# UK housing associations accused of mis-selling ‘affordable’ homes as service charges soar by up to 400%

Housing associations are facing allegations of mis-selling so-called “affordable” homes, with service charges that have soared, in some cases by more than 400%, after residents moved in.

Marketing and property documents examined by the _Observer_ reveal how buyers who may be struggling financially are enticed to buy shared ownership homes with estimated monthly service charges as low as £120. Residents accuse housing associations of failing to accurately reflect the likely cost, which in some cases has risen to more than £650 a month.

Shared ownership allows people to buy a proportion of a leasehold property, with buyers required to pass checks to ensure they have a low enough income to qualify and can afford the payments.

When Patrick Duffy, who works in an art gallery, moved into his shared ownership property in Dalston, east London, the service charge was about £95 a month. In recent years, the service charge on the property in Martel Place, marketed by One Housing – now the Riverside group – has risen dramatically, and will be £706 a month from April.

Duffy, who bought the home with his partner in 2017, considers the property was mis-sold. He said: “It’s wildly unaffordable and I might have this flat for the rest of my life because it’s not sellable on the open market.”

The __  how residents’ campaign group the Social Housing Action Campaign is planning legal action over the service charge scandal, which affects tenants in social housing, residents in shared ownership homes and other leaseholders. It plans to apply for a judicial review if the National Audit Office refuses to investigate. Housing associations have built and sold .

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Martel Place in Dalston, east London, has seen service charges rise dramatically. Photograph: Sophia Evans/The Observer

George Andain, who works in sales in sustainable power solutions, has seen his service charge at Clarion Housing Association flats at a development in central Brighton rise from £120 a month in 2021 to £390 for 2024-25.

“This is ruining people’s lives,” he said. “We’re trapped with these service charges. We can’t get out and we’re racking up debt we can’t afford. What’s the point of selling affordable homes if they are not affordable within 18 months?”

Bridget Cotter, a university lecturer who moved into her flat in the same development in 2022, has had her monthly service charge increase from an initial £145 to £372 in 2023-24.

“I’m furious and I’m scared,” she said. “I don’t know what to do. I can’t afford this and I can’t leave.”

She added: “I feel this was mis-sold. Clarion had a responsibility to scrutinise the estimated service charge cost. I’m so worried because my debt is racking up and I’m struggling to afford my rent and service charge.”

Housing associations are being challenged over whether they are accurately reflecting service charges for “affordable” flats at the point of sale. In one case, a shared ownership Peabody housing association flat is being marketed at the Pickle Factory in Bermondsey, south London, with a service charge from £247 a month. Documents seen by the _Observer_ reveal the actual estimated charge for a one-bedroom flat in 2024 in the block was £406 a month – more than 60% higher than the marketed cost.

A two-bedroom shared ownership property managed by Peabody on the same floor in the block comes with a service charge of about £667 a month in 2024-25.

A white paper was published by the government last week that set out plans to ban the sale of new leasehold flats, and introduce a new form of home ownership known as commonhold. Ministers say they are determined to allow residents to convert current leasehold properties to the new system, but specific plans have not been set out.

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Housing associations are being challenged over whether they are accurately reflecting service charges for ‘affordable’ flats such as the Pickle Factory in south-east London. Photograph: Sophia Evans/The Observer

Housing associations say they do not make a profit from service charges, which are typically compiled by external managing agents. Kate Henderson, chief executive of the National Housing Federation, which represents the associations, said: “Spiralling insurance premiums are affecting all buildings, including shared ownership. Increasing costs across the board, including building safety and rising inflation, have meant significant increases in the price of services and materials.”

Clarion said it was holding regular meetings with the managing agent of the Brighton development, requesting greater transparency on the rising costs. A spokesperson said: “Our priority remains making sure residents have a strong voice in challenging costs, and receive high-quality services at a fair price.”

Peabody said charges at the Pickle Factory were set by external managing agents and that it would review the marketing of the flat identified by the _Observer_ to ensure it was accurate.

A spokesperson for the Ministry of Housing, Communities and Local Government said: “Our  has just set out further action this government will take to provide immediate relief to leaseholders suffering now and a commitment to doing what is necessary to bring the feudal leasehold system to an end.”

Riverside said it was the landlord for five shared ownership homes in the Dalston development, but did not own the building or manage its maintenance. It said the building had been subject to severe inflationary costs and high insurance costs because of a timber frame construction.

A spokesperson said: “We want to apologise to Mr Duffy for the distress he has experienced in relation to the service charges for his home. We do not control the costs incurred for services leading to the service charge. “We recognise that any cost increase can be concerning and unwelcome, and have a range of support available and are committed to working with the managing agent to ensure that we do all we can to keep costs down for our customers.”
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