Share your views on proposed guidance for the new shared ownership model and Right to Shared Ownership

Following changes to the shared ownership model, the SORP Working Party are consulting on guidance to support those who prepare financial statements, as well as guidance on the new Right to Share Ownership model.

Changes to the shared ownership model and introduction of Right to Shared Ownership

In 2020, the government consulted on a new model for shared ownership, with the changes to the model coming into effect from April 2021.

The new model for shared ownership introduced the following changes:

• Reduce the minimum initial share from 25% to 10%.
• A new gradual staircasing offer, to allow people to buy additional shares in their home in 1% instalments with heavily reduced fees.
• A 10-year period during which the shared owner will receive support from their landlord to pay for essential repairs.
• Give Shared Ownership leaseholders (shared owners) more control when they come to sell their home.

In the Social Housing White Paper 2021, the government then introduced the Right to Shared Ownership, giving social housing residents living in new rented homes the opportunity to purchase a stake in their home and then purchase further shares when they can afford to do so. Right to Shared Ownership also allows eligible tenants who occupy eligible properties to purchase their social or affordable rented property on shared ownership terms.

Consultation on shared ownership and Right to Shared Ownership guidance

On behalf of the SORP-making body, the Housing SORP Working Party (SWP) discussed what the changes to the shared ownership model and the introduction of Right to Shared Ownership could mean for accounting and financial reporting.

The SWP agreed that changes to the minimum initial share, staircasing, and giving shared owners more control when they come to sell their own home do not change the fundamental nature of shared ownership and therefore do not change the guidance set out in the Housing SORP.

However, the key impact to financial reporting was considered to be the introduction of a 10-year period where shared owners will receive support from their landlord to pay for essential repairs.

In response to this, the SORP making-body has developed guidance to support those who prepare financial statements in relation to the new shared ownership model, alongside guidance on the Right to Shared Ownership.

The SWP are asking for feedback on the following in relation to the guidance:

1. Do you agree with the interpretation of the model leases and the conclusions reached in relation to recognition of a provision?
2. Do you agree with the interpretation of new requirement for Right to Shared Ownership and the conclusions reached in relation to the accounting treatment?
3. Do you consider that this guidance will create any commercial or operational issues for your organisation?
4. Based on current data for your own organisations do you consider this will have any significant financial or reporting impact?
5. Do you find the guidance understandable and relevant?
6. Do you agree that the proposed guidance should be incorporated into the next version of the Housing SORP (during the next planned revision)?
7. Do you have any other comments or feedback in relation to the proposed guidance?