Assembly members have warned such ‘affordable’ homes often face high interest rate mortgage payments and unregulated service charges, reports Kumail Jaffer, Local Democracy Reporter

Challenges around shared ownership properties are a “particular” issue for Londoners, the government’s housing minister has admitted.

The scheme – aimed at households who cannot afford to buy a property on the open market – allows people to purchase a share of their new home and pay regulated rent on the remainder.

Due to stringent restrictions, buyers must have a gross household income of no more than £90,000 a year and not already own a home. It is considered ‘affordable housing’ by the government.

However, assembly members have previously warned that such homes in the capital could become out of reach for many Londoners due to high interest rate mortgage payments and unregulated service charges. Last year, the London Assembly housing committee told the mayor to include “designing down service charges” as part of his updated London Plan.

Housing minister Matthew Pennycook, who has previously said there are “specific problems” with the scheme that need addressing, indicated that the issues are accentuated in London. “I think it’s a particular issue for London members and I face this in my own constituency,” the MP for Greenwich and Woolwich told the House of Commons housing, communities and local government committee last Tuesday (10th).

“We have seen across the country shared ownership working incredibly effectively and in some parts of the country it being a more problematic tenure with shared owners facing different challenges.

“There seems to me, on all the basis of the evidence we’ve got and the departments collected, some real regional discrepancies in terms of the […] consumer experience.”

One of the primary reasons for Londoners being susceptible to issues around these fees comes from the fact that the capital has the highest proportion of leasehold homes in the country, meaning they are at the mercy of high service charges and, in some cases, ground rent.

Khan himself has admitted that shared ownership “will not be suitable for everyone” in the capital, with City Hall now pivoting its priority towards social rent after starting 42,070 shared ownership homes during the 2016-2023 Affordable Home Programme (AHP). There are thought to be around 60,000 such properties in London, compared to 190,000 in other UK regions.

Pennycook said the “affordability pressures that shared owners face are, broadly, high staircasing and resale fees […] and then high and rising service charges”.

He also noted that staircasing – where owners buy additional shares to increase their equity and reduce monthly rent – can be “complex and costly”.

Figures from 2023 from the Regulator for Social Housing showed that fewer than 2,000 households in London managed to staircase to 100%, at which point they would own their property outright.

“That is why we are reforming the shared ownership model to provide greater flexibility, including smaller staircasing increments,” the minister added. “We are thinking very carefully about what more can be done to improve the staircasing process and the wider customer experience.”

Zoë Garbett, chair of the London Assembly’s housing committee, told the Local Democracy Reporting Service (LDRS): “Ensuring Londoners have access to high quality, affordable housing, must be a key priority.

“The London Assembly housing committee carried out an investigation into the challenges associated with leasehold homes in London, which included looking at service charges for shared ownership homes.

“Thousands of Londoners are living in shared ownership homes funded by the mayor. However, many shared owners told us how current practice on service charges can undermine the very point of shared ownership – of being an affordable housing option.

“While service charges may appear affordable at the time of sale for some, large increases can undermine the affordability of shared ownership over time.

“Since the income range of those who qualify for shared ownership is wide, those at the lower end of this range experience the impact of these increases more acutely.

“Although it is not always possible to precisely predict service charge increases due to the complex and sometimes unexpected factors that influence them, shared owners deserve better information at the time of sale.”

City Hall Labour’s housing spokesperson Sem Moema backed the housing minister, adding: “Shared ownership is becoming an increasingly concerning issue in London.

“I know people who entered shared ownership in good faith, only to see their homes become progressively unaffordable due to rising rents and staggering service charge increases on top of rising mortgage costs we saw under the previous government. For many, what was meant to be a first step onto the housing ladder is now a source of real financial pressure.

“But more work must be done to ensure shared ownership remains a genuinely affordable tenure for Londoners, with greater transparency on service charges, stronger consumer protections and a clearer focus on long-term affordability.”

A spokesperson for Mayor of London Sir Sadiq Khan told the LDRS: “The mayor has taken steps within his power to support the affordability of shared ownership homes for Londoners, including using City Hall’s planning powers to ensure that housing costs for shared ownership should not exceed 40% of a household’s net income.

“City Hall’s service charges charter has been set up in collaboration with housing providers and leaseholders to ensure that service charges are fair, affordable and transparent, particularly for those in shared ownership properties.

“The mayor will always prioritise getting as many social and affordable homes built as possible and has secured a record investment of £11.7billion to deliver social and affordable housing over the next decade as we build a better and fairer city for everyone.”

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