Announcement of the September ‘RPI’ inflation figure has sealed the rent rises that the majority of shared owners will be expected to pay. The RPI increase was confirmed by government as 12.6%, which translates into rent increases of 13.1% – 14.6%, depending on the formula used in the lease.
Worst of Both Worlds
Shared owners arguably suffer the worst of both worlds because they own part of their home, but rent the remainder from a landlord. Rent levels are set out in their lease (tenancy) agreement and is usually based on the September Retail Price Index (RPI) figure, with an an additional amount between 0.5% and 2% added on top.
With inflation currently rampant, this has led to shocking levels of rent increases for shared owners. Many have also had to absorb mini-budget-induced sharp increases in the mortgages they hold on the share they own.
Olive*, an L&Q shared owner says:
I’m shocked our rents will rise like this. We’re already paying more on our mortgage and our wages aren’t keeping up. I’m really worried we will get into arrears. I lie awake with the worry of it all. It’s a real possibility that we’re facing now that we won’t be able to stay in our home.“Olive, L&Q Shared Owner
Shared Owners are responsible for the full costs of repairs and maintenance, rather than just a proportion based on the percentage of ownership. These costs have also risen sharply over the last few months.
The use of the RPI inflation to calculate annual rent increases is set out in the government’s Homes England model lease for shared ownership.
However, the Office for National Statistics, another government department, has repudiated this measure saying that RPI does not accurately reflect the costs of essential goods and services.
This rise will inevitably push shared owners into arrears, or into deeper arrears if they’re already struggling with rents. Many fear eviction and homelessness.
The rising costs of rents and service charges is a law of diminishing returns for housing association landlords. Putting up rents offers increasingly marginal returns as renters simply default because they can no longer afford to pay. Growing numbers of tenants and residents in arrears does not create a stable business, and is symptomatic of a broken housing model.
SHAC Demands Rent and Service Charge Freeze
SHAC is campaigning alongside a number of housing groups to demand that government freezes social and shared owner rents and service charges.
Government is currently signalling a preference for a 5% increase to the social rent cap, and many housing associations have traditionally raised rents by the full amount allowed. Even this is too high, and it does not protect shared owners. Nor does it control the amount that social landlords can increase their service charges.
* Not her real name.
30 October 2022
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