Landlords stand up for shared ownership
The government must act to maintain the integrity and reputation of publicly funded shared ownership schemes, according to a new paper by a group of housing associations.
It follows concerns that 7,800 shared ownership homes are due to be completed in 2010/11 compared to 12,400 a year on average from 2006 to 2009, according to government figures.
The associations are calling for a standard definition to differentiate government-funded shared ownership schemes from private sector schemes.
Marilyn Di Cara, chair of Promoting Shared Ownership, said: ‘I think over the years low cost home ownership products have had a range of names and descriptions and have come in different shapes and forms. What we would like to see is some stability of the Homebuy brand, which which is well-known and respected.’
In a paper due for publication next week, the 21 associations call on the government to maintain the current levels for the new build home buy scheme in the next National Affordable Housing Programme funding round from 2011-14.
Between 2008 and 2011, £583.9 million was spent on the scheme, with slightly more than a third of that on intermediate rental schemes, most of them shared ownership.
Shared ownership products helped 14,700 families off social housing waiting lists between 2004 and 2009, according to the report.
Products were also used by 17,000 households living with friends or family and 2,979 in social rented tenancies. It says the median income for a household buying through shared ownership is £25,680, compared to £30,355 for shared equity schemes.
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Readers' comments (10)
Anonymous | 03/09/2010 9:06 am
What is the difference between shared ownership and shared equity?
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SocialHousingWorks | 03/09/2010 9:29 am
Shared Equity in a nutshell:
You own the property and there are no rental payments
Usually offered by your local housing association under HomeBuy Direct (household income must be under £60,000pa) or through a house-builder (these schemes can vary)
You must be a first time buyer, key worker, housing association or council tenant or be in housing need
The Housing Association will provide you with a top up low or no cost 'equity loan' providing the lion's share of the deposit, usually up to 30% of the purchase proce and the remainder is financed by your deposit and mortgage
You are normally entitled to repay all or some of the equity loan at and point but you would need to check the terms of your particular scheme
Currently you will need at least a 5% deposit
When you sell the property you will need to replay the equity loan remaining and a proportion of the equity growth that reflects the proportion of the equity loan remaining
Restricted to new build properties which are lovely but command a premium
Shared Ownership in a nutshell:
You own part of the property and pay rent to a co-owner in addition to your mortgage payments
Usually operated though local council or housing association
Brand new and refurbished properties available
Properties available on open market (see sites like Rightmove, Zoopla and Prime Location)
You can start owning as little as 24% of the property and buying more know as staircasing. Rents derease.
The deposit and mortgage requirement sill be lower as you are only buying part of the property
You still need 10% deposit but just of the share you are buying
Service charges can bump up monthly costs
Source: http://www.firstrungnow.com/
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Alpha One | 03/09/2010 10:49 am
All of what SocialHousingWorks says is not quite correct. Let me elaborate.
Shared Equity comes in the form of loans, there is Homebuy Direct which is provided by builders and OpenMarket Homebuy which comes from one of two HA's in the country. Many HA's operate their own form of equity loans under licence from the FSA and the Consumer Credit Act. Loans are offers usually up to 30% of the value of the property and can be used in lieu of a cash deposit, although lenders these days tend to require a cash deposit as well.
Shared Equity also comes in the form of a leasehold scheme. It is often confused with Shared Ownership but there is a difference. Much like its cousin the equity loan a shared equity lease allows you to buy a percentage share of the equity in the property with the HA owning the remaining amount. You are not permitted to acquire the HA's share, but your lender may if it enters into possession.
Shared Equity leases are not very common and are a residue of the past mainly. They differ from fixed equity in that the lender can acquire the HA's share and from shared ownership in that you can't.
Council's often confuse the terminology in S106 agreements and refer to shared equity schemes when they mean shared ownership. It doesn't help that the TSA refers to shared equity loans as equity sharing schemes.
Furthmore the term LCHO which is often confusingly used to describe Shared Ownership, can also refer to the Lord Prescott came up with in the part of this century, namely housing that costs no more than £60k to construct. LCHO can sometimes be treated as a separate form of housing that doesn't require a buyer to take a shared ownership lease or some other equity sharing arrangement, but does have a restricted value on sale and re-sale.
Then there is shared ownership. Contrary to popular belief, when you buy a shared ownership property you don't actually 'buy' anything. You don't own a share in the equity of the landlord's interest, nor do you own a long lease. Your interest in the property is no better than that of an Assured Tenant in a housing association property, except that you've paid x% on acquisition and are expected to pay rent.
The case Richardson v Midland Heart Limited 2007 brought this to the fore. Shared Ownership is quite possibly the least secure form of tenure in existence, simply because if you fail to pay your rent for 2 months the landlord can forfeit your lease and has no obligation to return the premium you paid at the outset. Your only saving grace is your mortgage lender who will normally stump up the cash for arrears so they don't lose their security (like you if the HA gets possession the lender is entitled to nothing). The downside being that they lump the arrears payment on your mortgage and you then have to pay them for that as well. If you end up in this situation it is likely you'll end up being repossessed before long.
Shared Ownership leases does not afford the protection of long leases, i.e. you can apply to the Court for relief from Forfeiture by the Landlord. If you fail to pay your rent, the landlord can take possession and has not legal requirement to pay you the money back.
That said, Shared Ownership is also one of the best ways to get a foot on the ladder. It is a genuinely affordable scheme, and people on relatively low incomes can still afford a very nice house in a very nice area and the cost of running a shared ownership property is generally affordable. Plus, done right you can get a 100% interest relatively quickly.
I hate to scare people away from shared ownership, but you must know the risks before getting involved. Fundamentally PAY YOUR RENT!
Going back to the point of the article however, YES the definately needs to be clarity on the terminology.
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Chris | 03/09/2010 10:51 am
Shared Ownership would be more valuable as a means of low cost home ownership if it were not so concentrated on the provision of flats. These schemes appear more an excuse to make service charges than provide affordable housing. The combined mortgage, rent and service charge costs often come as a suprise to the the new shared owner and causes them financial hardship.
Grant funding that enables freehold ownership needs to be available in more cases. Bringing back the DIYSO style schemes for instance, would enable more choice without loss of social housing stock - and could even be a driver to bring redundent housing back into use.
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Barbara Val | 07/09/2010 2:11 pm
As a shared owner I can safely say many buyers of shared ownership properties have been let down by the way the system works. The lack of flexibility of the scheme, paired with the high service charges is putting many potential buyers off shared ownership. People are wising up to the fact that once you buy a share, you are locked in a lease that favours the HA - and leaves the buyer hostage to service charge hikes every year. Basically I feel at the mercy of my HA. If I want to move out of my tiny flat, I have to sell as I'm not allowed to sublet the property. In a housing market forecast to remain flat or fall, who is going to lock himself into such a bad deal? My contract says I cannot sublet even after staircasing to 100%! These type of constraints are now reaching the mainstream and scaring the hell out of potential customers. That's the feedback I get from friends and family every time I mention the subject.
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| 07/09/2010 11:07 pm
Not one poster - ever - on this forum who has been a shared owner has ever had a good word to say about it. Toxic leases, cant sublet, cant sell without the RSL permission, no liquid secondary market when you get it, rents + loans working out more than regular mortgages, incompetent RSL management, liability for 100% of annual and major works charges despite having only a 25% share, where does one stop? All funding for S/O should cease forthwith and the leases declared illegal as the false contracts that they are.
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Barbara Val | 08/09/2010 4:30 pm
I do think the leases should be declared illegal as false contracts. I think in the next 10 to 20 years this issue will explode. When current shared "owners" want to move on in 10 years time and realised they are in trouble, this issue will come to the forefront. Personally I'm preparing in my own way, seeking legal advice and the sort to catch them by surprise just like they have done with me... : ) I'm no victim here....
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Sidney Webb | 08/09/2010 5:21 pm
Why is it that the people who, through open choice, have made themselves slaves to service charges are always complaining about having service charges.
At what point in your purchase did the service charges come as a suprise?
Did you really make a purchase without researching the costs?
Why do you now expect something for nothing, when it was clearly put to you that there would be a charge?
For those who are willing to put it to the poor and disadvantaged that they should take responsibility for their own actions, why is the reverse law meant to apply to leaseholders?
Me me me, all about me, squeeks the cat from Islington.
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Barbara Val | 08/09/2010 11:31 pm
Regarding the service charges, I can only speak for myself here, I wouldn't mind a service charge that stayed the same through the years. But they attempt to hike the service charge every April. The problem with shared ownership is they tell you something when you buy, then later on, the truth is something else. Therefore, at first they tell people: this will be your expenses, but later on, they increase them dramatically. They make you believe the service charge will be such, so you can budget, then they increase it. My HA tried to increase it 33% first year. We all complained and they had to back off. Also, they don't tell you other many things, like staircasing to 100 per cent does not give you equal rights as a normal owner, etc. They make you believe many things that are misleading..
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| 11/09/2010 6:47 pm
PSR: "Why do you now expect something for nothing"
Not like the "needs" allocated tenants on benefits then? Which comprise two thirds of all social tenants in England as you well know. Up from one half in 1981. Why don't you turn round to them and say that? They pay no rent and they pay no service charges as those are taken care of by HB as well. Whilst the remaining one third who do work, along with their leaseholder neighbours, have to pay for everything. Hardly an incentive to get off their backsides is it?
You obviously won't agree being an SWP card carrying Spart. But then your opinions are, in the final analysis, irrelevant. Your lot are history. You lost the election and loonies have been returned to the asylum from whence they came. Unfortunately they still wont shut up - as we can see from their rants on this forum - but hey, who cares, your lot ain't in power anymore. And it will stay that way for a very long time methinks. In meantime, try the haloperidol and largactil that they hand out at the asylum. At the very the least it will lessen the frequency of your rants...
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