Optivo chief executive Paul Hackett says changes could imperil delivery of 180,000-home affordable homes programme
Government changes to the rules around shared ownership sales could nearly double the amount of grant needed to build new homes and imperil the government’s 180,000-home affordable housing programme, according a major social landlord.
Paul Hackett, chief executive of G15 housing association Optivo (pictured, right) said an initial costing undertaken by the organisation of the rule changes suggested that homes will need an extra £25,000 in grant per unit to make them viable to develop.
The changes to the shared ownership system, set out last week, give housing association tenants the right to shared ownership on most new build properties, and allow them to purchase a much smaller initial stake, of as little as 10% of the value of the property, making the product available to many more people.
Crucially, the changes will also mean that landlords of the homes – usually housing associations – will have to pay the full cost of any repairs and maintenance on the property for 10 years after the shared ownership purchase is first made.
Shared ownership properties are one where a person buys a proportion of a home as a step to getting on the housing ladder, paying a rental charge on the remaining proportion that he or she doesn’t own. Currently the buyers of shared ownership properties are responsible for the whole cost of property repairs and a proportion of maintenance costs from day one, despite not owning all of the home.
Hackett said the changes made shared ownership much more attractive for buyers, which was likely to increase demand, but also hugely increased the financial costs on developing new homes.
In particular, he said initial modelling by Optivo suggested the liability for 10 years of repair and maintenance costs was likely to increase the average government grant needed per property to enable schemes to go ahead by £25,000, from around £30,000 at present.
Hackett said: “The biggest change is the ten-year repair liability. The question is where is the additional money going to come from? If greater subsidy is required per unit, then there are going to be fewer homes built with the government’s money.”
This specific change, announced as part of the “new model for shared ownership” published by the government last week, has not been formally consulted upon, unlike other parts of the package.
“We’ll have to see the detailed leases, but if we’re looking at full responsibility for internal and external repairs that’s the magnitude of it,” he said.
Hackett said the change called in to question the ability to deliver the 180,000 homes promised under the government’s new £11.5bn affordable housing programme, launched last week, which he said would be “a real challenge”.
Hackett added that the reduction in the size of the initial stake buyers can purchase, from 25% to 10%, meant housing associations will also bring in less cash per home, meaning they will have to borrow more to finance construction. It will also reduce the profitability, measured by Internal Rate of Return of shared ownership properties, meaning fewer would be likely to be developed.
“From a consumer point of view, these changes should help more people, which is great. But they are going to have implications for overall delivery,” he said
Hackett is not the first to raise concerns over the system. Last week the director of policy at the National Housing Federation, Catherine Ryder, said she was worried about the implications of the changes upon the viability of shared ownership schemes, with “additional potential risks” loaded on to associations.
The chief executive of Peabody, Brendan Sarsfield, also said the new system affected its financial capacity to sustain a long term development programme.