Shared ownership

Due to rising property prices, owning your own property is now very hard for many people.

Shared ownership was introduced to help those people who are unable to afford to buy a property outright. Through the scheme, a share of the property can be purchased and you pay rent on the other share which remains in the ownership of a housing association.

It is possible to buy further shares in your home; this is known as 'staircasing'. It must be remembered, however, that house prices can go up or down, which means you may pay more for additional shares or, if you decide to move, you may have to sell at a price less than you originally paid.

How does shared ownership work?

The share you purchase will normally be funded by a mortgage which you will need to arrange through a bank or building society. You will then pay rent on the share of the property still owned by the housing association. The size of the share purchased can vary between 10% and 75% depending upon income and savings, but most applicants buy a 50% share. The larger the share you buy, the less rent you will have to pay. You must also bear in mind that if you buy a flat, you will have to pay a service charge.

When a purchase is made through shared ownership, the housing association will grant you a lease which sets out your rights and responsibilities.

The current model of shared ownership with the initial purchase share starting at 25% will continue until 2023. There is a new model of shared ownership which reduces the initial share from 25% to 10% and this should be available to purchase from 2022 (there were a limited number of properties available in 2021). Therefore, there will be a transition period in which both the former and new shared ownership models will be available. It is important to check which model you are applying for. Under the new shared ownership model there is a 10 year repair during which the shared owner receives support from their landlord to pay for essential repairs and a new 1% gradual staircasing model has been introduced. This means shared owners can staircase in smaller instalments of as little as 1%, down from 10%.

What is a shared ownership lease?

Under the shared ownership scheme, the housing association will grant you a lease, which usually runs for 99 years. This lease entitles you to live in your home as an owner-occupier. It also entitles you to buy further shares in the property and explains how this can be done.

Your lease will also set out your responsibilities, for example for repairs to your property and the payment of rent. Although you have not bought your property outright, you will have the normal rights and responsibilities that come with home ownership. It would be wise to take your own legal advice on the terms and conditions of the lease.

What costs are involved?

Before deciding whether shared ownership is for you, it is important to think about the costs involved in buying and running your own home.

Legal fees

You will need to get a solicitor or licensed conveyancer to assist you in the purchase of your share. As fees can vary, it is worth getting estimates from a number of firms.

Deposit

You may be required to put a deposit down on the property.

Stamp duty

You will need to check with your solicitor or licensed conveyancer whether stamp duty is payable at the time of purchase. This is tax on the transfer of property. If it is payable, you can either pay the duty on your share of the property or on the total value of the property. Your solicitor/licensed conveyancer will advise you on the best option to take.

Mortgage indemnity insurance

Your mortgage lender may require you to takeout mortgage indemnity insurance.

Removal costs

You will need to think about the distance you are moving, as removal costs can be costly.

Running costs

Once you've considered the initial costs, you will need to think about how much it is likely to cost you to run and maintain your home.

Mortgage repayments

You may need to borrow all or at least part of the cost of your share from a bank or building society in the form of a mortgage. The amount you have to repay will vary according to the amount borrowed, the length of the mortgage, interest rates and the type of mortgage.

Rent

You must still pay rent on the share of the property owned by the housing association. The monthly rent will be based on the rent for the total property and the amount charged to you will be calculated on:

the amount of share you own
the repayments you make as an owner-occupier
your share of any insurance, maintenance and repairs

Once these have been taken into account, the rent will be less than the normal rent you would pay if you were renting the whole property. Your rent is usually reviewed every year.

Council tax

You will be responsible for paying council tax for the property.

Repairs, insurance and service charges

If your home is a flat, all repairs and redecoration inside the property will be your responsibility. The housing association must ensure that the building itself is in good structural repair and will insure the structure and keep all communal areas such as staircases and corridors, lit, decorated and clean. A share of this cost will be passed onto you in the form of a service charge. The housing association must tell you how this service charge is spent and consult you before any major repair or maintenance work is undertaken. If your home is a house, you are responsible for all repair and redecoration, both inside and outside of the property. The housing association will insure the structure of your home. You will have to pay a small management charge to cover this and to help meet the costs of rent collection.

Other costs

You are responsible for your own bills for heating, lighting and water rates, and for supplying your own fittings and furniture in the property. You will also be responsible for the cost of insuring the contents of your home.

If you would like to receive information and advice to help you get onto the housing ladder and be kept up to date on all low cost home ownership opportunities available in the borough, please sign up to the Low cost home ownership register