
Owners buy a percentage share of their home, with the rest owned by their not-for-profit housing association, with the option to buy further shares in future towards full ownership.
The government wants to expand shared ownership as part of its £12 billion ‘affordable homes programme’, including allowing people to take on shares as low as ten per cent, rather than the current 25 per cent minimum.
Given the huge emphasis on affordable housing and the sheer number of shared ownership developments cropping up across London, campaigners now fear thousands are unaware of exactly what they are signing up to.
Katie Kendrick, founder of National Leasehold Campaign, has described shared ownership as ‘misleading by name’.
“It is neither shared nor owned,” she said. “The part you ‘own’ is in fact ‘leased’. Shared ownership is very enticing by the way it is advertised.
“It is often dressed up as ‘affordable housing’, however this can be a very costly way of getting on the property ladder, a ladder that has one rung, with many hidden costs.
“Very few ever staircase to 100 per cent because over time it is often unaffordable.
“Initially shared ownership may appear as a desirable option, but shared owners are actually just tenants with a landlord and are therefore subject to many restrictions.”
The Panorama episode followed one Southwark-based leaseholder, Deepa Mistry, who said rising service charge fees meant she was unable to buy further shares in her Peabody property, of which she owns 75 per cent.
Her service charge had doubled in just a few years and is now over three thousand a year. This year, during the pandemic, she had to start claiming Universal Credit and is now in a worsening financial situation.
“It’s embarrassing to say it but I have accrued a lot of arrears because I cannot pay it,” she said of the service charge.
An obvious solution would be to sell up and move out of London somewhere cheaper. But despite being desperate to leave the property, she is now trapped in an unsellable home due to the cladding and fire safety scandal.
Since the Grenfell tragedy, her home is one of many new build homes effectively worthless until it is issued an EWS1 certificate confirming it is safe and any remedial works have taken place. As the News has reported, there are huge delays in fire safety work being completed; delays in certificates being granted due to the backlog and a shortage of trained surveyors; and questions over who pays – and how – for major works.
She is one of millions across the UK affected by the cladding scandal, with up to five per cent of private homes in England now believed to be unmortgageable.
“With the cladding crisis, many shared ownership tenants now find themselves facing totally unaffordable costs, they are unable to sell their home to move on or change their mortgage or job,” says Martin Boyd, chair of trustees at Leasehold Knowledge Partnership. “In some cases, shared owners face the prospect of being made bankrupt paying to fix the building defects caused by the developer.”
Now living with three children in the two bed flat, Ms Mistry has no idea when she can ever sell and move to a more affordable area.
“I don’t know how many years it’s going to take,” she said. “I never imagined my children growing up as teenagers in this place but it’s looking more and more likely.
“I’ve trapped us. A decision I’ve made based on information that was given to me, and how things were sold as being affordable has now turned into the worst – the absolute worst – thing I could ever have done.”
The government has committed to reforming the leasehold system since 2017 but has been slow to act.
It has already agreed to ban the sale of new leasehold houses, though not flats; restrict grounds rents to zero for future leases; and ensure new shared owners do not have to pay maintenance and building costs for the first ten years. It has also pledged to give leaseholders more freedoms and powers to buy their freehold, or use commonhold instead.
But these changes have yet to be implemented and many do not affect those already living in shared ownership homes, or locked into lengthy disputes.
And they do not answer the ongoing questions over fire safety remedial works, usually costing between £10,000 and £100,000.
In response to the documentary, a Peabody spokesperson said: “We’re sorry to hear of Ms Mistry’s concerns. Ms Mistry bought a majority share of the property in 2010 and her lease agreement states that she is able to staircase at any time including within the first year.
“Service charges are recovered for costs incurred and do not generate income.
“Ms Mistry bought the property part way through the year and the charge was therefore lower than the full year amount which other leaseholders would have paid.
“We have dedicated teams to support homeowners and people who may be struggling financially. We would encourage Ms Mistry to talk to us if that is the case.”
Shared “ownership” should be abolished immediately and renamed:
SHARED LEASEHOLD TENANCY.