UK (Parliament Politics Magazine) – Housing associations are accused of misleading buyers of “affordable” homes, with service charges up by 400%, causing financial hardship for residents.
As reported by The Guardian, housing associations are under scrutiny for being accused of mis-selling “affordable” homes. Complaints have emerged about service charges that have increased, in some cases by more than 400%, after residents moved in.
What’s behind the rising service charges on shared ownership homes?
An investigation by the Observer into marketing and property documents shows how potential buyers facing financial challenges are encouraged to consider shared ownership homes. The report highlights that these homes are advertised with monthly service charges as low as £120 per month, appealing to those who may be struggling with higher housing costs.
Residents have alleged that housing associations have provided inaccurate estimates of the expected charges, with some costs now surpassing £650 a month.
Under the shared ownership scheme, buyers are permitted to acquire a share in a leasehold property, with applicants required to pass income tests to prove they are eligible and can afford the monthly payments.
How residents are taking legal action over the service charge scandal?
Last week, it was revealed that the Social Housing Action Campaign, a group representing residents, plans to take legal action over the ongoing service charge dispute. The scandal has not only affected tenants in social housing but also residents in shared ownership properties and other leaseholders.
The campaign plans to request a judicial inquiry if the National Audit Office declines to review the matter. In the last ten years, housing associations have constructed and sold over 100,000 shared ownership homes. Residents are alleging negligence for selling properties with service charges that the government has described as “unreasonable and excessive” in certain cases.
What did the government propose in the latest white paper on leasehold reform?
A white paper released by the government last week revealed proposals to ban the sale of new leasehold flats and implement a new type of property ownership called commonhold. Officials have expressed their commitment to enabling residents to convert existing leasehold properties into the new system, but no further details have been shared yet.
What commitment did the Ministry of Housing make regarding leasehold reform?
A spokesperson for the Ministry of Housing, Communities and Local Government stated,
“Our commonhold white paper has just set out further action this government will take to provide immediate relief to leaseholders suffering now and a commitment to doing what is necessary to bring the feudal leasehold system to an end.”
They said,
“We want to apologise to Mr Duffy for the distress he has experienced about the service charges for his home. We do not control the costs incurred for services leading to the service charge.”
A department representative stated,
“We recognise that any cost increase can be concerning and unwelcome, and have a range of support available and are committed to working with the managing agent to ensure that we do all we can to keep costs down for our customers.”
What did the National Housing Federation say about the impact of rising service charges?
Housing associations said they do not earn a profit from service charges, which are generally calculated by third-party management companies.
Kate Henderson, CEO of the National Housing Federation, which represents the associations, stated,
“Spiralling insurance premiums are affecting all buildings, including shared ownership. Increasing costs across the board, including building safety and rising inflation, have meant significant increases in the price of services and materials.”
She added,
“The sector trend over the last five years has been to undercharge for service charges. In 2024, housing associations collected £2bn in service charge income, compared with expenditure of £2.6bn.”
How are rising service charges affecting residents at Clarion Housing?
George Andain, a sales professional in sustainable power solutions, noticed his service charge at Clarion Housing Association flats in central Brighton rose from £120 per month in 2021 to £390 for the 2024-25 year.
He stated, “This is ruining people’s lives,” adding, “We’re trapped with these service charges. We can’t get out and we’re racking up debt we can’t afford. What’s the point of selling affordable homes if they are not affordable within 18 months?”
Bridget Cotter, a university lecturer, relocated to her flat in the same development in 2022 and has seen her monthly service charge increase from £145 to £372 for the 2023-24 period.
She said,
“I feel this was mis-sold. Clarion had a responsibility to scrutinise the estimated service charge cost. I’m so worried because my debt is racking up and I’m struggling to afford my rent and service charge.”
The Labour government has pledged to build 1.5 million houses over the next parliament in an effort to address the UK housing crisis.