NEW MODEL SHARED OWNERSHIP

THE SHARED OWNERSHIP SCHEME, WHICH ENABLES PEOPLE TO PART-BUY, PART-RENT A HOME, IS CHANGING TO MAKE IT EASIER FOR EVEN MORE PEOPLE TO TAKE A STEP ON TO THE HOUSING LADDER

Shared ownership is a low-cost way to get a foot on the housing ladder by buying a share in the leasehold of a home, and paying rent on the rest, with the option to buy more shares later. Changes to the scheme began to be implemented in 2021, and as the transition period draws to a close this year, most shared ownership sales will follow the new model – which means lower initial costs, easier staircasing and more help with repairs and maintenance.

Smaller Shares

Previously, those who wanted to make a shared ownership purchase had to be able to afford to buy a minimum share of 25% of the value of the property. That minimum purchase has now been reduced to 10%, making it easier for those on lower incomes to take part, especially in areas with high house prices – a change which the Government said will help an additional 300,000 households on the way to homeownership. Buyers will still be encouraged to take out the largest share they can afford, however, and will pay a deposit based on the share they are buying.

Longer Leases

In the past, shared ownership homes could have leases as short as 99 years. As the value of a leasehold reduces with less than 80 years remaining, shared owners often had to pay for a lease extension when they wanted to sell. Under the new model, leases must be a minimum of 990 years, so will hold their value for generations.

Owning More

The process of buying more shares in a home is known as “staircasing”, and this process is now cheaper and easier. Those on the old shared ownership model had to buy at least another 10% when they staircased, with new valuation and legal fees each time. With the new scheme, shared owners can buy an additional 1% every year for 15 years, with no legal or valuation fees. Instead, the price of each share is set using an estimate, based on the original valuation and house price inflation. The option to staircase in larger chunks, from 5% at a time, is also available but will need a new valuation.

Help With Repairs

The Government promotes shared ownership as a “middle ground” between homeownership and renting, and to make the transition easier, shared ownership buyers will now get support with repairs. Previously, even if a shared owner had only bought 25% of the leasehold to the property, they were fully responsible for all the repairs and maintenance, both for their own home and, via the service charge, for communal areas such as the roof and exterior cladding. Under the new scheme, for 10 years any essential repairs to the exterior or structure that are not covered by a warranty will be carried out by the landlord (if they own the building). Work inside the home remains the job of the shared ownership leaseholder, but when it comes to boilers, heating systems and bathrooms they can claim from the landlord £500 a year to cover essential repairs if they are not already covered by a warranty. The 10-year period starts from the completion of the building, so shared ownership resales will have a shorter guarantee period. The guarantee will end if the buyer staircases to 100% within that decade.

More Flexible Selling

When it comes to selling a shared ownership home, the new model could be faster. Previously, the housing provider had the right to market the property exclusively for eight weeks. Now, sellers can use an estate agent or sell privately after just four weeks if they wish.

Right To Shared Ownership

Another change is that people who are renting a home that has been created by the Affordable Homes Programme will have the legal right to buy it using shared ownership, providing they have been a social tenant for three years, have lived in the property for 12 months, and meet income requirements.

Eligibility Unchanged

The general eligibility requirements for shared ownership remain unchanged. Buyers must have a deposit of 5-10% of the share they are buying, be able to afford the costs of buying a home and have a household income of less than £80,000, or £90,000 in London.