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Shared ownership to be made more affordable

The government aims to help more first time buyers with changes announced this week to the shared ownership scheme. Homebuyers struggling with affordability will now be able to buy a smaller share in their property - just 10% - to get a foot on the housing ladder.

shared ownership

A new model for shared ownership has been announced this week as part of the £11.5 billion Affordable Homes Programme due to be delivered over the next five years to provide 180,000 new homes across England.

Half the homes will be available for affordable home ownership in a bid to help more first-time buyers gain a foothold on the property ladder.

Buy a share in a property for just 10% 

Shared ownership allows you to buy a percentage of a home for people who can’t afford to take out a mortgage for the total value of the property. More details of how the scheme currently works can be found here.

At the moment, the minimum initial share you can buy under the scheme is 25%, but this will be reduced to just 10%, making shared ownership even more affordable for many.

Buying more shares will become “more affordable”

New shared ownership homeowners will also be able to buy additional shares in their home in just 1% increments with little or no fees from next year.  We do not yet know whether existing shared ownership homeowners will also be able to benefit from this change.

Referred to as “staircasing“, buying more shares in your property under the scheme currently needs to be done in chunks of between 5% and 10%.

Staircasing has been a major source of complaint about the scheme because it is very complicated, time-consuming and costly.

The government says that under the changes:

  • Shared owners will no longer have to get a RICS surveyor to carry out a new valuation each time they want to buy more shares.
  • Landlords will be prohibited from charging administration fees on shares bought as part of this gradual staircasing model.
  • Buying in 1% tranches will make it much easier to staircase without additional lending, enabling shared owners to avoid expensive mortgage fees.

Whether buying shares in your property at 1% at a time makes financial sense for people remains to be seen. Our mind boggles at the thought of all the admin required for each 1%!

For shared owners wishing to buy larger chunks of shares, the existing staircasing process still applies i.e. with RICS surveyor valuation and mortgage fees.

No repairs and maintenance fees for 10 years

The government also announced a 10-year period for new shared owners where the landlord would cover the cost of any repairs and maintenance.

This is good news for new buyers. One of the major drawbacks for shared ownership is the ongoing costs. Currently, while you may only own a small share of the property, you’re liable for the full maintenance and repair costs.

So we welcome the government’s announcement to remedy this by introducing a 10-year cost free period. But we do worry that this will encourage landlords to delay any necessary repairs which may mean a hefty bill in year 11.

Other costs do remain and need to be highlighted to homebuyers under the scheme. Shared ownership properties are usually leasehold, with uncapped service charges and conditions on what they can and can’t do (from subletting to certain home improvements). These issues have not been addressed in the latest government announcement.

More control over selling your shared ownership home

At the moment, when it comes to selling a shared ownership home, the landlord has an 8 week period during which they have exclusive rights to market the property. If they fail to sell it in that time, the shared owner can place it on the open market. The idea is that the landlord (usually a local authority or housing association) has a list of prospective shared ownership buyers. But in practice the 8 week period often means delay for the shared owner. So the period has been reduced to 4 weeks.

A standard model

This new standard model will be introduced on all future Shared Ownership homes delivered with Government funding.

Shared ownership can make financial sense if you are struggling to raise a deposit, allowing you to own a share of their home.

Monthly costs can be cheaper than renting, shared owners can build up equity if that’s what they want, or simply use the scheme as a stepping stone to eventually buying on the open market.

But the scheme is not straightforward and buying a leasehold can come with additional costs and problems. So, make sure you’re aware of all the pros and cons.

Already own a shared ownership home? Tell us about your experience in the comments below

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  1. Victoria beeVictoria bee

    I had a SO property 15 years ago, I lived there for 7 and said never again. 15 years later and life changes… I’m extremely greatful to be back in SO. This time I’m a single parent with just my two younger ones left at home. I am saving £900 a month just on the house costs compared to my private rent!
    I don’t really see SO this time round as an investment, I see it as an affordable home. I have no interest in stair casing, I do want to pay my mortgage off tho. However, I do hope that the new SO schemes don’t leave original SO owners unable to sell.. My house was a resale, like my last SO house, which I feel are cheaper over all than the new builds. But like others say the maintenance can be a thorn in the side.
    In a time when I couldn’t get on the local authority housing list despite having disabled kids, high rent and a low income SO has given me a home. However… the HA need to rethink their allocations policy as they made it very hard for me, declining me to even view the property. However a lovely mortgage advisor and Barclays backed me up and I was allowed to buy the house. I also had the most points, there were 8 other families turned down.
    I think it depends on your mind set to how you gel with SO.

  2. Kim stoutKim stout

    Nightmare trying to sell
    Our 1 flat bedroom flat in leatherhead surrey is through rosebery housing Epsom
    .our problem is the rent is very high and much higher than similar properties in the area plus a mortgage to pay as well.
    Shared ownership is not fit for purpose in our experience and would advise people to steer clear of it.
    We are in contact with the housing minister at the moment to try and get help but are finding it very difficult.
    The housing association just hide behind the lease and seem happy to rip you off because they will not be able to change a newcomer what they charge the existing tenant.

  3. John GearingJohn Gearing

    I’m a Valuer RICS for Shared Ownership and Help to Buy. Two issues – when buying a smaller percentage ie less than 100% make sure that the grossed up figure of what you are paying equals a market value. Get advice. Too many people are paying too much for a smaller percentage ( getting exploited) and then get caught out when they cant sell their share for what they paid because someone like me has to value the property to a market value at 100% share equity. The other issue aired here is the matter of shorter Leases. When the Lease gets to between 80 – 85 years some lenders refuse mortgages making it difficult to sell. You can extend your lease for a premium but even though you own less than 100% shares say 40% you have to pay the full 100% premium NOT 40% of the premium – that seems inequitable to me. The Shared Owner is also benefiting on an increased value and should pay his share – but no the property owner has to pay the full premium. So beware of shorter Leases.
    John G FRICS

  4. SaraSara

    I own a 60% shared ownership and am a first tim buyer. I was not aware that every time buying additional shares one has to pay stamp duty as a firsr time buyer and only buying shares in First home and owning one home only. How is that affordable and help First Time Buyers own their First home 100% eventuallY? Changes need to be made also for existing shared ownership owners and not new ones only.

  5. AngeAnge

    I bought 60% outright with a very well known HA London & Quadrant, What I can tell you is this:
    – they chose the construction company to complete a conversion, (same company that provided cladding on Grenfell) who installed inappropriate air vents in to the property but ensured massive double glazing, and when I moved in the road noise was unbearable and engine smoke came in. It took me four years of trying to resolve this. The HA didn’t want to know, all they did was tell me they couldn’t block the vents but never offered a solution, other then telling me to sell it. Pass the problem to someone else! I was initially expected to mediate with the builder and construction person who told me it was all ok, he couldn’t hear anything. Eventually, I had to go to the Local authority and demand the planning permission information they got to ensure these vents satisfied the road level of dcb. It did not!
    Thereafter I had to get a solicitor and the HA came back and had to close the vents and ensure a mechanical ventilation system. I could not bear the idea of re-selling something that I new was not fit for purpose and knew that I had to get this right before even thinking of selling.

    They never took responsibility and nor are they connected as an organisation.
    Service charges get raised yearly and It became a challenging affair, I would have to go through everything with a fine tooth comb as they would charge me and the development for things that we did not have.

    After three years trying to sell, It sold it. It had now become too much to afford through shared ownership, as a percentage, so instead it went out to the open market. It was purchased. I did not come away with enough to buy on the open market unfortunately but I did make a small gain and this has enabled me to use towards a place in the future and pay for some study.

    Oxford University in 2012 did an excellent study to determine whether or not shared ownership is effective in terms of resales and stair casing. Their findings then showed that whilst there could be a financial return, in London, that it was in fact harder to staircase here but easier to sell, compared to the rest of the country. Outside of London it seemed easier to staircase.

    I am not completely against Shared ownership but it really is a different process compared to the open market. It can be more effective then renting especially in London.

    Quite recently, I have noticed that developments are being built by well regarded construction companies and care is being taken to ensure the build is effective and then they are being sold to open market and some shared ownership. I have more faith in this process, as it assumes a home owner, irrespective of what type. My sense with the shared ownership scheme I bought, was that I had no rights and just had to deal with poor construction throughout and remedial works that extended two two years.

  6. Alice JosephineAlice Josephine

    I have had the same experience as Evelyn which has been rather expensive. Two failed expensive staircasing, including 8 weeks failing to sell but having to extend the lease instead!
    The HA declined one because house prices had dropped but there’s no where in the agreement which states you will be declined staircasing because of a reduction in house prices!
    The service charge increases annually but again is included even when you have full ownership.
    HA doesn’t make it easier to staircase and it can be very expensive. At the moment, the mortgage is much cheaper and reduced but the rent has increased yearly.
    If it’s a stepping stone, then I have not moved forward in the last 12 years!

  7. Eric LeggeEric Legge

    There is important information in the comments that is not in the article. This whole shared=ownership business looks to me as if it could turn into a nightmare for the buyer/renter.

  8. Susan RandlesSusan Randles

    I own 75% of my bungalow, pay rent for the other 25% and pay maintenance costs, in total £133 per month. I bought the larger share because my husband was in a care home and with his fees I could not afford to keep the family home which we had been in for 43years. In order to provide for my future I bought the bungalow and did all the necessary work to make sure I was comfortable in my senior years. However my husband died a year later and I now find myself wishing I could reduce my share and free up cash to allow me to do some of the things I would like to do before I get too old.
    As far as I know reduction of the % share is not possible. Why is this?

  9. Evelyn MasonEvelyn Mason

    Reforms are also needed in the selling process. In order to sell my share as a resale I paid £400 for a valuation to set the price. The price was set far too high, the property has not sold and I have to pay for a new £400 valuation every 3 months. This would not happen in selling a normal property- it’s price is what a buyer is willing to pay. In addition, these properties are sold on such short leases that it has been necessary to extend in order to sell. To extend I must pay the extension premium, my own legal costs £1000 plus the housing association legal costs £2000.

    Perhaps the worst sharp practice of them all is the forfeiture clause-if you miss a few rent payments the HA can keep your entire investment.

    None of this was explained to me at point of sale. Least of all that I was buying a Share of a lease rather than a share of a property.

  10. Andrew StanleyAndrew Stanley

    What about when you buy your final part of the property but ground rent is still allowed to be part of the agreement. Some lenders will not lend with such an arrangement (Nationwide). It also becomes more onerous the further through the lease period for ongoing sales!

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