Written evidence submitted by the Shared Owners’ Network (RDC0143)

We are a network of shared owners and former shared owners. Our submission is based on the lived experience of our members. The Shared Owners’ Network is an active member of the End Our Cladding Scandal campaign[1].

Our network includes shared owners who bought a new shared ownership (SO) flat; shared owners who bought a SO flat in a resale transaction; shared owners who ‘staircased’ to become leaseholders and shared owners who sold their SO flats on the open market.

Background

• We are very concerned about the progress and timelines on identification and remediation of residential buildings with fire safety defects and strongly disagree with the Government’s overly complex and partial approach to building safety remediation. The ongoing focus on cladding, and failure to take non-cladding defects into account, will not protect taxpayers’ money because it will leave buildings unsafe. This means that blocks will remain un-mortgageable and, potentially, very expensive to insure for decades.
• For shared owners, the financial impact of being trapped in the building safety crisis is particularly severe, leading to devastating consequences. We have been supporting shared owners who face significant hardship, with some dealing with bankruptcy and repossession, others desperately trying to get their landlord to buy back their property. Yet these individuals experienced a shocking lack of support from their social landlord.
• This crisis should be assessed in the context of findings from the 2024 (then) DLUHC Select Committee Inquiry into Shared Ownership[2]: “Shared ownership has historically been considered to provide an affordable route to homeownership. However, it has failed to deliver on this for too many people, for too long. In particular, rising rents, uncapped service charges, liability for repairs and maintenance costs and complex leases make shared ownership an unbearable reality for many people seeking to become 100% homeowners. (…) Shared owners also often have difficulty selling their share in cases where their properties are affected by building safety remediation issues, with many people ending up ‘trapped’ in properties they can no longer afford.”
• University of York research[3] also highlighted the financial vulnerability of shared owners and intrinsic risks of the shared ownership scheme as homes sold as ‘affordable’ very quickly become unaffordable.
• The extraordinary complexity of the Government Cladding Remediation schemes leaves leaseholders, including shared owners, facing a funding lottery; some will get their building fixed through Government funding schemes, while others will not be protected from costs. For shared owners, the issues are compounded by complex leases and ownership structures, leaving them exposed to higher costs and the inability to sell.
• The Government’s approach to risk around building safety is partial, ineffective, and may in fact lead to greater costs for the taxpayer in the longer term.
• We contributed to, and fully support, the written evidence provided by the End Our Cladding Scandal campaign to this Committee.
• In 2022 the End Our Cladding Scandal report ‘Dereliction of Duty: how housing associations failed leaseholders trapped in the building safety crisis’[4] found systemic, industry-wide issues such as withholding of information, lack of expertise and knowledge on building safety, poor communication, poor customer service, lack of accountability, and a disregard for people’s human right to adequate housing[5].

Key concerns

1. Building remediation outcomes remains a lottery for shared owners.

For shared owners, the complexity of the Government cladding remediation schemes is compounded by other factors:

• Whether their landlord is the freeholder, or just a head lessee;
• Whether their landlord manages the building;
• Whether their landlord is the ‘responsible person’ under the Building Safety Act
• Whether their building is eligible to one of the cladding remediation schemes;
• Whether their landlord have different sets of policies for buildings they own vs buildings they do not own[6];
• The complexity of their lease and the ownership structure.

This will result in very different outcomes for shared owners across the country, with some still denied basic access to information about the safety of their building seven and a half years after the Grenfell tragedy, while others fortunate to have their buildings remediated.

Shared owners find it more difficult to access information when their landlord is not the freeholder, but is a head lessee or a sublessee, which is common with section 106 developments. In this scenario, shared owners have no contractual relationship with the managing agent.

A key ask[7] of the End Our Cladding Scandal (EOCS) campaign is for social landlords to be granted conditional access to building safety funds. This will prevent tenants and shared owners effectively paying for repairs through their rents. However, in return for access to funding, EOCS stress that there must be a requirement for social landlords to provide information to all residents, protect them from costs, and offer buyback deals to shared owners with unmortgageable flats where the property no longer meets their housing needs, or where they can no longer afford to stay in their homes.

2. Shared owners: financially more vulnerable than other leaseholders

By definition, shared owners are leaseholders who used the scheme because they could not afford a mortgage to buy a property on the open market. Unfortunately, there has been a total failure of government to put policies in place to mitigate the impact of the building safety crisis on this cohort.

Successive ministers have so far failed to monitor the effect of the crisis on those who used a government-backed scheme to buy what they thought was an ‘affordable’ home. Worse, ministers have failed to change rules that caused some shared owners to sustain additional financial harm, for example shared owners who became ‘accidental landlords’ but were required to sublet their flats at a loss, while their neighbours who are private leaseholders can do this for commercial gain.

We are concerned about the fact that the number of accidental landlords[8], or the number of distressed sales[9] are not monitored, including in the Greater London area, which has the highest number of shared owners trapped in the building safety crisis. The resulting net loss of ‘affordable homes’ through distressed sales is not monitored either[10].

Shared owners trapped in the building safety crisis have had to face exponential service charge increases, as well as above-inflation rent and cost-of-living increases, and are also unable to remortgage, sell, staircase or extend their lease. For the vast majority of lower-to-middle income shared owners this crisis has had severe financial consequences, making them poorer, making staircasing impossible, and forced some to sell to cash buyers. We are concerned that there is no monitoring of how many have already had to do this[11].

A survey[12] carried out by the End Our Cladding Scandal campaign showed that 80% of housing association leaseholders were worried about building safety related costs and/or had researched applying for bankruptcy, while 10% were already facing financial hardship or bankruptcy.

Shared owners’ financial vulnerability and resulting exposure to hardship is partly due to the scheme’s rules itself, which force prospective buyers to buy the largest share they can afford at the time of purchase and borrow at the threshold of affordability. This requirement precludes shared owners from having the financial capacity to absorb any additional costs. This is particularly worrying when research shows that 38% of shared owners display some indicators of financial vulnerability[13].

Many shared owners are now struggling[14] to meet their housing-related costs[15], but also face the inability to remortgage after a fixed rate deal, and/or the fact their building may be excluded from Building Safety Act leaseholder protections based on height[16]. 

Government and the social housing sector have thus far spectacularly failed to mitigate the impact of the building safety crisis on shared owners. Regrettably, this has led to repossessions[17] and forced shared owners into distressed sales to cash buyers.

The existing government data collection system[18] is not fit for purpose. It does not provide adequate monitoring of outcomes for shared owners, because it does not enable disaggregation of ‘staircasing’ data. Historically this data has failed to identify the percentage of ‘staircasing’ that results in a shared owner staying in the property from ‘back-to-back staircase and resales’ data. It has also failed to identify distressed sales within that dataset[19].

We also have serious concerns about how the remediation schemes impact the costly shared ownership ‘resale’ process. In a falling housing market, many shared owners who are forced to sell may face negative equity on the percentage share they bought, but for some the financial impact will be even greater. This is because some housing associations[20] require shared owners to sell 100% of the property on the open market after the ‘nomination period’[21]. While this may provide a larger pool of buyers, it also makes shared owners liable for any loss on the percentage share owned by the housing association[22] as well as their own. Shared owners will owe the difference between the pre-sale RICS valuation and the actual sale price on 100% share to their housing association. This will leave many shared owners with life-changing debt[23].

3. Inadequate government response:

The failure to monitor the impact of the building safety crisis on shared owners has led to piecemeal and ineffective policy measures, such as changes to voluntary guidance[24] on subletting rules for shared owners trapped in the building safety crisis. Predictably, most registered providers ignored these amendments to Homes England Capital Funding Guide (CFG) and the Greater London Authority’s CFG and these were not communicated to shared owners.

Unfortunately, funding authorities such as Homes England and the Greater London Authority do not control the information supplied to existing[25] shared owners.

Shared owners also face additional difficulties selling their properties. This was noted by the (then DLUHC) Select Committee in their March 2024 Shared Ownership Inquiry report[26]: “Many people who shared their experiences of shared ownership with us said that they had struggled to sell their shares, which they often needed to do due to no longer being able to afford the costs of the property, as discussed above. They cited a variety of difficulties including the need for building remediation and associated costs; a lack of support from providers or landlords to sell; and high and increasing service charges and rents making the property less attractive to potential buyers.”

The committee added “shared owners can face considerable difficulty selling shares in their property, which many are prompted to do once rising costs reach unaffordable levels. Many are still waiting on their buildings to be remediated, without which they are legally unable to sell their shares and so end up trapped in properties they can no longer afford.”

What could be improved

⮚        Information about the cladding remediation schemes must be improved and the Government must ensure effective information provision to existing shared owners on all aspects of their building’s remediation. The Government takes it for granted that all leaseholders are informed about plans for building remediation, but this is not the case for shared owners.

⮚        Government must therefore acknowledge that some shared owners will find it extremely difficult to get information about their building, especially where there is a complex tenure arrangement with several parties involved, and where the shared owner has no contractual relationship with the managing agent.

⮚        There must be enforceable provisions to ensure social landlords obtain and supply relevant reports to shared owners, e.g. Fire Risk Assessment of External Wall (FRAEW) surveys, and provide regular and timely information about the remediation process. The same level of information must also be provided to shared owners who live in buildings social landlords do not own. Landlords must be held accountable if they do not obtain and supply this information from relevant parties in a timely manner.

⮚        The Government must also ensure that shared owners who are impacted by the building safety crisis get timely information about policy changes that are relevant to them, including, but not limited to, regulatory and scheme rules change on staircasing, lease extension[27], rent increases, service charge information, and the resale process.[28] This information should be in plain English and easily accessible.

⮚        The Government must regularly engage with groups of shared owners to better understand their lived experience, and amend shared ownership scheme rules where these unfairly penalise victims of the building safety crisis, cause financial harm and increase financial vulnerability.

⮚        We fully support the MHCLG Select Committee’s recommendation for the Government to require providers to buy back shares from shared owners in situations where they are trapped and unable to sell shares due to building remediation issues. We also support their recommendation for the Government to undertake an assessment of the potential merits of requiring provider buyback of shares as an automatic entitlement for shared owners. Naturally, we also agree with their suggestion that the Government should provide grant funding for this.

⮚        We firmly believe that shared owners should have a legal right to a buy back where the property is unmortgageable for reasons beyond the shared owner’s control, such as the building safety crisis, and where the property no longer meets their housing needs. It is our view that the property no longer meets the needs of the shared owner when any of the following applies: (a) they have become ‘accidental landlords’ or (b) the property is overcrowded[29] or (c) the shared owner no longer has a legal right to reside in the UK[30] or (d) the shared owner has acquired a disability that cannot be accommodated in their property.

⮚        The right to sublet at market rate for all shared owners who are accidental landlords. There is no justification for the ongoing restrictions that put shared owners at a disadvantage with other leaseholders. It is not acceptable for a scheme to impose loss-making subletting rules as is currently the case. Shared owners should have the same right to set the rent when they sublet their flat, as other landlords. This is the only way for them to protect themselves from escalating costs and financial harm. Shared owners should not be treated as second-class landlords, nor should they be forced into a position where they cannot meet their obligations as landlords.

⮚        Existing non-judicial means of redress for shared owners are not fit for purpose and remedies are not sufficient to act as a deterrent for social landlords. Complaining to the Housing Ombudsman takes a long time and there is no evidence that it has any impact on social landlords’ service delivery. In its current form, the Housing Ombudsman is not adequately equipped or resourced to deal with shared owners’ complaints on building remediation. It is unlikely to have built suitable expertise to handle such complaints effectively.

January 2025