There are a handful of schemes out there that aim to help people get their foot in the door and one of them is the Government’s shared ownership scheme – here we explain what is it alongside the pros and cons
The shared ownership scheme is often sold as a cheaper way for first-time buyers to get on the property ladder – but is it all as it seems?
Getting your deposit together is harder than ever due to skyrocketing house prices and the cost of living. Currently, the average house price in the UK costs in January 2024 sat at £282,000 according to the latest Government stats. To buy with a 10% deposit, you would need to save £28,200, and for a smaller 5% deposit you would need to save £14,100. As house prices rise even further, owning a home is considered a pipe dream for millions of Brits.
The idea of shared ownership is to help people on the housing ladder by allowing them to buy a share of the property, while paying rent on the rest. However, shared ownership schemes have made headlines over the recent months due to their supposed “hidden costs”. Here we explain everything you need to know about this Government housing scheme – including some of the pros and the cons.
What is shared ownership?
Shared ownership scheme has actually been around for a lot longer than people believe. It was first introduced in the 1980s and allows first time buyers to buy part of a home, then pay rent on the rest. According to the housing experts at HomeViews, the idea of the scheme is that you gradually buy more and more of your home as time goes by.
There are different rules on shared ownership in England, Scotland and Wales, but typically you start with buying a 25% share – though for some homes, it’s possible to just buy a 10% share. You then purchase more of your home in a process which is called “staircasing” – you can often “staircase” to a 100% share. The rules changed in 2023 so that you can buy an extra 1% at a time.
Initially, local councils decided who could be eligible for shared ownership and it was based on things such as salary, profession, and where the buyer comes from. However, in 2016, the Government relaxed the criteria around it which allowed more people to use the scheme. Under the current rules, you qualify for the shared Ownership scheme if the following applies:
- You’re over 18 years old
- You’re a first-time buyer, or you used to own your home and can no longer afford to
- Your household earns less than £80,000 per year (this rises to £90,000 in London and is £60,000 in Wales)
Pros of shared ownership
One of the major advantages of shared ownership schemes, according to HomeViews, is that it requires a much smaller deposit than on the normal housing market. This is because you’re only putting down a deposit on the share that you will be buying. The scheme also allows those with lower wages to be granted a mortgage this is because you are borrowing a much smaller amount, making you a smaller credit risk.
HomeView also noted that shared ownership generally sees your monthly housing payments lower than compared to privately renting. The “staircasing” process allows you to eventually own the property outright when you reach 100%. This means you are no longer required to pay any rent, just your mortgage along with any relevant service charges and ground rent. You can also sell your shared ownership home if you want to, but there are rules around this. If you own 100% of your home, then you can sell it on the open market as you would any other property.
Cons of shared ownership
The main disadvantage of shared ownership is that you still have to make monthly rental payments, as you don’t fully own the property. Although, unlike rented accommodation, a shared ownership property is viewed as your “rightful home”. So this means you are allowed to decorate how you like, although in some cases, some major structural changes, such as knocking down a wall, may require permission from the housing association which owns the remainder of your home.
Selling your shared ownership home can also be more complicated than a standard house sale. If you want to sell, you’ll need to first contact your housing provider – they will then have around two months to market your home first. If they can’t find a buyer during this time, you can then choose to sell your property privately or through an estate agent of your choice.
Under a shared ownership scheme, it is your responsibility to pay for repairs and maintenance – mending or replacing a broken boiler, for example – no matter how much of the property you own. In addition, you will be responsible for monthly service charges to cover the cost of maintenance of communal areas. These extra costs can become particularly expensive and are often the “hidden costs” which are reported. With a shared ownership home, you can usually sub-let a room, as long as you are also living there but in the majority of cases you are not allowed to sub-let your entire home unless you own a 100% share, or you have got permission to do so from your landlord.
Shared ownership properties are usually leaseholds, which means you will need to pay ground rent on your home. You would only qualify for the right to extend your lease if you have “staircased” up to 100% ownership. Finally, not all lenders offer mortgages for shared ownership, however the majority will.