Six years ago, one of Inside Croydon’s loyal readers reported on the sheer unaffordability of the shared ownership homes being built in the borough by Brick by Brick. Now, as ANDREW FISHER explains, a parliamentary select committee has published a report that suggests our reader was right all along…

The UK has a housing crisis – it is a crisis of rough sleeping, homelessness and widespread unaffordability.

Rough sleeping has more than doubled since 2010. The number of children living in temporary accommodation – with no permanent home – is at record levels. And last year the average private rent increased by more than 9%. House prices are more unaffordable than ever: in Croydon, the average house price is £385,885 – up nearly 450% in 30 years.

Housing policy has been a growing failure for decades now. When I was born, about 30% of people lived in council housing. Now that figure is barely above 10%.

A generation ago, 65% of 25-to-34-year-olds had secured a mortgage and were on the road to becoming homeowners. Today, that figure is about 25%.

The reason for that massive collapse in homeownership among young people is sharply rising house prices versus stagnant wages. If we look over the last 14 years, house prices have increased by roughly 40%, while wages have stagnated in real terms.

Instead of increasing housebuilding, or building council homes, or introducing rent controls (solutions that might actually tackle the crisis of affordability), one of the “solutions” offered by politicians has been shared ownership.

In recent years, about one-third of all new “affordable housing” built by housing associations, councils or private developers has been shared ownership.

People who take on a shared ownership property buy a part of the flat or house from a housing provider, and then pay subsidised rent on the remaining share, which is retained by the provider, who becomes their landlord. The share bought can be anything between 10% to 75% – depending on what they can get a mortgage for.

Financial burden: the majority of Brick by Brick’s ‘affordable’ homes in fact went for sale as shared ownership properties

When first introduced, shared ownership homes were built with a view of providing homes for public lower-paid service workers, including teachers, nurses and firefighters, for whom even the typical 10% deposit for a mortgage on a flat or house was way beyond their savings.

The theory goes that because many people are priced out of housing, buying a part-stake is the next best option. The buyer then has the option of acquiring a bigger stake as their finances improve – this is known as “staircasing”, the process of climbing up the home ownership staircase.

But as well as having to pay their mortgage and their rent, shared ownership purchasers also have to pay ground rent and service charges. It soon became clear that shared ownership offered few of the advantages of being a homeowner, while carrying most of the disadvantages, and costs, of being a tenant.

When Croydon Council established Brick by Brick as its wholly owned house-builder in 2015, it promised that half of all the homes built would be “affordable”. But by “affordable”, they actually meant shared ownership homes.

This plan may have been flawed from the beginning in terms of delivering the truly affordable homes that this borough needs so desperately. It was not long before it was also discovered that Brick by Brick failed to get itself registered as a provider of shared ownership homes.

In 2021, Brick by Brick sold 85 of its properties in Croydon (including in Upper Norwood, Thornton Heath and South Croydon) for £29million to RESI Housing, a for-profit investment vehicle that was registered to sell shared ownership schemes. Croydon Council had lent Brick by Brick £214million between 2015 and 2020, so this was a relatively small repayment to the beleaguered council. And it has done little to resolve the housing crisis in the borough.

Those who have taken out mortgages to buy a share in these Croydon homes are only now discovering some of the difficulties that come with living in shared ownership homes.

As with leasehold properties, there are growing concerns about ground rents and service charges levied by some unscrupulous providers. The shared ownership purchaser is a leaseholder, who pays rent to the freeholder – either a housing association or property company.

And banks are likely to charge shared ownership purchasers a premium on their mortgages. Research by Cambridge University academics found lenders charging higher interest rates on shared ownership mortgages, due to perceptions of higher risk.

The consumer magazine Which? says that if the costs of rent, ground rent and service charges are combined with a shared ownership owner’s mortgage payment and come to more than 45% of their overall income, “You may struggle to pass affordability checks”.

‘An unbearable reality… a blizzard of charges and an unfair burden of repair costs’

Despite shared ownership purchasers being only partial owners of their homes, they have to pay a 100% share of service charges and repair bills. Shared ownership is a great deal for housing developers and providers, but less good for those looking for a place to call home.

Last week a House of Commons select committee published a report critical of this kind of housing product.

On affordability, shared ownership had “failed to deliver… for too many people, for too long”, the committee of MPs said in their report.

The committee, chaired by Labour’s Clive Betts but with a majority of Conservative MPs, found that uncapped service charges, rising rents and unfair charges for maintenance costs meant that in reality, shared ownership was either unaffordable at the outset for many would-be part-buyers, or soon became so.

Affordability problems: select committee chair Clive Betts MP

As with leasehold and the private rented sector, a lack of regulation leaves all the power with freeholders and landlords – and leaves tenants, leaseholds and part-buyers fleeced.

The Levelling Up, Housing and Communities Committee stated that rising service charges have often left owners “regretting having made the purchase in the first place”.

One shared ownership purchaser in Croydon told me that the provider had switched the water off to their building for days – due to leaks – without any reduction in service charges.

The owners weren’t consulted on repairs, but were saddled with paying 100% of the bill, even if they only owned a fraction of the overall property.

The select committee heard evidence that for some shared ownership purchasers their service charges had risen by more than 140% in two years, and evidence was submitted that showed a housing association attempting to introduce ground rent charges that doubled every five years.

Betts said the hopes raised by shared ownership had become “an unbearable reality, where a blizzard of charges and an unfair burden for maintenance and repair costs means that they are unable to afford full home ownership.

“Rising rents, hefty service charges, complex leases, disproportionate repairs and maintenance costs are experienced by too many people who take the shared ownership route. The Government needs to take clear and urgent action to tackle these issues.”

The report also recommends the Government examines how it can ensure shared owners are only ever liable for repairs and maintenance costs proportionate to the size of share they own.

This is particular issue following the cladding scandal, when many properties were forced to remove dangerous, flammable cladding, following the Grenfell Tower tragedy. This was a failure by housebuilders, a failure of government regulation – but it has been leaseholders and shared ownership purchasers footing the bill.

The End our Cladding Scandal campaign says shared owners have faced “exponential increases in service charges, as well as above-inflation rent increases”, and those with dubious cladding still on their buildings cannot remortgage or sell their property – through no fault of their own.

Billed as a solution to the housing crisis, for many people shared ownership has only been a route to more housing nightmares, rather than the dream of home ownership.

• From 2015 to 2019, Andrew Fisher was the Labour Party’s Director of Policy under Jeremy Corbyn. Fisher is also the author of The Failed Experiment – and how to build an economy that works, and now writes columns for InsideCroydon, the i newspaper and is a regular pundit on BBC and Sky News programmes

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