Shared Ownership Schemes Criticised for Complexity and Hidden Costs
A report by the National Audit Office (NAO) has found that shared ownership schemes, which are designed to help people onto the property ladder, can be complex and are not always fully understood by those who take them on. These Government-backed schemes aim to make home ownership more accessible for individuals who cannot afford to buy a property outright on the open market. Buyers purchase a share of a home and pay rent on the remaining portion, typically to a housing association, local authority, or private provider.
Navigating Barriers and Additional Costs
However, the spending watchdog warned that the system can be difficult for buyers to navigate, with barriers including complicated rules, additional costs, and a lack of clear information about long-term financial commitments. Shared ownership is particularly popular in London and the South East, where many of the homes offered through the scheme are flats, according to the report.
Buyers can increase their stake in the property over time through a process known as 'staircasing', which allows them to purchase additional shares. However, the NAO said the process can be expensive and complicated. Each time a buyer increases their share, they may face costs such as legal fees, valuations, and administrative charges.
The report stated: “As such, shared owners may opt to staircase less frequently and with larger equity portions in each transaction.” It added that people’s ability to staircase also depends on wider housing market conditions, noting: “Shared owners’ abilities to staircase are also linked to house price changes and therefore to what is happening in the wider housing market.”
Rising Service Charges and Unclear Costs
Shared owners hold a long lease on their property and are responsible for paying service charges to cover maintenance, management, and communal services within buildings or estates. The NAO said some buyers have been caught out by rising service charges or unclear costs.
The report highlighted: “Shared ownership is a complex financial and legal product for consumers. There have been criticisms from stakeholder groups about the information given to prospective and current shared owners in the past. These criticisms included a lack of information and concerns about increasing costs relating to service charges, complex lease arrangements, and routes of redress.”
It also warned that the lack of consistent information makes it harder for owners to challenge charges, adding: “There is currently no standardised format or terminology for service charges. When charges are unclear, it can be difficult for shared owners to contest them.”
Limited Government Data and Affordability Concerns
The NAO said limited government data means it is difficult to fully assess how well shared ownership schemes are working and whether they remain affordable over time. More detailed information would help the Ministry of Housing, Communities and Local Government (MHCLG) better understand risks facing buyers and how the model performs across its lifecycle, the report said.
Despite the challenges, the Government argues that staircasing to full ownership is not the only measure of success. The report noted: “MHCLG told us that staircasing to 100% is not the only positive outcome of the shared ownership model and that a shared owner who buys a share and stays at a certain level of ownership still gains stability, builds equity and is typically financially better off than remaining in the private rented sector.”
Expert Warnings and Calls for Reform
Gareth Davies, head of the NAO, said: “Shared ownership remains an important route into home ownership, but it is complex and weaknesses in information, affordability, data quality and redress mean that government does not yet have a full understanding of how the model works for consumers.”
Sir Geoffrey Clifton-Brown, chairman of the Public Accounts Committee, also raised concerns about the pressures faced by some shared owners. He stated: “Shared ownership offers a pathway into home ownership for those who cannot afford to purchase a home on the open market. As a chartered surveyor with a vested interest in this topic, it is wholly unsatisfactory that people who have relied on shared ownership to get a foot on the property ladder have been faced with cost pressures and complexities.
Rental increases, service charge rises and, in some cases, building safety concerns have led to unsustainable costs over time, with some owners experiencing difficulties in selling their properties. If we really want to help people own their own home, it is incumbent on the Government to see how they can make this scheme work better.”
Broader Leasehold Reforms
The report comes as the Government is also moving ahead with wider reforms to the leasehold system. In January, ministers announced that millions of leaseholders in England and Wales could benefit from changes that would cap ground rents at £250 a year. The Government said the reforms would help end excessive charges and make it easier for some homeowners to sell properties that have been difficult to move because of expensive leasehold terms. However, the plans have also prompted concerns about the potential impact on investor confidence in the housing market.
