Service Charges soar by 40%

Many residents who bought shared-ownership properties that were built as affordable homes, have been recently sent bills with increases of more than 40%. A number of these residents are saying they are unable to sell the properties now, because of these extortionate charges they have had inflicted upon them, with no cap on future increases in sight.

A recent investigation by the Observer newspaper has found that some of the UK’s largest housing providers have drastically increased their annual service charges by thousands of pounds, thereby thrusting their residents into financial crisis.

In most cases analysed, residents have said they had not been given detailed evidence of the costs to back-up the sharp rise in service charges. Furthermore, one expert is warning a parliamentary inquiry that the rises are quite often uncontrollable.

Many in shared-ownership homes have stated that service charge costs are now higher than their rents. Over 1,000 of the affected residents across the country are now threatening a refusal to pay these crippling costs.n

The findings of this worrying investigation has placed even more pressure on the beleaguered Housing Secretary Michael Gove, who quite recently has been forced to water down his highly publicised plans for leasehold reform in a bill that is currently going through parliament. A spokesperson for Gove stated to the media that ‘increases in service charges without proper justification are completely unacceptable”, but that the Government’s new bill would “strengthen protection for leaseholders”.

Richard Blakeway – the Housing Ombudsman has issued a warning that there may need to be a “fundamental rethink” of how shared-ownership schemes operate.

Suzanne Muna from the Social Housing Action campaign said, “These are extortionate demands beyond anything which seems reasonable and bear no resemblance to the services provided. There is wide-spread service-charge abuse.

“Residents can’t move because potential buyers are not going to want to buy properties with these service charges.” She said many residents were striking over the alleged abuse and called for ministers to intervene.

Labour MP Clive Betts, Chair of the Levelling Up, Housing and Communities committee, said people in affordable homes were facing “outrageous” demands. “There is absolutely no clarity on what people are being charged for,” he stated.

Although shared-ownership properties have strict controlled rent rises in place, there are however, no similar limits on service charges. Residents who were required to meet rigorous eligibility and affordability tests when they purchased shared-ownership homes, have since complained that they can no longer afford them because of the high service charge costs.

Residents in some shared-ownership homes in London have been told they face service charge increases of nearly 40%. Upon further investigation, the reasons behind these high bills can include paying for neighbourhood security patrols amongst other things.

The Housing Ombudsman said it had examined over 85 complaints concerning service charges in shared-ownership properties in 2023-24 and found maladministration in 79% of these cases. One of the highest annual service charges in the country is a shared-ownership one-bedroom flat in London’s Kings Cross, that has a demand of almost £16,000 according to a recent report by the BBC.

“There may need to be a fundamental rethink about how shared-ownership works,” said Blakeway. “Too often we are finding that we are upholding complaints. This is often because charges are opaque, and landlords have not provided transparent or detailed information to residents when challenged.

“There can also be concerns about the quality and level of service provided which can rise to the feelings of unfairness.”

A parliamentary inquiry published by the Levelling Up, Housing and Communities Committee recently warned that shared-property ownership homes were failing to deliver an affordable route to home ownership, especially as these schemes are often seen as a way of getting onto the housing ladder.

As widely reported in the media last year, Michael Gove said he wanted to abolish the “feudal” leasehold system, but has since scaled down his ambitious leasehold and freehold reform bill. The Labour Peer Baroness Taylor of Stevenage described the bill as a “virtually eviscerated shell”.

Shared-home ownerships has always been viewed as a vital part of the Government’s pledge to provide affordable homes, but it now seems the scheme is in jeopardy as it unravels over the crippling service charges now faced by the residents, many of whom live in London.

Over the last decade, Housing associations have delivered more than 100,000 shared-ownership properties. The scheme is promoted as an affordable way to get long-term housing security.

Under the strict shared-home ownership schemes, a prospective shared owner must have a household income of £90,000 or less in London and meet further conditions, one of which is being a first-time buyer. The buyer takes an initial share of the property, typically 25% and can then purchase additional stakes in it until they eventually have 100% ownership.

A shared owner’s outgoings will consist of a mortgage on the stake they own, plus a rent on the remaining share. They also have to factor in service charge increases on the property.

Some proposed service charge increases on shared properties for 2023/24 are more than a whopping 80% according to recently consulted residents.

Evidence submitted to the recent parliamentary inquiry on shared-ownership has additionally revealed that many prospective buyers have not been properly warned or adequately advised of the risk of these charges skyrocketing once they have moved in.

“Rising rents, uncapped service charges, liability for repairs and maintenance costs and complex leases make shared-ownership an unbearable reality for many people,” the Levelling Up, Housing and Communities Committee report on shared-ownership schemes recently concluded.