In late 2019, the secretary of state for housing, Robert Jenrick, announced a new pilot ‘Shared Ownership Right to Buy’ (SORTB) scheme whereby Housing Association (HA) tenants will be able to buy a share in their home for as little as 10%.

The initiative seeks to help social housing tenants purchase a share in their current home and allow them to staircase to 100%, mirroring that of the shared ownership scheme. This follows on from discussions of a new shared ownership model and provides an alternative for affordable housing.

How will this be implemented?

Tenants will receive an automatic right to buy a share in their current Housing Association property from as little as 10%. This measure sees a decrease in the initial percentage available for shared ownership properties, which is currently set at 25%.

The government have stated that a tenant currently in a £200,000 property could by a 10% share for as little as £20,000, with a deposit of £2,000 and an £18,000 mortgage. From this, it is apparent that the government are seeking to promote home ownership and assist even more people get onto the property ladder. 

Some HA properties provide for a statutory right for the tenant to purchase their current home at a discounted value through a preserved Right to Buy, however no such right exists for them to buy a share. Therefore, this initiative will provide an alternative means for tenants to be able to purchase their own home and promote affordability in the housing sector.

Who is eligible?

It has been announced that such a scheme would apply to affordable housing tenants in social rented properties. There is little discussion surrounding whether there are further criteria or restrictions to be imposed.

Currently, the government are keen to implement this scheme for new build Housing Association stock. However, they are determined for this programme to be as widely available as possible and will work directly with Housing Associations on a voluntary basis to consider what can be offered to existing tenants.

The National Housing Federation believes there could be as many as 850,000 tenants who will be able to benefit from the scheme.

What does this mean for Housing Associations?

A concern for Housing Associations is that converting existing stock into shared ownership may lead to an increase in borrowing costs. This is because Associations are currently able to borrow at lower rates for social rented units. Despite this, Jenrick has assured that this is unlikely to make a ‘material difference’ to lending and should not be affected by the scheme.

Furthermore, there is discussion that the initiative could be rolled out for new build properties by providing grant funding on the basis that the HA’s adopt the scheme. However, there is concern that there will be no clear distinction between shared ownership and social rent, with fears that the latter could diminish.

On the other hand, as this would be a voluntary scheme for existing stock that does not fall within the new build bracket, HA’s will be able to decide if and how to implement the initiative, therefore allowing them to retain a level of control and flexibility over their stock. 

It should be noted that the government have announced that such a scheme will not be available to tenants of local authority homes who already benefit from the preserved right to buy.

How can Capsticks help?

Our Housing and Regeneration lawyers are experts in low-cost home ownership, acting for over 200 housing associations on development projects, financing and property transactions.

If you have any queries around what is discussed in this article or need help with a similar matter at your organisation, please contact Nalton Stembari, James Howard or any of your contacts at Capsticks to find out more about how we can help.