Latest news with #sharedownership
Yahoo
12 hours ago
- Business
- Yahoo
Is shared ownership worth it? Pros and cons to be mindful of
First-time buyers using the government-backed shared ownership scheme may find it easier to get on the property ladder, but should be aware of multiple issues that can come with these properties – including high maintenance costs, punitive charges and difficulties when coming to sell. Young buyers have become increasingly reliant on such schemes in recent years – especially since the closure of the Help to Buy scheme – with high house prices leaving many unable to buy without support. Currently, buyers purchase between 10pc and 75pc of a property using a mortgage, and pay monthly rent on the remainder, which is owned by a housing association or other third party. Shared ownership was designed to help buyers achieve their dream of home ownership much sooner. It can deliver on this, but many buyers also find the scheme has many hidden pitfalls. What is a shared ownership property? Difficulties selling shared ownership The cost of staircasing Shared ownership FAQs Buying a shared ownership property is a way of vastly reducing the cost of taking that first step on to the property ladder. If you don't earn enough to qualify for a mortgage on the full price of a home, this scheme offers first-time buyers a way to buy just part of a property − between 10pc and 75pc − then pay rent on the rest. You only need to put down a deposit on the share that you are buying, which means that if you purchase 25pc of a home worth £230,000, you would have to find just 5pc of £57,500 (a quarter of the total value) for the deposit, i.e. £2,875. You then take out a mortgage for the remainder of the 25pc and pay rent on 75pc of the property. Buyers have the option later to purchase the remaining portion of their home in stages, gradually reducing their rent as they do. This is called 'staircasing'. To be eligible for the scheme you must not already own a home, and must earn less than £80,000 a year as a household, rising to £90,000 in London. You must also be a first-time buyer or if not meet another eligibility requirement – such as owning a home in the past but being unable to afford to buy one now. Some of the people who have been hardest hit by the cladding scandal are leaseholders in shared ownership schemes. Because of the way their leases are set out, they now face paying 100pc of remediation works despite only owning a fraction of their properties. These costs could exceed the total amount that owners have in their homes, leaving them in negative equity. Properties must be sold via the housing association you're renting from, which usually involves paying hundreds of pounds to market the property. At the same time, since you also own a portion of it, you need to pay a solicitor to deal with the legal side of selling. Combined, this can make selling up very expensive – especially if it takes a long time to sell. If the housing authority fails to sell the property, it can move to the open market – but you'll have to pay to market it yourself. Homeowners can lower their monthly rent by purchasing a greater share of the property – known as staircasing – but this has historically been expensive. However, since April 2021, buyers have been given the option to buy further shares in 1pc instalments. Buying back a stake in a home could be costly, as borrowers have to fork out fees for instructing a survey, legal costs and any stamp duty. But, as the rent you pay tends to be linked to inflation, increasing the proportion you owe may shield you from rising rents. That said, you'll have to weigh it against mortgage costs – which are also markedly higher than they were a few years ago. What's more, if you need to move your mortgage in the process of staircasing, you should be wary of any early repayment charges. Despite possibly only owning a small proportion of the property, under the shared ownership scheme property owners are responsible for 100pc of the maintenance costs for their homes – given that many shared ownership properties are in blocks of flats, which can come with hefty annual maintenance fees and service charges, this can add a significant expense. Shared ownership properties can have issues that could mean owners might not get the price they want when they come to sell. The property's lease can be a major issue, with prices tending to plummet if there is less than 80 years left on the lease. Since 2021, shared ownership properties have been offered on leases of 990 years, rather than 99 years or 125 years, but the new rules have done little to protect the investments of those who bought beforehand. While shared ownership has its drawbacks there are also positive elements to the scheme: Makes home ownership more accessible: The main appeal of using shared ownership is that it is far more accessible than full ownership as a way to get on to the property ladder. As you are only buying part of a property the deposit required is much smaller and overcomes the issue of saving that is a serious hurdle for many first-time buyers. There's a chance to make a profit when you sell: As you own part of your home through the scheme, you will benefit form any increase in property value. This gives shared ownership an advantage over renting and the chance to make a profit when you come to selling. You can increase ownership over time: While you begin only owning a portion of your property, the shared ownership scheme lets you work your way to full ownership via a process called staircasing. This is where you gradually increase the equity you hold in the property, reducing the amount you need to rent, all the way to becoming the 100pc owner and freeholder. Buying a property through a shared ownership scheme does not protect you from paying stamp duty land tax. There are two options for how you pay, either in stages or for the full value of the property. If you opt to pay in stages, this means you may have to make an initial stamp duty payment for the portion of the property you are buying, possibly plus an additional amount based on the rent you will be paying on the remainder of the property. You do not have to pay any stamp duty unless you are buying or own 80pc of the property, but your bill may be larger than you expect as your steps to 80pc may be included, rather than just your most recent increase. You can choose to pay the stamp duty due on the whole value of the property upfront. This means there is no further stamp duty to pay when you increase your equity. The rules around stamp duty on shared ownership properties are complicated. More granular information can be found on the government website. It's generally not allowed to sublet a shared ownership property unless you have explicit permission from the landlord, or you own 100pc of the property. You may be able to sublet a room if you are still living in the property. The 'key information document' that comes with your home will provide details on the rules for letting it out. Shared ownership properties can be more difficult to sell than properties purchased in the traditional way. You will usually need to give the freeholder the right to find a buyer before you put the property on the open market, although the buyer will need to be interested in owning through shared ownership. Once it sells you will receive a share of the price in proportion to the part you own. Broaden your horizons with award-winning British journalism. 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Yahoo
13 hours ago
- Business
- Yahoo
Shared ownership: 'It's a con and we felt trapped'
Touted as a stepping stone to getting on the property ladder, shared ownership was designed to be one answer to a tough housing market. But behind the hope lies a growing wave of discontent, as complaints to the housing watchdog - over repairs, costs and selling - have soared. "We had none of the rights of homeowners, and all the obligations of renters," said Diana, who together with her husband Chris, bought a shared ownership property in east London in February 2020. Shared ownership schemes involve purchasing a share of a property and paying rent on the rest. But the couple decided to sell in 2021 after finding it "traumatic". They said they had to try to sell through what is known as a nomination period during which the housing association or landlord has the exclusive right to find a buyer for the shared ownership home. Two years later and £10,000 worse off, after the property was re-evaluated at less than what they paid, they eventually sold. "It's a big con and we felt trapped," said Diana. "Not being able to sell was a trauma." They have gone back to private renting because, according to Chris, it is "much simpler and easier". Now out of it, Diana says she would not recommend the scheme because "they sell it to you as a dream but then it became a nightmare". There are currently about 250,000 shared ownership households in England, according to figures. In 2019-20 there were about 202,000, according to the English Housing Survey. Although more shared ownership properties were being delivered year on year, the complaint figures, obtained via a BBC Freedom Of Information (FOI) Act request, show shared ownership complaints have risen by almost 400% in the past five years, and are continuing to rise. The FOI also found: There has been a rapid increase in the number of complaints the ombudsman has received relating to shared ownership tenures; in 2024 it received 1,564 - almost five times the 324 received in 2020 Shared ownership complaints have risen faster than wider social housing ones Of the complaints made over the last five years, 44% were based in London, and the South East having the second highest number The most common complaints relate to repairs, costs, managing relations, and moving and selling properties. Kathy bought a 40% share with a friend in a two-bedroom flat in north London in 2017. She pays a subsidised rent on the remaining 60%. "I don't have the bank of mum and dad. It was either that or put most of my salary into rent and have this feeling that I'd never be on the property ladder or have my own space," said the 44-year-old. "I love my flat and the community. In terms of where the building is located and how close it is to London, these are all amazing things. "But it has mega downsides, particularly regarding finances and transparency and the level of service that we receive from the housing provider." In the past eight years, she said her costs had increased so much, including more than £200 a month rise in service charges, that she has had to get a lodger and cannot afford to increase her share. Repairs take years to complete, she said, adding a buzzer was broken for a year and a sewage system has been faulty since 2012. "The sewage was overflowing and flowing directly into the river, and going into the children's playground. It stank in summertime," she said. "They sent out all these consultants and they charged everything to us. The sewage system was not fit for purpose so why are we paying?" Kathy's housing association is not being named because her neighbours are scared it will devalue the property. "It's not affordable anymore. I have to have a lodger live in my house just to help me pay and keep my head above water," Kathy added. "My long-term plan is to sell - I can't continue like this." Fatima bought a shared ownership property in 2019 after being evicted from two rental properties when her two children were younger. As a single parent, she said there was "no way" she would have been able to get a mortgage so shared ownership was "the only option". Now "in a bind" due to an 80% increase in service charges within the last year, Fatima, along with others in the block, complained and said they would not pay the increase until it had been investigated. Repairs have been an issue for a long time, she said. When the BBC filmed at her flat, the communal corridors were heated to 31C (88F) and the lift was broken. "The biggest issue is all the heating costs that go into our service charges are heating the communal hallways. The building is cooking from the inside." She said the shared ownership model was an "in-between option which could work if there weren't so many companies involved". There was a freeholder who had appointed a managing agent, as well as a housing association, she said. "We don't know who to go to, everything takes so long." Fatima added: "I have an asset but if it's unsellable and unaffordable it's not an asset. "It's always on my mind. It causes a lot of anxiety." Housing Ombudsman Richard Blakeway said the "inherent complexities" of shared ownership presented challenges to landlords and residents. "Shared ownership has been around for decades, and there are still some inequities with the way in which it works that is driving complaints to us," he said. He described a "mismatch" between the expectation and understanding of the shared owner and the landlord. "Whilst it can start off as smiles, very quickly we can see that relationship break down." He added the number of parties involved could be "depressing for a shared owner; that feeling of being passed from pillar to post and being fobbed off at different parts of the process". "I can also see from a landlord's perspective they don't necessarily always have all of the levers in their hands to resolve the issue," he said. "Put all of that together and you've got a perfect storm - and that's what lands on our desks." He added that landlords must improve communication and transparency, and the government should address "fundamental inequities in the way in which shared ownership is designed". The Shared Ownership Council, a cross-sector initiative, said while it believed shared ownership had a "key role to play" in addressing housing needs, it recognised it "has not always worked as well as it should for everyone" and "key challenges" need to be addressed. "We take the concerns raised by the Housing Ombudsman and shared owners very seriously," it added. It has recently developed a code to "standardise best practices and consumer protection" ensuring, it says, "transparency, fairness, and improved support for shared owners in marketing, purchasing and management of homes". But Timea Szabo from the campaign group Shared Owners network says it is "too little, too late". "This is a sector that has consistently failed to comply with their statutory obligations - some of the housing providers who back the code have multiple maladministration findings to their name," she said. "We do not think that a voluntary code of practice will have much of an impact on their day-to-day experience." Figures shared exclusively with the BBC show 83 of 140 (59%) of Shared Owners members surveyed in February 2025 have struggled to sell their share, for reasons including unresolved building safety issues, high service charges, and a short lease that the shared owner cannot legally extend. A Ministry of Housing, Communities and Local Government spokesperson said it was "aware of the challenges faced by some who have entered the scheme". The spokesperson added the government was "considering what more can be done to improve the experience of shared owners, alongside consulting this year on implementing measures to drive up transparency of service charges, ensuring leaseholders and tenants can better hold their landlords to account". Listen to the best of BBC Radio London on Sounds and follow BBC London on Facebook, X and Instagram. Send your story ideas to 'My one-bed flat's service charge is now £16K a year' Tips from first-time buyers: 'We bought a £320,000 home aged 25' Housing crisis 'both a social and economic' issue
BBC News
14 hours ago
- Business
- BBC News
Shared ownership: 'It was sold as a dream but became a nightmare'
Touted as a stepping stone to getting on the property ladder, shared ownership was designed to be one answer to a tough housing market. But behind the hope lies a growing wave of discontent, as complaints to the housing watchdog - over repairs, costs and selling - have soared."We had none of the rights of homeowners, and all the obligations of renters," said Diana, who together with her husband Chris, bought a shared ownership property in east London in February ownership schemes involve purchasing a share of a property and paying rent on the the couple decided to sell in 2021 after finding it "traumatic".They said they had to try to sell through what is known as a nomination period during which the housing association or landlord has the exclusive right to find a buyer for the shared ownership years later and £10,000 worse off, after the property was re-evaluated at less than what they paid, they eventually sold."It's a big con and we felt trapped," said Diana."Not being able to sell was a trauma." They have gone back to private renting because, according to Chris, it is "much simpler and easier".Now out of it, Diana says she would not recommend the scheme because "they sell it to you as a dream but then it became a nightmare". There are currently about 250,000 shared ownership households in England, according to figures. In 2019-20 there were about 202,000, according to the English Housing Survey. Although more shared ownership properties were being delivered year on year, the complaint figures, obtained via a BBC Freedom Of Information (FOI) Act request, show shared ownership complaints have risen by almost 400% in the past five years, and are continuing to rise. The FOI also found:There has been a rapid increase in the number of complaints the ombudsman has received relating to shared ownership tenures; in 2024 it received 1,564 - almost five times the 324 received in 2020Shared ownership complaints have risen faster than wider social housing onesOf the complaints made over the last five years, 44% were based in London, and the South East having the second highest number The most common complaints relate to repairs, costs, managing relations, and moving and selling properties. Kathy bought a 40% share with a friend in a two-bedroom flat in north London in 2017. She pays a subsidised rent on the remaining 60%. "I don't have the bank of mum and dad. It was either that or put most of my salary into rent and have this feeling that I'd never be on the property ladder or have my own space," said the 44-year-old."I love my flat and the community. In terms of where the building is located and how close it is to London, these are all amazing things. "But it has mega downsides, particularly regarding finances and transparency and the level of service that we receive from the housing provider." In the past eight years, she said her costs had increased so much, including more than £200 a month rise in service charges, that she has had to get a lodger and cannot afford to increase her share. Repairs take years to complete, she said, adding a buzzer was broken for a year and a sewage system has been faulty since 2012. "The sewage was overflowing and flowing directly into the river, and going into the children's playground. It stank in summertime," she said."They sent out all these consultants and they charged everything to us. The sewage system was not fit for purpose so why are we paying?"Kathy's housing association is not being named because her neighbours are scared it will devalue the property. "It's not affordable anymore. I have to have a lodger live in my house just to help me pay and keep my head above water," Kathy added."My long-term plan is to sell - I can't continue like this." Fatima bought a shared ownership property in 2019 after being evicted from two rental properties when her two children were a single parent, she said there was "no way" she would have been able to get a mortgage so shared ownership was "the only option". Now "in a bind" due to an 80% increase in service charges within the last year, Fatima, along with others in the block, complained and said they would not pay the increase until it had been investigated. Repairs have been an issue for a long time, she said. When the BBC filmed at her flat, the communal corridors were heated to 31C (88F) and the lift was broken. "The biggest issue is all the heating costs that go into our service charges are heating the communal hallways. The building is cooking from the inside." She said the shared ownership model was an "in-between option which could work if there weren't so many companies involved".There was a freeholder who had appointed a managing agent, as well as a housing association, she said. "We don't know who to go to, everything takes so long."Fatima added: "I have an asset but if it's unsellable and unaffordable it's not an asset."It's always on my mind. It causes a lot of anxiety." 'Relationship breakdown' Housing Ombudsman Richard Blakeway said the "inherent complexities" of shared ownership presented challenges to landlords and residents. "Shared ownership has been around for decades, and there are still some inequities with the way in which it works that is driving complaints to us," he described a "mismatch" between the expectation and understanding of the shared owner and the landlord. "Whilst it can start off as smiles, very quickly we can see that relationship break down." He added the number of parties involved could be "depressing for a shared owner; that feeling of being passed from pillar to post and being fobbed off at different parts of the process"."I can also see from a landlord's perspective they don't necessarily always have all of the levers in their hands to resolve the issue," he said."Put all of that together and you've got a perfect storm - and that's what lands on our desks."He added that landlords must improve communication and transparency, and the government should address "fundamental inequities in the way in which shared ownership is designed". The Shared Ownership Council, a cross-sector initiative, said while it believed shared ownership had a "key role to play" in addressing housing needs, it recognised it "has not always worked as well as it should for everyone" and "key challenges" need to be addressed."We take the concerns raised by the Housing Ombudsman and shared owners very seriously," it has recently developed a code to "standardise best practices and consumer protection" ensuring, it says, "transparency, fairness, and improved support for shared owners in marketing, purchasing and management of homes". 'Drive up transparency' But Timea Szabo from the campaign group Shared Owners network says it is "too little, too late"."This is a sector that has consistently failed to comply with their statutory obligations - some of the housing providers who back the code have multiple maladministration findings to their name," she said."We do not think that a voluntary code of practice will have much of an impact on their day-to-day experience."Figures shared exclusively with the BBC show 83 of 140 (59%) of Shared Owners members surveyed in February 2025 have struggled to sell their share, for reasons including unresolved building safety issues, high service charges, and a short lease that the shared owner cannot legally extend.A Ministry of Housing, Communities and Local Government spokesperson said it was "aware of the challenges faced by some who have entered the scheme".The spokesperson added the government was "considering what more can be done to improve the experience of shared owners, alongside consulting this year on implementing measures to drive up transparency of service charges, ensuring leaseholders and tenants can better hold their landlords to account".
