Shared Ownership Rents - sky high

RichardTheComic

Hi there, this isn't a shared ownership bashing thread. Are there any statutory rules in place to ensure that housing associations that receive social housing grants keep their homes affordable. All the literature say its a subsidised rent - but is that really the case? Take this as an example: http://www.hellohomes.org.uk/main.cfm?Type=PROPDETA&propID=1026&pcode=NN15NJ

This flat has been for sale for 2 years. The 25% share is very affordable from a mortgage perspective, but the shared ownership rent at £440 for the 75% 'unowned' + Service charge of £92.51 means it would surely be out of the range of most people. EMH Homes believe someone on £15,000 could purchase this property - but that would represent a total cost of nearly 60% their gross income!

Aren't there rules in place to stop this sort of thing. The yield EMH Homes is generating on their 75% retained interest in the leasehold on that flat is the kind of yield I'd expect from a BTL investor, rather than a housing association providing low-cost home ownership.

RichardTheComic

apologies for nudging this thread, but really interested in getting ppl's views. sorry if this is in the wrong forum.

libf

The increase in rent is written into my shared ownership lease, and is linked to inflation.

I moved in when the place was first built, and in fact my rent/maintenance charges went down two years in a row because they'd over estimated the cost of communal charges initially.

Has the place in your link been shared ownership for a long time? Maybe the rent has crept up over the years?

Edit: I actually have my lease scanned so I've looked up the formula...

Existing Gross Rent * (RPI in Sept 2014/RPI in Sept 2013)*1.005 = New Gross Rent
Then if you own 25%, you pay 75% of the gross rent.

RichardTheComic

Hi libf - the property has been shared ownership since 2004 I believe. It seems to suggest, based on what you've said that the rent was possibly set too high in the first instance and the housing association has chosen to increase the rent by the maximum allowable under the calculation in the lease every year. It just seems disgraceful to me, that what's meant to be 'affordable' is clearly not. I'm working out costs for the flat would be in the region of £680 pcm, which just seems wrong to me.

libf

Is that still cheap in the context of the area?

Certainly, I have found shared ownership to be excellent value for money in Oxford and never would have been able to afford to rent privately anywhere in the city even nearly as cheaply. And now that prices have risen I can use the equity in my property as a deposit for somewhere bigger and free up the shared ownership flat for someone else who needs it.

RichardTheComic

hi libf - no it's not cheap in the context of Northampton. EMH Homes rents social rent properties in that development at £320 pcm and a privately rented apartment is £550 pcm (incl service charge), so it exceeds the market rent.

PS i benefited from shared ownership myself 12 years ago - so I know it can work. I'm investigating shared ownership on behalf of someone else btw.