'My one-bed flat's service charge is now £16K a year'

A new report by MPs has found shared owners often end up "trapped" in properties they can no longer afford

When Aisling opened this year's annual service charge bill for the one-bedroom flat she owns with her partner, she immediately assumed it "must be a mistake".

They bought the flat in Kings Cross, north London, last year through a shared ownership scheme run by Islington and Shoreditch Housing Association (ISHA).

From Monday, her 2024 bill will rise by 274% from £4,200 to almost £16,000 for communal maintenance and services, on top of mortgage and rent.

The housing association said it was a leaseholder at the building and did not set the "outrageous" increase in charges, which was the responsibility of managing agent, JAR. The agent said it was "reviewing options" and hoped to update homeowners "shortly".

It comes as a report from a cross-party committee of MPs said shared ownership schemes were “drastically failing to deliver an affordable route to homeownership for too many people and subject buyers to uncapped service charges".

'I cried the whole night'

Aisling, who did not want to be identified in this report, is one of many shared owners that have contacted the BBC, frustrated about rising service charges.

She owns a 30% share in the property and pays rent for the rest - but says the increase in her service charge means she will go from paying an additional £350 a month to almost £1,310.

“When I realised that it wasn't a mistake, I was devastated. I literally cried the whole night. I just couldn't believe it,” she said.

Shared ownership was designed to be an affordable way for people who can not afford to buy a home outright to get on the property ladder, offering the option over time to "staircase", which means gradually buying a larger share in the property.

Such properties are marketed as “affordable” and people have to prove they earn under a specific amount to qualify for them - in London, a household income of £90,000 or less.

Aisling said: “The whole point of shared ownership is affordable housing, and you're means tested based on your income to be able to afford it - so how it can it increase a full £1,000 per month?”

She says the prospect of the rising bills are “so frightening and all-consuming” and she and her neighbours are “in the dark” about the exact reasons for the increase.

Shared owner Jessica Salgado says she is "angry about it, adding "I don't see it improving"

The Levelling Up, Housing and Communities (LUHC) committee report, published on Thursday, found shared owners often ended up "trapped" in properties they could no longer afford - and Aisling says she is among them and “feels powerless”.

The committee has made a number of recommendations to the government, including that shared owners are “only ever liable for repairs and maintenance costs proportionate to the size of share they own”.

Labour MP Clive Betts, chair of the LUHC committee, said: “We have found that for too many people shared ownership becomes an unbearable reality, where a blizzard of charges and an unfair burden for maintenance and repair costs means that they are unable to afford full homeownership.

“The government needs to take clear and urgent action to tackle these issues and ensure shared ownership genuinely delivers affordable homeownership”.

'Not justifiable'

In a statement about Aisling's case, ISHA chief executive Ruth Davison said: "Service charges are set by the managing agent, JAR, who is employed by the freeholder.

“We think the service charge increase is outrageous and not justifiable. We will be challenging it on behalf of our residents and will go to tribunal to fight it if we must.”

Fiona Docherty, managing director at JAR, says when "major works become necessary", the firm engages "with all homeowners to seek their input and do all that we can to ensure that costs are either mitigated or kept as reasonable as possible".

"We are reviewing options to see if some of the costs might be mitigated and hope to be able to update all homeowners shortly."

Jessica Salgado says her service charge increase makes her feel "completely out of control, and it's not a nice feeling"

Jessica Salgado owns 25% of her property at Elephant Park, formerly known as Heygate, in south London, and pays rent on the rest to her landlord L&Q.

She says she has also seen an increase in her annual service charge, by 38% from £269.01 last year to £372.07, even though she feels the shared facilities are "quite basic" - including a small communal foyer with mailboxes, and a paved garden with plants that is shared between three blocks of flats.

"I'm angry about it," she said, adding: "I don't see it improving - I see a situation that I'm going to find myself in year on year, where I'm getting a letter saying 'this is your increase and now you just need to pay it'.

"There's no option available to me to really challenge those costs, understand how they're being applied. So I feel completely out of control and it's not a nice feeling."

Adrian Shaw, head of rent and service charge at L&Q said: “L&Q is a charitable housing association and does not make profits from service charges.

“Unfortunately, this year’s costs are higher, largely as a result of building safety legislation creating the need for more building inspections and increasing building insurance costs."

Lewis Ryan says his rising costs are causing him fear and anxiety

The shared ownership system also affects leaseholders, who pay a service charge to their building’s freeholder or landlord.

A management agent is usually contracted to maintain communal services such as cleaning, repairs and insurance. There is no cap on these charges and paying them is usually a condition of the lease.

Lewis Ryan is such a leaseholder, who bought a share in his two-bedroom flat in Dalston, east London, with his partner under a scheme run by One Housing housing association, but says his service charges have gone from £94 a month to £646 a month, a rise of 587%.

Mr Ryan said he has now been told by estate agents the property is worth £75,000 less than five years ago.

“I put my life savings into it and I’ll be lucky to come out with anything if I was to sell the flat," he said.

'Sharp rises in costs'

A One Housing spokesperson said: “We appreciate our customers’ concerns following increases in service charges, which unfortunately have been driven by sharp rises in costs across the sector such as utilities, insurance fees and maintenance.

"We do not make a profit on service charges.”

A Department for Levelling Up, Housing and Communities (DLUHC) spokesperson said: “Shared ownership has a vital role to play in helping people onto the property ladder, and since 2010 we have delivered 156,800 new shared ownership homes.

“We are taking action to ensure that the scheme provides best value for shared owners, including proposals in the Leasehold and Freehold Reform Bill to give the right to extend their leases by 990 years.”