Shared ownership eligibility caps will be increased for the first time since 2016 to ensure the scheme remains “accessible” to those who need it.
Housing Minister Matthew Pennycook announced this week the annual income cap will be raised from £80,000 to £90,000 outside of London and from £90,000 to £110,000 for buyers in the capital, the first adjustment in a decade.
The move has been made to ensure shared ownership continues to be accessible to borrowers on lower to middle incomes, Pennycook explained.
“As a low-cost home ownership product, Shared Ownership has enabled hundreds of thousands of people to get on the property ladder who otherwise would not have been able to do so,” he said. “However, despite improvements made to the model over recent years, the government is fully aware that shared owners continue to struggle with a range of serious affordability, transparency, management, staircasing and resale challenges.”
While some of these challenges are not unique to the shared ownership model, the housing minister said, they have a “disproportionate impact” on those who have purchased their homes through the scheme.
Pennycook referred to one example being sharp increases in service charges which for shared owners can create “acute financial pressures” despite them only owning a partial equity stake of their home.
He added: “While the government remains committed to shared ownership as an important route into home ownership for those who cannot afford to buy on the open market, we are determined to ensure that the model is fair, transparent and affordable across its lifecycle.
“That is why, in addition to progressing an ambitious leasehold reform agenda and accelerating the remediation of unsafe buildings to the benefit of shared owners and other long leaseholders, we are taking forward a phased programme of targeted improvements to the shared ownership model to ensure it provides an effective and sustainable route into home ownership.”
Outlining phases one and two of a programme to improve shared ownership, the housing minister summarised goals of phase one being to improve customer experience and give shared ownership providers “greater clarity, stability and confidence to deliver new shared ownership homes”.
This was addressed by the government informing registered providers to secure grant funding through the Social and Affordable Homes Programme (SAHP) to make improvements to long-term customer affordability, increasing transparency on costs and giving the option for customers to opt out of fees for optional services.
Alongside this, the government specified under capital funding guidance that fees charged to shared owners should not be used “as a source of profit”.
Meanwhile to support the delivery of new shared ownership homes, the Ministry for Housing confirmed it would not change provisions in the model lease that permits rents to increase by CPI+1% each year until 2036, while additionally removing Right to Shared Ownership as a contractual requirement of new grant funding.
Work set out for phase two will include: considering measures to reduce existing barriers to staircasing such as upfront and ongoing transaction costs; exploring options to support resales including an assessment of the efficacy and reasonableness of nomination periods and the fees charged by providers; developing better information and guidance to help existing shared owners understand and navigate the options available to them; and undertaking a comprehensive review of the functioning of buybacks (or leasehold repurchases) as an exit route for shared owners who, through no fault of their own, find themselves unable either to afford to remain in their home or to sell it.
