Sue Phillips (FCCA) founded the Shared Ownership Resources project in 2021. Shared Ownership Resources champions the interests of shared owners and households considering shared ownership. The project publishes case studies; collaborates with housing, legal and financial experts to offer specialist information and advice; and campaigns for improved transparency and better outcomes and against mis-selling and other poor practices in the sector.
This submission on the finances and sustainability of the social housing sector addresses questions that relate directly or indirectly to the shared ownership scheme, from a shared owner and leaseholder perspective.
This question encapsulates a fundamental tension inherent in the shared ownership scheme, which occupies a far from straightforward role in the cross subsidy development model. Shared ownership is ‘social and affordable housing’, yet it is simultaneously ‘market housing’. It is currently largely delivered under an Affordable Homes Programme yet must provide financial returns to enable the development of further affordable housing development.
In practice, the cross-subsidy model inevitably creates disconnects between the objectives of different stakeholders: government, housing providers and shared owners. At worst, it creates conflicts of interest where the interests of shared owners are often subservient to those of other stakeholders.
The Government’s development funding model creates a need for housing providers to extract value at six key stages in the lifecycle of shared ownership:
But the ongoing process of value extraction by housing associations may result in shared ownership homes becoming increasingly poor value for money, and even financially unsustainable, for shared owners themselves.
This topic is explored in further detail in Chapter 5 of the Shared Ownership Resources report Shared Ownership: The Consumer Perspective.
Despite the benefits of the shared ownership scheme there are also hazards for shared owners. These arise from:
Monitoring and evaluation largely takes a short-term perspective, with a frequent focus on recent buyers. This makes it extremely hard to answer questions about the desirability of this form of tenure for potential purchasers. However, there is a mounting body of evidence indicating disconnects between government aspirations for the tenure, marketing rhetoric and long-term outcomes and impact for entrants to the scheme.
The question of ‘desirability’ (understood as long-term outcomes and impact, rather than ‘awareness’ or ‘demand’) is a key theme of the report Shared Ownership: The Consumer Perspective.
Value for money and low risk
This question does not clearly identify whether the Committee is solely interested in ‘value for money’ and ‘low risk’ for social housing providers, or whether this interest extends to shared owners. (It is notable that shared ownership marketing campaigns often focus on benefits at the expense of transparency around hazards, future financial liabilities and full life cycle costs).
As referenced in the response to the previous question, there is remarkably little publicly available data on outcomes and impact for different shared owner demographics. However, an increasing body of evidence suggests that shared ownership is not always good value for money, and is not necessarily low risk, for shared owners themselves. The powers of the Regulator of Social Housing do not currently appear to extend to tackling these issues.
One of the key recommendations of the report Shared Ownership: The Consumer Perspective is that: Government and the Regulator of Social Housing should undertake robust data collection, evaluation and reporting on the ongoing financial sustainability of shared ownership.
Complexity of financial and corporate structures proliferating in the social housing sector
Does the Regulator of Social Housing have the resources and skills necessary to regulate the increasingly complex financial and corporate structures proliferating in the social housing sector? Certainly, provision of shared ownership is characterised by increasingly complex financial and corporate structures, with implications both for regulation and for shared owners’ experiences of the tenure.
There are indicators that shared owners are being left vulnerable to the consequences of these increasingly complex financial and corporate structures. For example, whether the housing provider is the freeholder – or merely a sub-lessee with a short interest in the lease – can have a profound impact on shared owners’ experiences of the scheme. Likewise whether or not the provider is registered with the Regulator of Social Housing and Housing Ombudsman. Or whether they are a private provider offering a scheme which could easily be confused with ‘standard’ shared ownership but, in fact, carries different risks and is subject to a lesser degree of regulation (by the Regulator of Social Housing, the Housing Ombudsman and/or the Financial Conduct Authority).
Yet it is in the commercial interests of providers of shared ownership (or superficially similar schemes) to promote benefits and to downplay the complexity and hazards involved.
Is the solution to reduce complexity of financial and corporate structures; improve regulatory monitoring, evaluation and reporting of outcomes and impact; or to tackle advertising which is non-compliant with consumer protection legislation and regulatory codes? These aspects are inter-related and action is required on all three fronts.
Additional information
There is considerable overlap between the inquiry’s questions, above, and the content of Shared Ownership: The Consumer Perspective report, which is due to be published later in the month (May 2023). I hope that this information is useful and would, of course, be happy to discuss these matters further with the Committee.
The report can be downloaded at: https://www.sharedownershipresources.org/campaigning/reports/consumer-perspective/
May 2023