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Shared ownership is a much needed scheme aimed at those struggling to afford to buy a home. The scheme is promoted by government and housing associations to be ‘a realistic pathway to full home ownership’. But the reality can be very different. That's why we are campaigning for better shared ownership. Read on for what needs to change.
Shared ownership is the government’s flagship affordable home scheme. But the proposition is a complex and confusing financial model that can be tricky to grasp – even for experienced property buyers and sellers – and with long term implications and financial obligations.
So how does it work? Put simply, it allows buyers who cannot afford all of the deposit and mortgage payments for a home to take out a mortgage to buy a share of the property (usually between 25-75%) and pay rent on the rest. Owners can then buy further shares, called ‘staircasing’. Shared ownership homes are sold and managed by housing associations who receive government grants.
For years we have been calling for a better shared ownership model that works better for owners. In particular we have criticised how unfair it is to require owners to pay for 100% of the full maintenance costs when they own only a share of the property. We have also highlighted the administrative and legal costs that stop people from staircasing and the sometimes insurmountable hurdles to selling a shared ownership house.
The government made positive changes to the scheme for those homes built under the Affordable Homes Programme (2021-26). In particular, requiring housing associations to contribute to the cost of some maintenance for the first 10 years, allowing owners to buy an extra 1% of their home every year – staircasing – with no admin fees and requiring a 990 year lease rather than 99 or 125 years. But these changes do not apply to homes built before this time, resulting in a two-tier market. You can read more about these shared ownership reforms and whether they are really a step in the right direction.
In 2023, the government announced changes to the maximum amount that shared ownership rents can increase each year by moving from the Retail Price Index – which typically is higher – to the more modern Consumer Prices Index. But the new rules will only apply to properties built after this time, adding further complexity.
More needs to be done to ensure this is a fair and affordable scheme. For instance:
The 2023 report, Shared Ownership: The Consumer Perspective, sheds further light on the growing dissatisfaction amongst shared owners, citing conflicts of interest, mis-selling and poor value-for-money.
The study found no evidence that shared ownership succeeds as a pathway to full home ownership for the majority of shared ownership households and real concerns over how shared ownership is advertised to potential buyers. We are dismayed that housing associations continue to flout the Advertising Standard Authority’s 2019 ruling that claims such as ‘part buy, part rent’ and ‘it’s yours’ were misleading as they exaggerate the level of homeownership.
The HOA fully supports Shared Ownership Resources campaign for change. We would like to see :
Commenting on the campaign Paula Higgins, CEO of the HomeOwners Alliance, said: “It’s about time that we take a more forensic look at the shared ownership tenure to understand how successful it is to help first time buyers start their journey into being a homeowner.
“Does it give a helping hand or does it trap people in some sort of limbo between renting and owning that ultimately costs them more and they cannot escape from? The shortcomings of shared ownership should not be used as an excuse to kill shared ownership as we are in the middle of an affordable housing crisis.
The challenge is to get it right.”
In February 2024, the HomeOwners Alliance was asked to join the Shared Ownership Council (SOC). This cross-industry group is committed to building a better shared ownership offer for consumers through the development of a Code of Best Practice. This is one of our key recommendations for change. Housemark‘s analysis of tenant satisfaction measures shows that the consumer satisfaction amongst shared owners is a dismal 56%, compared to an overall rating of 79% for housing providers in general.
Please make your views known by leaving a comment below, or send an email to hello@hoa.org.uk so you can be added to our virtual shared owners panel.
In March 2024, the Levelling Up, Housing and Communities Committee issued the findings of their nine month inquiry criticising the shared ownership scheme for trapping buyers in an “unbearable reality”.
MPs said the scheme was “drastically failing” to help buyers achieve full home ownership because of rising rents, uncapped service charges and unfair repair costs.
Clive Betts, Chair of the Committee said:
“Rising rents, hefty service charges, complex leases, disproportionate repairs and maintenance costs are experienced by too many people who take the shared ownership route. The Government needs to take clear and urgent action to tackle these issues and ensure shared ownership genuinely delivers affordable homeownership”.
The report also highlights the complexity of shared ownership leases and identifies a lack of a single, specialist source of independent and impartial advice for shared owners. The report calls on the Government and Homes England to improve the accessibility and quality of guidance and ensure providers offer the specialist advice needed to understand complex shared ownership leases.
The HomeOwners Alliance submitted written evidence on behalf of the shared owners who have contacted us. We welcome this thorough report from the Committee and look forward to hearing the government’s response.
Shared ownership can be a way to help those who priced out of buying on the open market. You buy a stake in your home of 25%-75% and pay rent on the rest. But there are downsides you should be aware of, such as having to little control over the rent you pay and restrictions when its time to sell.
As a first time buyer, when purchasing a Shared Ownership property you will have the option of paying Stamp Duty on the full value of the property as if you were buying outright, or you can choose to defer your Stamp Duty payment until your owned share reaches 80%. But with the wrong advice from your conveyancer, you may end up paying stamp duty twice.
Selling a shared ownership property can be more complicated then selling other types of properties – especially since it will usually be leasehold. But with the 2021 reforms you now can go to an estate agent to sell your property and give potential buyers to purchase a different share by arranging a back to back sale.
