Londoners trapped in shared ownership: ‘Life has stalled’

It is pitched as a way to get on the housing ladder, but for some Londoners shared ownership has been riddled with unforeseen costs and obstacles, leaving them unable ever to afford to buy the remaining share - and sometimes unable to sell their share.

To qualify for the schemes, you must be unable to afford the deposit and mortgage payments on a home “that meets your needs”, according to the government. Successful applicants can buy a share of 10% to 75% of the home’s full market value. In addition to the rent, they typically pay monthly ground rent and service charges for the property.

Over time, residents can potentially buy the rest of their home. However, a new report, Shared Ownership: The Consumer Perspective, suggests there is no evidence that most people ever reach full ownership. Sue Phillips, who runs the Shared Ownership Resources website, also found that total housing costs are ignored in the government’s initial eligibility and affordability assessment calculator.

While acknowledging shared ownership schemes “undoubtedly” can benefit some people, Ms Phillips says downplaying potential hazards “may lead to unrealistic expectations, followed by dissatisfaction and even financial hardship further down the line”. She warns that shared owners can become trapped in increasingly unaffordable homes, with no plausible way out.

“It’s vital that homebuyers are provided with the information and resources they need to make informed purchase decisions, and to successfully navigate their pathway through this complex and risky housing scheme,” she said.

‘Our life has stalled’

One of those caught in spiralling costs associated with a shared ownership scheme is Deepa Mistry.

Ms Mistry bought her flat in south London, in 2010, having come across shared ownership as an option for people struggling to put down a deposit.

Purchasing 75% of her flat, with the housing association Peabody owning the other 25%, she said she was happy with her choice.

But 13 years down the line, she said buying the rest of her flat has proven impossible, as soaring house prices mean the remaining 25% is now worth more than what she initially paid for her share.

Not only that, but the costs have gone up significantly. Her service charge has been hiked from £1,800 a year when she bought the flat to around £6,000 today, alongside rises in rent and mortgage payments.

In total, her service charge, rent and mortgage payments are £1,300 a month - more than £500 higher than just last year, when they were £860. This, she said, is despite the level of service received dropping after her second year in the flat.

Ms Mistry said she is currently renting a larger place, with her husband and three children, and is sub-letting her flat. The block in which her flat is located has only just received its EWS1 report indicating it is safe, something mortgage lenders are often requiring due to the ongoing building safety and cladding crisis. With that finally sorted, Ms Mistry said: “I’m going through the process of getting it on the market and getting it sold as soon as possible.”

Until then, however, she said she still has the issue “looming over my head”, and that her inability to sell has meant “our life has stalled for about four or five years”.

‘We are just waiting now’

Ed Spencer, another Londoner caught up in shared ownership, recalls many of the same problems.

Having bought 40% of an east London flat with a friend in December 2012, he told LondonWorld the estimated value for his and his mate’s share has rocketed from £150,000 to between £300,000-£400,000. With the whole flat now at £700,000 or more, he said there is no way they can buy the rest of the property.

The pair’s combined costs, including rent, mortgage payments and council tax, have gone from around £1,600 to roughly £2,200 a month since purchasing their home, making it increasingly difficult to save to buy elsewhere.

Mr Spencer and his friend are waiting for the building’s developer and the housing association, One Housing, to resolve an ongoing dispute over liability for the flammable cladding covering its exterior.

While the block qualifies for the government’s support fund, which pays for the replacement of flammable cladding on buildings taller than 11m, this can only be released once all legal avenues have been “exhausted”, meaning the pair are in the midst of “a protracted legal discussion among the developers and the owners”.

“Me and my wife would like to move to Brighton or Sheffield, somewhere more affordable,” Mr Spencer said.

He and his friend’s inability to sell the property means Mr Spencer and his wife “are having to pay a huge amount more money for a mortgage than we would have to do if we could move on”.

Peabody housing association

A spokesperson for Peabody, the housing association which owns the remaining 25% of Ms Mistry’s home, said: “We sympathise with anyone who feels they’ve outgrown their home but is having difficulty selling it.

“Ms Mistry has everything she needs from us to sell her home, and we have offered her additional financial support with her rent repayments.

“We always aim to provide good value for money, with service charges that accurately reflect day-to-day running costs. The charges in Ms Mistry’s block are average for the type of home and services provided and include her rent repayments, plus a portion of her energy bills.”

One Housing

A spokesperson for One Housing said: “At One Housing, our policy is to always fully investigate any issues that customers raise in regard to their service charges. We are aware of and appreciate our leaseholder Mr Spencer’s concerns following service charge increases resulting from increases in costs.

“Customers are on a variable service charge, which means One Housing provides an estimate of the service charges every April and confirmation of the full charges once the financial year has closed. Service charges this year have been based on end of year accounts plus inflation and the expected cost of utilities, taking into account energy price rises.

“We recognise that any cost increase presents an additional financial challenge at an unwelcome time and we are here to provide personalised support to our customers, including through our specialist welfare benefit advisors.”

What does the report recommend?

Ms Phillips’ report features a total of 18 recommendations intended to improve the experience and outcomes for shared owners.

They include reforming initial assessments to fully consider future total housing costs, strengthening regulatory oversight of ongoing affordability, and providing earlier and more support for those households where the scheme is becoming unsustainable.

Commenting on the report, Paula Higgins, chief executive of the HomeOwners Alliance, said: “It’s about time that we take a more forensic look at the shared ownership tenure to understand how successful it is to help first time buyers start their journey into being a homeowner.

“Does it give a helping hand or does it trap people in some sort of limbo between renting and owning that ultimately costs them more and they cannot escape from? The shortcomings of shared ownership identified in the report should not be used as an excuse to kill shared ownership as we are in the middle of an affordable housing crisis. The challenge is to get it right.”

Asked whether she would recommend shared ownership to others looking to move out of private renting, Ms Mistry said: “If you know what you’re getting into and you’re fully aware and know how you can be restricted, I think it’s okay. But as a very naive first time buyer…I still didn’t really understand it.”

The government

The Department for Levelling Up, Housing and Communities was approached for comment.

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