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The government’s new shared ownership model: how will it affect landlords?

Details of the government’s new model for shared ownership have been revealed after a year-long consultation. Dominic Brady looks at the key considerations for landlords

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Picture: Getty
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The government’s new shared ownership model: how will it affect landlords? #UKhousing

Key considerations for landlords under the new shared ownership model #UKhousing

This week the government finally revealed details of its long-awaited revamp of shared ownership, more than a year after housing secretary Robert Jenrick announced a consultation on the overhaul.

The government last year claimed that the policy – which was introduced in the 1970s – is being shaken up to make it “fairer, more affordable, and more consumer-friendly”.

The new model aims to get more people on the housing ladder by making changes to aspects such as minimum initial shares and staircasing increments. But what does this mean for landlords?

Here Inside Housing runs through the key elements of the government’s shared ownership remodel.

Lower minimum initial stake

People looking to get on the property ladder via shared ownership will now be able do so with less money. Under the plans, new buyers can purchase a property with an initial stake of just 10% – down from 25% in the current model.

This will mean that people can purchase a property with lower deposits. It will also lead to lower combined rent and mortgage costs, the government says.

So while a family buying a £200,000 property previously had to provide £50,000 as minimum stake, they will now have to spend a minimum of £20,000.

The government says the change “will make shared ownership accessible to more people and support those for whom realising the ambition of homeownership is most challenging”.

The Ministry of Housing, Communities and Local Government has estimated that more than 300,000 additional households will now be able to access shared ownership homes as a result of these changes.

Staircasing in lower increments

Under the new proposals, announced alongside funding for the Affordable Homes Programme, the increments at which shared owners can increase their equity in the property have been significantly reduced.

For shared owners looking to ‘staircase’ – incrementally increase their share of the property – they will now be able to do so in tranches of just 1%, down from 10%.

The government noted that saving for a 10% share can be difficult as a result of house prices rising faster than wages. But under the new model, shared owners can buy as little as 1% with “heavily reduced fees” for up to 15 years.

The change comes despite warnings that legal costs involved in staircasing make it impractical. Shared owners can be made to fork out around £1,000 each time they staircase.

Under the new rules, landlords will be prohibited from charging administration fees on shares bought as part of this gradual staircasing model, the government says.


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Repairs costs covered by landlords

Landlords will now be expected to pick up the bill for repairs on the first 10 years of a shared ownership property.

The move aims to prevent shared owners being hit by full costs for repairs and maintenance on a property they own only a small stake in. It follows on from stories of shared owners having to pay 100% costs for cladding remediation despite owning just 5% of the property.

The government claims that the new model will “bridge the gap” between renting and homeownership by enabling residents to put money aside towards buying more of their home. However, this would likely mean huge additional costs for housing associations and potentially make some question whether shared ownership is worthwhile.

Shared owners to be given more control over resales

When it comes to shared owners looking to sell their property, the current system has proven to be inefficient, according tho the government.

If a shared owner wants to sell their property, under the current model they must give their social landlord an eight-week period in which they have the exclusive right to market the property for shared ownership.

The government says: “Landlords holding long lists of prospective buyers interested in shared ownership are often well placed to arrange a speedy sale. But sometimes, the eight-week nomination period can result in unnecessary delays.”

To make the process smoother, the new model will give shared owners the option to cut the eight-week period in half if they actively wish to pursue an open market sale.

In doing so, the government says it is giving shared owners “greater power and influence” over the resale process.

Standard model on all future shared ownership homes

As part of the new government funding plans, a Right to Shared Ownership will be available for housing association tenants on all rental homes funded through government grant, and all will adopt this new model.

That means all shared ownership properties built under the Affordable Homes Programme 2021-26 will adhere to the new model, but those built using funds from the existing programme – which runs until March 2021 – will not.

The government says it will also set a new expectation that shared ownership delivered through the planning system, via Section 106, should use the standard model, to guarantee “consistency in the offer to consumers”.

A further technical consultation on the implementation of the new shared ownership model will be produced at an unspecified later date.

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