17. Shared ownership
Shared ownership, also known as part-buy, part-rent, is a government-backed scheme designed to help people in the UK who are unable to afford to buy a home outright. It allows individuals to purchase a share (usually between 25% and 75%) of a property from a housing association or private developer and pay subsidised rent on the remaining share. The scheme is primarily aimed at first-time buyers, key workers, and those with low to moderate incomes.
Key features of shared ownership
| Ownership share | Under shared ownership, the buyer purchases a share of the property, typically between 25% and 75%. The exact share purchased depends on affordability and eligibility criteria. |
| Mortgage and rent | The buyer takes out a mortgage to finance the purchase of their share of the property. They also pay subsidised rent on the remaining share owned by the housing association or developer. |
| Staircasing | Shared ownership allows buyers to increase their ownership stake over time through a process called "staircasing." This involves buying additional shares in the property until eventually owning it outright. |
| Affordability criteria | Shared ownership is targeted at individuals or households who cannot afford to purchase a home on the open market. Eligibility criteria typically include maximum income thresholds and other requirements set by the housing association or developer. |
| Leasehold ownership | Shared ownership properties are typically leasehold, meaning that the buyer owns the property for a fixed term (e.g., 99 or 125 years), subject to payment of ground rent and compliance with lease conditions. |
| Maintenance and repairs | The buyer is responsible for maintaining and repairing their share of the property, while the housing association or developer is responsible for maintaining and repairing the common areas. |
Advantages of shared ownership
- Affordability: Shared ownership allows individuals to get onto the property ladder with a smaller deposit and mortgage, making homeownership more accessible.
- Stability: Shared ownership provides the security and stability of homeownership, allowing individuals to live in their own home and build equity over time.
- Flexibility: The staircasing feature of shared ownership gives buyers the flexibility to increase their ownership stake as their financial situation improves.
Considerations
- Restrictions: Shared ownership properties may have restrictions on subletting, making alterations, or selling the property. Buyers should carefully review the terms and conditions of the shared ownership lease.
- Additional costs: In addition to mortgage payments and rent, buyers should budget for other costs associated with home ownership, such as service charges, ground rent, and maintenance expenses.
- Eligibility criteria: Buyers must meet certain eligibility criteria to qualify for shared ownership, including maximum income thresholds and requirements related to residency, citizenship, and financial stability.
Shared ownership provides a valuable opportunity for individuals and families to achieve home ownership when traditional methods may be out of reach. However, it is important for buyers to thoroughly understand the terms and conditions of shared ownership and consider their long-term financial goals before entering into a shared ownership arrangement.