Consultation on new shared ownership model

The government has made some important adjustments to its proposals and we’re seeking members’ views.

The government has today launched a consultation on the proposed new model of shared ownership that was first announced in the 2021-26 Affordable Homes Programme.

The new model aims to deliver on the government’s manifesto commitment of a “fairer, more transparent” form of shared ownership.

Housing associations are the country’s main provider of shared ownership and fully support this ambition. However, we heard serious concerns from our members that the proposed new model would be more costly to deliver and could result in far fewer homes being built.

• Read our summary of the original proposals.

Changes to new model proposed in consultation

The NHF has been engaging heavily with the government on this in recent weeks. We’ve been clear about housing associations’ ambition and commitment to shared ownership - but also about our concerns on viability.

We are pleased to see a number of critical adjustments have been made in the proposals outlined in the consultation that will help address these challenges. The changes published today include:

• Introduction of a 10-year period where the landlord will cover the cost of repairs and maintenance - the consultation now proposes an annual cap of £500 on internal repairs, which can be rolled on for a year. Shared owners will also still need to pay service charges (where appropriate), contribute into a sinking fund, and take responsibility for health and safety requirements.
• Applying the new shared ownership model to rented homes if a resident exercises the Right to Shared Ownership - the 10-year period where the landlord will cover the cost of repair and maintenance will begin when the home is built, rather than when it is transferred into shared ownership. So, if the home is already more than 10 years old, the shared owner would take responsibility for repairs and maintenance costs from the start.
• Reduction of the minimum initial share from 25% to 10% - the government has clarified that buyers will continue to be encouraged to take the maximum share they can afford.
• Introduction of a new gradual staircasing offer, to allow people to buy additional shares in their home in 1% instalments with heavily reduced fees - the government has recognised the challenge in valuation, and are consulting on a proposed approach.

The consultation acknowledges housing associations’ concerns about the additional costs of delivering the new model and “would expect providers to consider” these costs when applying for funding.

It confirms that the new model of shared ownership will apply to homes built through section 106 that receive planning permission from April 2021. However, it recognises that some housing associations will have bought land and be preparing planning applications using financial assumptions based on the current product. It proposes a transitional arrangement to cover this, in line with the approach used for First Homes.

The consultation asks questions throughout about how all of the proposed changes should be implemented in a way that works for shared owners and for housing associations.

Our view

We know members will still have concerns about managing the risks of introducing a new model during a time of market and economic uncertainty.

However, we hope these clarifications, including the cap on repair costs, provide the additional certainty that members will need when thinking about bidding under the new programme and what grant would be needed to ensure it is viable.

Next steps

The consultation is open for four weeks, closing at 23:45 on 17 December 2020. We will be developing a response on behalf of the sector and will be engaging with members on this - details to come soon.

If you would like to share your views in the meantime, please get in touch.