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The Department for Levelling Up, Housing and Communities has released new guidance which changes rent reviews for future shared ownership leases.

The government has introduced reforms to shared ownership rents which will apply to new shared ownership leases through the Affordable Homes Programme, the Right to Shared Ownership scheme and the Section 106 developer contributions system, with some exceptions. 

Rent reviews will change from being based on the Retail Prices Index (RPI) to a Consumer Price Index (CPI). 

Currently, shared ownership rents could be increased by the RPI plus 0.5%, but from 12 October 2023, rents for new shared ownership leases can instead be increased by no more than the CPI plus 1%.

This brings the rent review basis in line with Social and Affordable rented homes.  

The government has also announced that shared ownership rent cannot be increased if CPI is -1% or lower. 

However there are exemptions including new properties that are already under contract under the Affordable Homes Programme. 

Guidance for new shared ownership properties delivered through the planning system via Section 106 developer contributions

Any new Homes England model shared ownership lease must include a Rent Review schedule providing that the ‘specified rent’ can be increased once a year by a maximum of CPI plus 1%. 

Likewise, it is expected that if planning permission is now granted, the Section 106 planning obligations must reflect this new Rent Review schedule. However, where the local authority take the view that substantial work has already been completed to satisfy the Section 106 planning obligations they may allow the agreement to proceed on the current basis, if possible and necessary to secure the affordable homes. 

Where a Section 106 planning obligation is already in place and agreed with the relevant parties, the parties may amend the agreement in line with the new Rent Review schedule, if it is reasonable and practicable to do so and if it is a benefit to the new shared owners.

There will be potential administrative challenges which providers will need to think through in operating a dual rent review across their stock. Relevant parties will need to make sure that the correct model lease and updated Key Information Documents are now being used.