Shared ownership

Shared ownership was often in our thoughts in 2023: from the impact of the Right to Shared Ownership, to rent caps, and supporting shared owners living in homes with building safety issues. We see this continuing in 2024, for example:

• Parliamentary inquiry - Parliament's Levelling Up, Homes and Community Committee was hearing oral evidence in its Shared Ownership Inquiry before Christmas. The inquiry was set up to "examine the challenges associated with shared home ownership schemes" and expected to "explore challenges around reselling, affordability issues such as service charges and maintenance responsibilities, and questions around mortgage availability and the limited range of providers"
• Secretary of State letter to RPs - meanwhile, the Secretary of State for Levelling Up, Housing and Communities was writing to registered providers of social housing in England about changes to the capital funding guide "to clarify and improve the options available to registered providers of social housing to help support shared owners affected by building safety issues". The letter encouraged RPs to use those options "wherever possible". There is no one size fits all solution to these complex issues, so we expect RPs to tailor their approaches based on their own policies and stock
• Will rents need to be rebased or waived again? Clients have asked us whether the new rent settlement (see Part 1 of this series) means RPs will need to rebase or waive rents this year. They did so last year to implement the voluntary 7% rent cap for shared ownership units, and consents from funders were requested in many cases. We anticipate RPs will again take different approaches to this issue. This will partly be influenced by the approach they took as an organisation to the voluntary rent cap last year

So we expect shared ownership to remain a hot topic in 2024 and will be interested to read the inquiry's recommendations when they are published.

Modern Methods of Construction (MMC)

Despite some negative press last year on big players in the MMC industry (e.g. L&G and Ilke Homes) entering administration and closing their factory doors, 2023 ended on a slightly more promising note.

In October, the House of Lords Built Environment Committee launched the inquiry "Modern methods of construction – what's gone wrong?". The inquiry was set up to "understand the barriers to the increased delivery of MMC homes and to what extent the Government’s approach to supporting MMC development is effectively overcoming and resolving these barriers".

It invited a variety of speakers to help the Committee determine the pitfalls and positives of MMC. Some of the most notable evidence was from TopHat's chair, who reiterated the Government cannot deliver on its housing targets without supporting Category 1 modular building. Category 1 is fully modular houses built in a factory and has seen less take up than the panellised systems known as Category 2. He also stated, "when a traditional contractor goes bust, nobody says the whole of the contracting industry is going to go bust”.

The Committee delivered a series of questions and recommendations to the Department of Levelling Up, Housing and Communities (DLUHC). Suggestions included Homes England increasing MMC requirements for housing associations within its Affordable Homes Programme from the current 25%. The questions focussed on the obstacles to MMC raised in the inquiry, such as:

• risk aversion on the part of warranty providers and insurance companies noting a “reticence of insurance providers to accept compliance with building regulations as sufficient”; and
• insufficient clarity for planning requirements.

The Committee also asked the Government to consider why successful foreign modular firms have not established themselves in the UK, after firms presented evidence that they had difficulties getting through the procurement network because of lack of experience.

DLUHC’s full strategy and response has been requested by the Committee by no later than the end of February. We eagerly await the publication of this response to influence the future of MMC homes.

New legislation

Parliament continues to be busy with new residential property legislation. Some of the new legislation the politicians are still debating and negotiating is:

• Renters Reform Bill - proposals include:
  • abolition of the assured shorthold tenancy (AST) regime and "no fault" evictions has grabbed headlines. The Tenancy Standard (one of the four Consumer Standards RPs must comply with) allows ASTs, and many RPs use ASTs for starter tenancies and as demoted tenancies to deal with anti-social behaviour. But most general needs social and affordable housing is let on assured tenancies, which will not be affected by those changes
  • the end of fixed term tenancies - the Tenancy Standard currently allows fixed terms for a minimum of 5 years (or exceptionally no less than 2 years) in addition to any probationary tenancy period
  • fixed term tenancies of longer than 7 years will not be assured tenancies - this would mean a shared ownership lease would no longer be an assured tenancy, which would remove the threat of possession using grounds of rent arrears (on the part still owned by the RP)
• Leasehold and Freehold Reform Bill
  • Its main aims are to:
    • improve leaseholders' rights to enfranchise and extend their leases. We are keeping an eye on if (or how) it will affect shared ownership leases
    • introduce more regulation for service charges
    • regulate estate management charges so freehold owners on estates have similar rights to tenants who pay a service charge
  • Running alongside the Bill has been a consultation on restricting ground rents in existing leases. This follows the 2022 reform limiting ground rents in new leases to a peppercorn. We are awaiting the Government response which will make its way into the Bill
  • There is also the widely publicised ban on new leasehold houses which is yet to be introduced to the Bill
• Private Member's Bill - we also have a Private Members' Bill in the offing: the Affordable Housing (Conversion of Commercial Property) Bill. Its stated aim is "to make provision to enable local authorities to establish planning obligations relating to affordable housing in respect of the conversion of commercial property to residential use". We don't have any further information as the text of the Bill has not yet been published, but we'll be watching its Second Reading on 1 March with interest