The document, entitled ‘Shared Ownership and Leasehold Enfranchisement’, proposes that ‘staircasing’ – where a person builds up the amount of equity in the home over time – should be outlawed in areas where the burden on affordable housing is greatest.
It also suggested that people who moved into a shared ownership property would have to control 100 per cent of the equity before they could apply to buy the freehold.
The consultation said: “Government supports both shared ownership and enfranchisement. However, current legislation means that there is a potential conflict in the relationship between shared ownership of houses and enfranchisement.
“In some instances, the loss of particular shared ownership homes may not be desirable. This is particularly the case in areas where replacement would be difficult, such as rural areas and potentially some urban areas.”
However, Neil Johnson, head of PR and policy at the Building Societies Association, believed placing restrictions on shared ownership would undermine its intended benefits.
“Placing restrictions on what you can and cannot do with a property makes it very difficult to lend against as it affects the market value and lenders don’t like that. Also, if you don’t allow staircasing, it traps borrowers into some form of shared ownership as they cannot build up enough equity to buy outright. This would ruin the point of shared ownership.”
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