The Advertising Standards Agency has ruled that adverts for shared ownership properties misled prospective buyers by leaving out essential information on costs, and failing to alert them to the greater risks associated with this product.
We … understood that there were potential risks that existed with Shared Ownership which would not exist for those buying a property outright. Specifically, Shared Ownership schemes were, in the eyes of the law, considered to be ‘assured tenancies
… We therefore considered that the ad should have made those risks clear when describing the scheme as “part buy, part rent”, or stating “It’s yours” […] by omitting that material information, the claims exaggerated the level of ownership and proprietary rights attained by those who took on a Shared Ownership arrangement. For those reasons, we concluded that the ad was misleading.”Advertising Standards Authority, 21 September 2022
The ruling was in response to a complaint by the campaign group Shared Ownership Resources (SOR) about an advert on a website owned at the time by the National Housing Federation, a membership and lobbying organisation representing housing associations.
Sue Philips from SOR explains:
Shared owners are exposed to greater risk, and have fewer protections, than leaseholders more generally. For example, shared owners face restrictions on subletting and sale, and do not have a statutory right to lease extension.Sue Philips, Shared Ownership Resources
Shared Ownership is a type of tenancy subsidised and heavily promoted by government, and offered by many housing associations. Tenants ‘buy’ (usually with a mortgage) a share of 25%, 50%, or 75% of the property, and pay rent to a landlord on the remaining percentage.
They are often unaware at the time of purchase that no matter how small the share they ‘own’, they will be responsible for 100% of the repairs and maintenance costs for their property, and will need to pay service charges for communal services. Some have also fallen into the cladding crisis, unable to sell their homes.
Step on a Broken Ladder
Shared Ownership is promoted using the argument that a ‘part rent, part buy’ arrangement allows residents to take a step on the property ladder when buying a whole property would be prohibitively expensive. Too many end up regretting the decision.
Denise Ramsey, for example, dreamt of owning her own home. But her Optivo shared ownership home turned into a nightmare. Denise explains that “I own nothing but am responsible for everything. I face a bill of up to £90,000 for building safety which is likely to bankrupt me, leaving me homeless.“ (My SO Home). Denise’s experiences and many similar stories highlighted by SOR demonstrate just how many pitfalls there are with this type of tenancy.
Those wanting to enter this arrangement have to ‘buy’ the maximum share they can afford, but are vulnerable to massive rent increases, and now rising mortgage interest rates too.
Most tenancies base the annual rent increase on the RPI inflation measure, with an additional percentage (between 0.5% and 2%). RPI is currently rising at record rates and is not capped by government as social rents are.
Rent Freeze Demand for Shared Owners
Shared Ownership Resources supports SHAC’s call on Government to freeze rents and service charges during the cost of living crisis, and extend the freeze to service charges and shared ownership rents.
They have added their support for the Pledge, noting that people can sign as supporters if they don’t wish to withhold payment of their rent increases. Rent strikes can be a powerful tactic, but are always best done as part of a collective (on an estate or through SHAC for example), and the additional vulnerabilities of shared owners makes it more of an ‘option of last resort’ for them.
In May 2021, SHAC and other campaigners co-signed an open Letter to the National Trading Standards Estate and Letting Agency Team calling for the ‘assured tenancy’ nature of shared ownership to be made clearer to prospective buyers by any organisation advertising this product.
Addressing the Rent Crisis
Shared Ownership tenancies have been used by Government to imply support for home ownership among poorer sections of society, but in fact it merely provides landlords with a means to further exploit those facing housing shortages.
The solution to the housing crisis must start with controlling rents, and proper investment in genuinely affordable, public housing owned by councils. Rent caps on private and housing association rental properties based on average wages (rather than average prices) would also help make renting more accessible.
30 September 2022
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