Earlier this week, Michael Gove (the Secretary of State for Levelling Up, Housing and Communities) announced a series of changes that Homes England has made to the Capital Funding Guide. These changes came into force on the 19 December 2023 and are important for Registered Providers (RPs) to be aware of as they aim to improve the options currently available in respect of Shared Ownership with a focus on helping shared owners, particularly those affected by building safety issues, in selling or subletting their homes.

The changes to the Capital Funding Guide are as follows:

Lessening of Restrictions on Subletting

In assessing requests to sublet, RPs may ease any restrictions on the level of rent that can be charged. The aim of this is to allow shared owners, particularly those affected by building safety issues with more substantial ongoing housing costs, to charge a level of rent that meets these costs. Mr Gove outlined that, except where absolutely necessary, RPs should not be applying a blanket approach to subletting, but instead should be tailoring the terms of a subletting offer to the individual needs of the shared owner.

Buyback of Shared Ownership Homes through Recycled Capital Grant Funding

In situations where sales are proving difficult due to building safety issues, RPs will be able to buy back these shared ownership homes using recycled capital grant funding. This is an option not freely available to every shared owner, but will be at the discretion of the RP. This option will apply to homes delivered through both the Affordable Homes Programme as well as the planning system via s106 contributions.

Simultaneous Staircasing & Sale Valuations

The previous position was that a simultaneous staircasing and sale transaction should take place at market value as per a RICS valuation as required by the staircasing provisions in a shared ownership lease. RPs are now expected to work with the shared owner in updating the valuation to reflect the actual market conditions and any difficulty in selling the home in situations where the eventual sale price will be lower than the initial market valuation. Mr Gove outlined that RPs should support the shared owner in securing a new valuation as quickly and cost-efficiently as possible, such as via a desktop reassessment or relying on the incoming buyer’s valuation if RICS compliant, where it appears that the sale price will need to be reduced based on the actual offers received.

Next steps

These changes will be welcome news especially for shared owners who may have felt trapped by building safety issues as there will now be more options available to them in respect of their home. Mr Gove himself acknowledged that more still needs to be done to support those impacted by a crisis for which they bear no responsibility. Mr Gove also encouraged RPs to make use of these changes wherever possible, recommending that they ensure their shared owners have easy access to the details of all relevant policies on their websites in order for shared owners to be fully aware of the options available to them.

How Capsticks can help

Capsticks aims to be the firm of choice to RPs, offering a full service across, corporate and securitisation, development and planning law, housing management, housing leasehold and asset management. We can provide advice and assistance on changes discussed above and any updates that come in the future on this topic.

If you have any queries around what's discussed in this article, and the impact on your organisation, please speak to Nalton Stembari to find out more about how Capsticks can help.