The revised post-2002 shared ownership scheme provides for a mechanism where by the rent al equity is treated as a capital loan and the interest rate charged is the standard local authority mortgage rate. This rental equity repayment is remitted against the local authority loan for that equity. In circumstances where the rental payments remitted exceed the interest due on the loan, the balance is set against outstanding capital, thus decreasing the balance of equity due for subsequent acquisition by the borrower . The scheme does not provide for downward valuation of the equity.
The rental equity value held by the local authority at the commencement of the transaction is the base value from which the rent is recalculated on an annual basis. The rent payment starts at 4.3% of the initial rental equity balance and is increased by 4.5% per annum. Amounts paid above the variable interest rate, currently 2.75%, are credited against the outstanding rental equity balance.
The Government’s 2011 housing policy statement announced the standing down of all affordable housing schemes, including the shared ownership scheme, in the context of a full review of Part V of the Planning and Development Act 2000. That review is now almost concluded and I have also asked the Housing and Sustainable Communities Agency to provide me with a stand alone analysis of the shared ownership scheme, including identification of the main difficulties and recommendations for mitigating measures. Any future changes to legislation governing affordable housing schemes, including the shared ownership scheme, will be made in the context of both pieces of work and I expect to make announcements in this regard in the near future.
