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The writer is a journalist specialized in social affairs.
Stunned by the impact of the Grenfell Tower tragedy and the ongoing damp and mold scandal, social landlords may be breathing a sigh of relief this week at the prospect of a new, more understanding government. They would be fools to relax. Public scrutiny is likely to return as another crisis approaches: the desperate plight of shared owners.
Shared owners tend to be lower-middle-income families. Locked out of the mainstream property market, they buy a share of a property (usually less than 50 per cent of its value, collecting a deposit of between 5 and 10 per cent of that share’s value) and rent the rest to a housing association . . The product was designed more than three decades ago to meet the needs of low-paid key workers, such as teachers and nurses, in Britain’s expensive cities. It worked well: as their salaries increased over time, they were able to “scale up” to taking full ownership of their homes. Meanwhile, the property itself increased in value. It offered a good deal compared to private rental.
In the last 20 years, things have changed. As the cost of housing skyrocketed, with the median home price tripling between 1999 and 2019, the product became popular among a growing group of high-priced middle-income people. Funding for social housing from central government has been slashed since 2010, forcing housing associations to be creative in finding ways to house the poorest families. They did this by building shared ownership homes and channeling the profits back into social housing. They were balancing their books on the backs of the not-quite-poor.
Because when things go wrong, shared ownership is a very bad deal. Stock owners now face a triple threat to their finances, putting many in a desperate position. The higher mortgage payments are compounded by housing associations’ rapidly rising rents on their share of the property, linked to the consumer price index, which has soared over the past two years. In the wake of a crackdown on building safety caused by the Grenfell fire, charges for building maintenance services (including cladding repairs or 24-hour security guards) have also skyrocketed.
The shared ownership agreement requires the buyer to take on the maximum equity they can afford when their eligibility is assessed. The day they complete and collect their keys, they are already financially stretched. No co-owner enters the agreement with the capacity for rapid and dizzying growth in the monthly cost of the home. However, one shared landlord I interviewed in east London described how her service charge had almost doubled since she signed her agreement in late 2018. Meanwhile, her rent increased by £ 630 to £883; Her mortgage payments have also doubled. His total monthly payments now exceed £2,000. They are stuck in a building that has not yet had its cladding completely removed, meaning the lease cannot be extended and the property cannot be remortgaged.
Many shared landlords now feel much worse off than private renters, even though rents in London have risen by 7 per cent in the last year. They are desperate to get out, but even many of the owners of flats in blocks with no cladding or fire safety problems say they cannot find a buyer. The combination of house price inflation and rents, making saving for a deposit unthinkable, has left even shared ownership out of reach for the lower-middle-income market. The current political battle for the future of leasing It has only increased uncertainty for potential buyers.
In March, a long-running select committee investigation was finally reported: MPs concluded that shared ownership now did not provide an affordable route to home ownership. Worse, it has become a form of financial cheating. Housing associations and successive governments should be questioned about their role in its creation.