DLUHC intervenes on shared ownership rents to ‘protect’ residents

It is the second major government intervention on shared ownership within the past three years. In 2021, ministers introduced a slew of changes, including allowing buyers to acquire an initial stake of 10 per cent in a home.

Under the latest changes, shared owners who buy new homes delivered through the Affordable Homes Programme (AHP) and via Section 106 developer contributions will benefit from the shift, the Department for Levelling Up, Housing and Communities (DLUHC) said.

It will also apply to the leases of new shared owners who purchase a leasehold interest in their homes through the Right to Shared Ownership.

Under the current rent standard for other social housing, landlords are only able to increase rents by CPI plus one per cent. 

However the government intervened last November to cap rent increases at seven per cent amid soaring inflation and the cost of living crisis. 

Housing associations with shared ownership portfolios subsequently followed the move in capping rents for the part-buy, part-rent tenure.

In other changes announced yesterday, Homes England is amending the rent review schedule of its model shared ownership lease to make it clear that registered providers of social housing have discretion to increase rents by less than CPI plus one per cent. 

“This ensures that providers have greater flexibility to protect new shared owners from particularly high rent increases during periods of high inflation,” DLUHC said in a policy paper. 

The floor for shared ownership rent has also been changed from 0.5 per cent to zero per cent, which means that rents cannot be increased if CPI is minus one per cent or lower, the department said. 

However the government said it is exempting certain new shared ownership homes from the reforms. This includes new homes that are already in contract to deliver via the Affordable Homes Programme. 

“This is to ensure that providers can continue to deliver these new homes, where the terms of their delivery have already been officially finalised with Homes England and the Greater London Authority,” DLUHC said. 

The government is also aiming to protect shared owners under its Renters’ Reform Bill. The legislation, once passed, will mean shared owners cannot be considered assured tenants, which should offer then same statutory protections from forfeiture as other leaseholders.