An update for shared owners

Over the past year, we’ve raised a number of issues with the government that affect shared owners trapped in the building safety crisis. We have also raised these issues with housing associations and the LUHC Select Committee. 

In December 2023, the Secretary of State intervened to address some of the issues we had raised and gave housing associations more flexibility to support shared owners in a number of ways. Unfortunately, we have yet to see this translate into support on the ground.

The Secretary of State’s letter set out a number of important changes. As we received feedback that housing associations were still not changing their policies, we then asked the government to produce “plain English” guidance about this letter for shared owners. We are currently waiting for this guidance to be finalised and published. This is an update summarising what ministers and government officials told us, as well as our campaign activities on these issues. 

If you are affected by any of these issues, please get in touch with us

Changes to subletting rules arising from the Secretary of State’s letter 

Housing associations are no longer required to put restrictions on the level of rent that can be charged by shared owners who sublet their flat because of the building safety crisis. This means that shared owners who are “accidental landlords” as a result of the crisis can set their own rent. 

Previous rules have had a very negative impact on shared owners who became accidental landlords as most were effectively subletting at a loss, due to year-on-year above-inflation increases to their rent, as well as increases in service charges and higher mortgage rates. We welcome the changes but note that many shared owners who have suffered financial losses are unlikely to recover from the impact of previous rules, especially where they have been subletting for a number of years. 

Unfortunately, based on the feedback we have received, housing associations have yet to inform shared owners who are accidental landlords about these important changes. Some shared owners have recently told us that, over six months since the Secretary of State’s letter was issued, their housing associations still do not understand the new rules.

We note that one housing association, Metropolitan Thames Valley Housing (MTVH), never set restrictions on the level of rent that their shared owners could charge when subletting. MTVH shared owners therefore appear to have been better protected from financial hardship than shared owners from other housing associations. Clearly, this inconsistency is far from ideal and means that positive outcomes for shared owners can be based on chance.

No more “blanket approach” to subletting

The Secretary of State asked housing associations to tailor the terms of their subletting offer to the individual needs of their shared owners, instead of applying blanket policies. 

Unfortunately, we continue to see evidence that housing associations generally have a blanket approach to subletting. For example, we see housing associations imposing a “hard stop” to the right to sublet once an EWS1 form is available for a building. This is not reasonable as properties may still be unmortgageable, or very difficult to sell, even if they have a “compliant” EWS1 form, i.e. one with a B1 rating. This could be because the lease includes an onerous ground rent clause, or because the service charge is now so high that it is also considered onerous by some lenders. Poor practice also includes forcing shared owners to move back to the properties they have been subletting if they are unable to sell them. 

Easier access to funding for housing associations to buy back shared ownership properties

Housing associations can now use Recycled Capital Grant Funding* to repurchase shared ownership properties affected by building safety issues where the shared owner wishes to move on but is unable to do so because of difficulties related to selling their home. However, availability of buybacks remains at the sole discretion of housing associations, and is based on their inadequate buyback policies.

*The use of Recycled Capital Grants Funding for buybacks has to be authorised by the Greater London Authority for properties in London (see rules here) and by Homes England for properties elsewhere (see rules here).

Shared ownership resales and RICS valuations

Resales of shared ownership flats, including those occurring via a “back-to-back” staircasing and resale transaction, have to take place at market value, as established by a RICS valuation. We highlighted to government our concerns about the negative impact on shared owners where a sale cannot achieve this RICS valuation price – as is usually the case for properties that have not been remediated – because the responsibility for paying the difference between the higher RICS valuation and the sold price is borne entirely by the shared owner on the total value of the property, even if they only own a minority share. 

In his December 2023 letter to housing associations, the Secretary of State explained that he expected them to “work with the shared owner” to ensure the valuation is updated to reflect the actual market conditions and any difficulty in selling the home. It is suggested that the shared owner should be “supported” to secure a new valuation “as quickly and cost efficiently as possible” using “desktop reassessment” or “using the incoming buyer’s valuation, where it is RICS compliant”.

We await further clarification from the government on this, not least because all valuation costs must be paid by shared owners. 

Publication of relevant policies online

The Secretary of State also asked housing associations to make details of all their relevant policies freely available on their websites “in a clear and accessible manner”. He pointed out that shared owners often find it “difficult” to know what their options are, and that advice is “not always provided in a consistent manner”. 

Two months after the publication of the Secretary of State’s letter, we carried out a desk review of a sample of websites, including the websites of the G15 London housing associations and two smaller housing associations operating outside London. We tracked information about subletting, buybacks, resales and staircasing. We did not find any update related to the Secretary of State’s letter of 19th December 2023. Furthermore, none of the shared owners in our membership had been notified of any changes to their registered providers’ policies. 

We found that only 1 in 10 registered providers actually publish all their policies online. Most merely provide an outline, without a link to the relevant policy document. Others provide no information at all. We informed the government and Housing Minister Lee Rowley about this failure to comply with the guidance and we were due to discuss this at our next meeting with Michael Gove and Lee Rowley; however, that was cancelled following the announcement of the July 4th General Election. 

We will continue to raise these matters with the next government, working with our new sister group, the Shared Owners’ Network, to ensure there is better information and support for shared owners in all buildings.  

For more information, read our reaction to the recent Commons Select Committee report on shared ownership here

CALL TO ACTION! 
If you are facing difficulties with your housing association, please write to the government at [email protected] and copy us at [email protected] so we can follow up.

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