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Shared ownership: a scheme beyond repair?

Shared ownership has its benefits, but it is not the panacea for the country’s housing crisis.  

Home ownership is becoming an ever-distant dream. Nowhere is this seen more acutely than in London where exorbitant house prices mean exorbitant private rents are often considered the only viable option. So those with the opportunity to get on the property ladder through the somewhat elusive shared ownership route are the lucky ones, right?

Well let us explore that further.

You can get a shared ownership home through a housing association. You buy a share of your home (between 25% – soon to be lowered to 10% – and 75%) and pay rent to the housing association on the rest. 

Northern Ireland and Scotland set their own criteria, but elsewhere in the UK you can buy a home under this scheme if your household earns £80,000 a year or less (capped at £90,000 in London) and are either a first-time buyer, someone who used to own a home but can’t afford to buy one now, or are an existing shared owner. 

It is true, there certainly are benefits to this arrangement. Shared owners have more stability than those renting. They are not so much at the mercy of a landlord who could evict them almost immediately under section 60. Greater permanency is met with greater control. Shared owners can paint a wall or put up a shelf without first seeking permission from a reluctant landlord. 

Then there is the cost. Shared ownership can form a happy medium for those wishing to leave the private rented sector but who cannot yet meet the stratospheric costs of full ownership. This is again particularly true in London where the average house price is more than double that of the national average.  

But just because this can be the more affordable option, it does not automatically mean it’s affordable by anyone’s definition. Which is where we begin to uncover the flaws of this scheme. 

In London, shared ownership is increasingly expensive. An investigation by the London Assembly Housing Committee found that the incomes of new shared owners, and the deposits they must put down to buy their share, are generally higher than those of the average earner. 

Affordability is called further into question when you compare what a share in a London property will get you with what you could afford in a part of the country with lower house prices. For example, a 30% share on a two-bed flat in Wandsworth could get you full ownership of a four-bed semi-detached in Wigan. 

The purse strings must be loosened again when service chargers are factored in. Service charge estimates given to prospective shared owners often increase following completion. Residents can be presented with service charge statements a chartered accountant would have trouble understanding.

Any credit can soon turn out to be a false credit because the managing company has forgotten to charge for building insurance and service charge bills can increase each year because the faulty lift requires additional maintenance. 

This is all compounded by the expense shared owners must take on to extend their lease, problems with poor maintenance of properties, and the difficulties in staircasing to full ownership. Moreover, residents continually report that Housing Associations are unresponsive to their queries and concerns. 

With so many pitfalls, we might ask why shared ownership is considered the preferred option for many people. There will always be the lure of home ownership, but there is more to it than that. 

Most shared owners are first-time buyers. Many have no experience of buying property, nor the financial and administrative burdens of shared ownership. The Assembly’s Housing Committee found that many reported not knowing what exactly they were getting into. 

For those who have already undergone that process, some say the model still is not working for them, that they had not been given enough information when buying and that they’re now lumbered with spiralling costs.  

So, what is to be done? Well, the positive news is that the scheme is not beyond repair. With the right political will, there are actions we can take today to make it work for those already in shared ownership, as well as prospective shared owners. 

A requirement on housing associations to report on service charges and maintenance costs for every block of shared ownership homes is an essential first step, because the biggest hindrances to making these fairer are the lack of transparency and scrutiny. 

This should be met with a requirement on housing associations to set out for prospective buyers, in one clear document, an accurate description of what shared ownership entails – and costs – in reality. Clear guidance should also be provided on routes for redress for those who feel they do not receive a decent enough service for the amount they fork out in service charges.  

To understand the value of shared ownership in helping first-time buyers successfully get a foot on – and then move up – the property ladder, housing associations should be required to publish annually the types of tenure those that sell their shared ownership property are moving into, alongside staircasing sales.

Given the call upon affordable housing resource that shared ownership necessitates, this is the very least we should expect from those organisations who benefit. And on a similar note, the Government should reverse their decision to make it easier for shared ownership properties to be sold on the open market and work instead to ensure they remain affordable housing stock. 

Labour’s role is, and always will be, to level the playing field. Shared ownership is a good place to start to explore how that might look under a future Labour government. Overhauling the scheme to make it more accessible to the many is one option.

But of course, there is always the alternative of moving away from this type of model in favour of more affordable housing options accessible to those on lower and middle incomes.  

Sadiq Khan’s action in delivering record levels of affordable housing, driving up council house building in the capital and implementing the London Living Rent are shining examples of what can be achieved when Labour is at the helm. Now, just imagine what could be achieved under a Labour Government. 

<strong><span class="has-inline-color has-accent-color">Len Duvall</span></strong>
Len Duvall

Len Duvall is the London Assembly Member for Greenwich and Lewisham and has been Leader of the London Assembly Labour Group since 2004.

Before joining the London Assembly, Len was Leader of Greenwich Council for 8 years. On the Assembly, Len is Chair of the GLA Oversight Committee, Deputy Chair of the Budget and Performance Committee, and a Member of the Police and Crime Committee and the EU Exit Working Group.

Len leads on the London Assembly’s Campaign for a Domestic Abusers’ Register. He has been in elected office since 1990. 

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Shared ownership – affordable housing or overpriced?

With property prices for first time buyers increasing 69% over the past 10 years[1] and an average deposit of £47,059 needed it is no surprise that shared ownership is thought to be a good option for first time buyers.

The part-rent part-buy properties are mainly developed by housing associations as “low cost home ownership” and so can qualify as the affordable housing needed to secure planning for new developments.

But does it really represent good value for money for the purchaser and the wider public?

There is a lot to love in shared ownership if you are fed up with paying rent to a buy to let landlord.  You don’t have to have keep paying out management fees, deposits and all the other costs associated with renting. You also benefit from rising house prices.  

With shared ownership only have to save for a 5% the deposit on the proportion of the property value that you are buying – if you are buying 25% of a £400,000 property the minimum deposit is £5,000. If you buy in the open market you need a £40,000 deposit for a property of the same value because mortgage lenders require a 10% deposit.

The downside is that you are responsible any repairs and maintenance – your shower breaks down; you must pay the plumber. Even if you only own 25% of the property, you’re responsible for 100% of the cost of new doors to meet changing fire regulations.

It can be expensive buying additional shares in the property, especially if you repeatedly buy small shares. If you want to buy any part of the remaining portion there will be legal, valuation, stamp duty land tax and mortgage fees to pay. If house prices are rising you will be paying more for property as the cost is based on current market value, not the price you originally bought it for.

Another drawback is that most shared ownership is on leasehold flats so that on top of the rent, owners must pay service charges and ground rent. Nor can shared ownership residents exercise the “right to manage”, so you will be stuck with your managing agent even if they are useless. 

But the main problem is down to the so-called new build premium – a term used to describe the fact that most new build properties cost more than otherwise similar homes. In 2019 Zoopla found that on average a new build was £65,000 more than a similar older home in the same location. It is tempting to buy a property that has a dishwasher in the fitted kitchen, and a 10-year guarantee against major property defects. But is it worth £65,000?

All the aspirational property TV programmes focus on the “potential” in buildings – essentially buying something run down, making improvements with new kitchens and bathrooms, and creating additional value. So why is shared ownership restricted to properties which have no room for improvement, and where the main beneficiaries appear to be large scale builders who get their planning permission for large blocks through low cost home ownership and not true social, affordable housing?

The first two homes I owned were wrecks, cheaper than new builds and I was able to put in central heating, double glazing, and new kitchens over time. Just the sort of properties that are snapped up by buy to let portfolio landlords today. Why can’t subsidies be directed to people who are happy to take on a project and use local builders to make improvements rather than hand profit directly to the large-scale building developers?

In England there have been some co-operative shared ownership schemes, but these have mainly been based on a new development rather than benefit from the lower prices in the second-hand market.  A number of housing associations work with disability charities to provide adapted housing through the government-backed HOLD (housing for people with long term disabilities) scheme in England.

Qualifying people can buy any home for sale on a shared ownership basis (part-rent/part-buy) and this model works well for people who have received compensation for an accident and qualify for long term disability benefits. 

To assist people to buy their first home I think there needs to be a second-hand market option, backed by a housing association to manage the rental element and ensure the finances are in order.  We don’t have to look far for a model – based in Belfast the Co-Ownership Housing Association[2] is enabling first time buyers to part-rent and part-buy in the second-hand housing market across Northern Ireland.

Since 1978 more than 29,000 people have been assisted to buy their first home and currently 9,000 people are currently co-owners.  A 50% own/50% rent is cheaper than private renting and normally no deposit is needed. The home owner is able to choose the property they want to part-rent part-buy in the open market and, subject to valuation the housing association will buy 50% of the property and charge rent based on 2.5% of the value of the rented portion.

This will require a new way of thinking for housing associations and there will need to be some seed funding but rental incomes and purchases of additional portions of the property should make the scheme sustainable in the long term. If we want sustainable communities, we need to have a variety of tenures and affordable homes, and shared ownership can help achieve that.

<span class="has-inline-color has-accent-color"><strong>Sue Rossiter</strong></span>
Sue Rossiter

Sue Rossiter is the Chair of Bethnal Green and Bow CLP and is an expert in mortgage policy with more than 20 years experience of regulatory policy development.


[1] Halifax House Price Index September 2020

[2] www.co-ownership.org