Trapped in Shared Ownership Schemes

by Mark Johnston

Shared ownership has been credited with helping more than 170,000 mainly low and middle income households on to the property ladder since the schemes were launched.

These schemes basically are were a housing provider, usually a housing association or large property developer, builds a new unit and then the buyer part owns and part rents it. The buyer then owns either 25%, 50%, 75% share of the property and can purchase additional shares in time until they have bought the house outright.

As a result of strict mortgage criteria and large deposits more and more first time buyers are now looking in to shared ownership/shared equity schemes as a means, and in a lot of cases the only means, by which they can get their feet on to the property ladder.

These schemes however, do have their disadvantages such as:

–          you have the responsibilities of a home owner but the home does not fully belong to you

–          not everyone can qualify for these schemes

–          as you do not own the property in full you may have to gain permission regarding redecoration or improvements

–          there may be selling restrictions in place

–          valuers fees are payable each time you wish to increase your share

Research has found that shared ownership is failing to act as a stepping stone to full ownership as promised, leaving many people in worse positions than they were before.

Recent investigations in to these schemes found that only a very small proportion of residents are actually able to move to full ownership. A money mail investigation suggests that the vast majority of people already in such schemes never buy their entire home or even increase their shares.

Places for people, who sell and rent homes nationwide, including through shared ownership, stated that over the past decade ‘just 90 of its customers have upped their shares, with only a further 1,500 buying the home outright’.

As well as this, many buyers who are already in these schemes and who’s circumstances have changed are now finding it extremely difficult to move.

For anyone in shared ownership there are only 2 options available to them: selling on their share or buying the portion of the property they do not own. However for these who bought before the housing market went in to freefall their property may have now slumped in value, meaning they would have to sell at a loss. As for buying the other portion of shares, in this particular economic climate it seems unaffordable for most.

According to reports thousands of home owners may have overpaid for their new property purchased through these schemes.

The Institute for Public Policy Research (IPPR) has stated “the biggest beneficiaries have been large housebuilders, who have used the schemes to sell an oversupply of properties, particularly one and two bedroomed apartments”.

Katy John, of price out, a campaign for first time buyers, said “we are concerned that these schemes are more about bailing out the housebuilder than helping the public”.

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