Update to affordability guidance for shared ownership

Homes England has announced an update to Section 6 (Affordability Guidance) of the Shared Ownership chapter in their Capital Funding Guide.

This applies to any NHF member who currently offers shared ownership or intends to do so in the future.

What is Section 6?

Section 6 explains Home England’s expectations and requirements concerning applicant affordability, the financial assessment process to arrive at the share they can afford to purchase, and the role of the provider and independent financial advisor in making this decision.

The overarching principles in the updated guidance stay the same:

• Applicants are prioritised and dealt with on a first come, first served basis.
• The applicant’s assessment should be provided free of any charge to them.
• Shared ownership homes should be sold across a range of equity shares.
• The provider must ensure that the share level being purchased is affordable for the applicant and meets their needs and cirucmstances as determined by a regulated, qualified mortgage or financial advisor (and be able to evidence this). Providers should follow the advice provided by the advisor for all mortgage and financial matters.

What is changing?

• Homes England’s affordability calculator will be withdrawn on Wednesday 31st July 2024, along with our advisory guidance regarding the minimum 25% and maximum 45% net mortgageable household income thresholds. Mortgage or financial advisors will determine the suitable proportion or amount of an applicant’s income that can be spent on housing costs.
• More transparency from providers, including publishing their first come, first served policy (a requirement) and other policies they may have.
• Introduction of a new affordability methodology which more closely aligns with mortgage lender methodology.
• The use of an advisor sign-off sheet and budget planner to confirm affordability and evidence the outcome. This will become a fundamental Homes England Compliance Audit requirement.

When is the guidance changing?

The updated guidance will go live after Wednesday 31st July 2024. Homes England has asked that all members covered by the guidance are familiar with the changes and have done what is needed to be compliant by the go live date. Members are encouraged to share this with their independent financial or mortgage advisors.

How can I find out more?

The full updated guidance, along with the original, can be found online. There is also a list of frequently asked questions covering the key changes.

Homes England has cancelled their two virtual sessions to support the introduction of the updated guidance in light of the general election. Members can instead email with any questions.