'Affordable' housing:are London's shared-ownership homes still within reach of first-time buyers?

Paying a mortgage, rent and service charges can add up to high monthly costs for shared-ownership buyers in London...

Just how affordable is the capital’s affordable housing? For some 30 years, housing associations have been earning a reputation as the major supplier of affordable new homes for Londoners, with the largest 15 — known as G15 — building 10,000 a year.

It is a tough job. Land is so expensive in the capital that it can be hard to deliver a new-build flat within the budget of an average working Londoner — cue the Government’s Help to Buy schemes that enable first-timers to stretch their savings a bit further. But even as they claw their way into their first flat, sometimes nasty surprises await in the form of service charges and running costs that can appear disproportionately high.

In London, “affordable” has been broadened to include £450,000 starter homes that are way beyond the average Londoner’s £34,320 wage.

Shared ownership is a popular option, where households part buy, part rent a property. This enables the buying costs to be proportionally scaled down to match the percentage of the home bought. For example with a deposit of £9,900, you can buy a 30 per cent share — that would be £78,000 — in a studio in Mocha Court, Bow through East Thames housing association (0300 303 7333). As the share price is under £125,000 there is no stamp duty to pay.

For transactions completed from this month onwards, shared ownership is even easier thanks to the Government relaxing the eligibility rules. Gone is the priority that was given to key workers and those who have lived in the borough previously, along with the bedroom restriction. The maximum household income allowed has also been raised to £90,000 in the capital. All this is set to open up shared ownership to another 175,000 Londoners.

Driving the supply of shared-ownership homes are the housing associations, charitable organisations with a social mission to provide “affordable homes for ordinary Londoners”. The largest 15 already house one in 10 Londoners and manage 40,000 properties. But it’s hard to believe that shared-ownership homes coming to market at the moment priced up to £650,000 for a one-bedroom flat — at Catalyst Housing’s Portobello Square for example — have been built with “ordinary Londoners” in mind.

Up to £650,000: for one-bedroom shared-ownership flats at Portobello Square on the Notting Hill border, through Catalyst Housing

Then there is the service charge issue. The lack of government regulation means the costs and standards of services can vary dramatically. And is it reasonable that shared owners pay 100 per cent of the annual management fee despite also paying rent? Similarly, is it reasonable that the major shareholder, particularly a charity, should benefit from the lion’s share of the property’s appreciation without paying its share of the annual upkeep?

At L&G’s development in Chobham Manor near Walthamstow, you’ll be paying almost £3,000 a year for your 25 per cent stake in a one-bedroom flat. Such high service charges on a small stake can make a meaningful difference on passing the affordability criteria for a mortgage. They also make it harder for the buyer to save and increase their share of their home.

Portobello Square: one-bedroom shared-ownership flats for up to £650,000 for "ordinary Londoners"?

First-timers, it seems, can pay a high premium for a shared-ownership stake in a new-build development. Instead of gaining their freedom from renting, many find they have to share their home to cover the costs of the mortgage, the rental portion, plus the service charge.

The Department for Communities and Local Government says service charge costs must be “reasonable”. A spokesman said: “Shared ownership is extremely popular and is an effective way of helping people into home ownership, which is why we are extending it to many more people.

“Shared ownership is designed to work for both the homebuyer and landlords, and protections for leaseholders make clear that service charge costs must be reasonable.”

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