Commonhold reform: will it be a social housing feat or failure?

Under proposed changes, tenants will own their individual unit, with common areas managed by a commonhold association alongside other residents.

However, the government is yet to clarify how additional management responsibilities will work in practice. For example, it’s not yet clear to what extent RPs might retain a percentage of the responsibility on units where shared owners (SOs) have not fully staircased. This may create greater disputes between RPs, SOs and full commonhold association members. 

“While the shift to commonhold aims to bring residents together, it could create a distinctive split as changes take effect”

It’s also difficult to say whether the average person will be able or willing to take on a management role within the commonhold association.

This is already seen under the Right to Manage, where leaseholders who have been keen to collectively replace the landlord’s management control instead find greater conflict in decision-making with each other. While the shift to commonhold aims to bring residents together, it could create a distinctive split as changes take effect – those who are keen to have more control in their residency, and those who aren’t comfortable with taking on this new role. 

In addition to clarifying the division of responsibilities in a commonhold association, the government will also need to consider measures to incentivise tenants who are reluctant to step up to the role. These could include stamp duty relief or reduced taxes for commonhold purchases, along with mortgage support schemes.  

A similar split could also arise in mixed-use buildings, where there is a clear divide of interests for those representing social and non-social housing in one commonhold association. In instances where this creates barriers to decision-making or distributing funds, the government will need to clarify to whom final decisions will fall.

Maintenance costs could also be more contentious in a mixed-use building. More detail is needed on how these expenses will be minimised as commonhold becomes the norm, as they’d traditionally be controlled by the landlord themselves. Ensuring costs are suitable for every tenant in the building could be tricky to manage under a default commonhold model. The social housing sector requires clarity on this to safeguard tenants from unreasonable expenses.

There is also clarity needed on how changes will co-exist with current leasehold legislation. Establishing commonhold as the default tenure will require serious consideration around how it will impact Section 106 agreements, for example.

Under a traditional leasehold model, developers work closely with local planning authorities to allocate different types of tenure, including affordable housing, to the community. RPs and social housing landlords, who typically hold a position of responsibility over tenants and the entire housing unit, may not be as inclined to push for commonhold social housing under new legislation.  

“Ensuring costs are suitable for every tenant in the building could be tricky to manage under a default commonhold model. The social housing sector requires clarity on this to safeguard tenants from unreasonable expenses”

This could have a serious impact on the long-term health of the sector, as the provision of a diverse mix of affordable housing could become deprioritised.

To address this, the government could consider incentives for developers and RPs, such as grants or reduced levies if flats are sold as commonhold, or low-interest financing for building commonhold schemes. At present, however, the reform appears to focus on regulatory rather than fiscal changes. 

While this push towards commonhold intends to contribute to a more united social housing sector, if not implemented right it has the potential to create a problematic divide between landlords and tenants.

If details are not clear on the role of landlords in these commonhold associations and how their management approaches need to be adapted, along with how current legislation will be affected, the longevity of the affordable housing sector could face serious risk.

Without this, and a robust plan for next steps, the government’s announcement of a push towards commonhold will not provide the sector with much tangible impact, beyond a pressing need for more answers.  

Bukola Obadun-Craigs, partner, and Anita Rasaratnam, legal director, at Shakespeare Martineau’s affordable housing team