Nine ways to improve shared ownership – my first-hand experience as a buyer

So shared ownership, for my family, represented the only available third way between the broken rental market and overheated sales market. It may not be perfect but I’m certainly grateful it exists.

The rest of what follows isn’t just another attack on the product but more of a heartfelt plea to improve it and make it more accessible for people like me.

1. Tell it like it is

Having spent the past year explaining to friends, family and a sceptical wife (now co-shared owner) what shared ownership actually is, I do wish the sector would adopt a ‘does what it says on the tin’ description. It is part rent, part buy. Or just part buy.

More than one person in my generation has dismissed it because they assume it means co-living. But the other phrase ‘affordable homeownership’ oversells it.

‘Affordable’ is subjective and (as we will see below) often not true. It also isn’t homeownership, it’s part ownership. Honesty breeds trust, and for suspicious buyers surrounded by critical opinions that really is important.

2. Acknowledge that it isn’t ‘that’ affordable in London…

Shared ownership is often pitched as the answer for “nurses and teachers” but unless you are co-habiting or borrowing from parents, it will be out of reach in most, if not all, of London.

I’m not sure that’s always understood by housing associations and policymakers – these people need low-cost rented housing to stay in the capital long term. (We were lucky to lodge with parents for a year rent free to save the deposit – most don’t have that option.)

Many of the apartments coming on stream through new build are ludicrously priced. It is not unusual to see glamorous apartments which would cost buyers somewhere between £2,000 and £2,500 a month – this just isn’t affordable housing by any stretch, and I don’t see how it can even be done within the £90,000 salary cap.

What results is the bizarre situation we exposed in 2014, where shared ownership buyers put down deposits of more than £100,000 to reduce the mortgage costs. Would this grant have been better used on a lower volume of cheaper homes?

3. Remember parents to be

Why are young people most likely to stump up the money to jump out of rental accommodation into a product described by the nation’s foremost broadsheet as “the next great housing scandal”?

The answer: kids on the way. London’s private rented market is tough for everyone but intolerable for families. I know of parents-to-be who have decorated a nursery for their baby only to find themselves on the wrong end of a no-fault eviction before the child is born.

Despite this, on most eligibility forms I filled in there is no option to declare expected children. My partner was pregnant when we were applying but we were assessed as two co-habiting adults. This decreases the chance of being nominated to a suitably sized house.

We also missed out on one property we applied for because we failed the bank’s affordability assessment due to my partner’s forthcoming maternity leave. This isn’t just annoying – it’s a breach of the Equality Act. Making the product inaccessible for parents-to-be cuts out a huge swathe of very likely buyers.

4. Think hard about service charges

Service charges are the element of shared ownership most widely attacked by critics. It isn’t hard to see why: the fact that you can own 25% of a home but find yourself liable for 100% of the service charge bill is plainly unfair.

But the sector does not seem to be going out of its way to mitigate this. Average monthly figures in excess of £200 a month are not uncommon – this put us off more than one home that would otherwise have served our needs.

The frustrating thing is this often pays for features designed to make the open market sales element of the product more attractive (concierge services, etc). But the market sales are supposed to be cross-subsidising the affordable – the cart is driving the horses if the affordable homes are put out of reach as a result.

5. Build houses as well as flats

We picked a house rather than a flat, largely to swerve the service charge issue. The most striking thing about filtering for ‘houses only’ on the listings page for new shared ownership homes is you discover that they are almost all resales.

It seems we built a lot of houses for shared ownership between 2000 and 2005 – but the modern trend is to pack in as many apartments as possible. High density works for ministers obsessed with housing numbers, it works less well for families.

6. Have a look at ‘minimum affordability’ rules

This is an under-discussed rule. Originally, we applied to buy 40% of the home we now live in (a resale house). This entailed total monthly payments of around £1,100 and a deposit of £8,700. This was comfortably within our budget.

But we were then required to undergo an affordability assessment and told that we would instead have to buy 55% – the seller’s share and a further 15% from the housing association.

The monthly cost rose to above £1,300, and the deposit to £11,965. When we said we would prefer the 40% share, we were told we had to take the 55% as the product was “too affordable” for us otherwise.

This strikes me as backwards thinking. Shared ownership gets more expensive over time. The interest rates on our mortgage are fixed for two years but will only go up after that.

Our rent will rise at inflation plus 2% each year. My partner will also go back to work part time after her maternity leave, there will be nursery fees to pay when she does.

All of this meant we wanted to build some headroom into the deal to protect us against economic shocks – the kind of stress-testing housing associations champion for themselves. But the rules stopped us doing so, and I’m not sure what purpose they serve.

7. Be aware that lease extensions can sink deals and have a plan in place

We initially came close to completing on another shared ownership property before the sellers pulled out. In this instance, the lease extension became an enormous source of stress, delay and cost for all involved.

Two months after being nominated as buyers, we learned that the lender would not provide a mortgage because there were 82 years left on the 99-year lease. An extension was required, and when valued the cost of this came in at £9,345, plus £1,000 for the housing association’s legal fees and a £228 ‘administration fee’. This effectively doubled the upfront cost of the deal.

The sellers were not willing to pay for the extension or contribute to it. Our son was due in two months, we had waited months to be nominated to a suitable home and we were desperate.

“It felt like the need to extend the lease caught the housing association by surprise as much as it did us”

But paying the bill would have blown all our savings out of the water and sent us crawling cap in hand to parents for a loan. It would have meant starting new life as a family with £0 in the bank account, and needing to furnish the house on hire purchase.

The housing association refused to offer a payment plan. It was pay up or walk away. In the end we agreed to pay.

We could not risk being without a home for our son but I became stressed and anxious and spent sleepless nights fretting that we were making a mistake.

In the event, the sellers dropped out and the second property we were nominated to did not require an extension. But the sector must develop a plan for situations like this. It felt like the need to extend the lease caught the housing association by surprise as much as it did us.

At the very least, buyers should be warned about the potential for lease extension fees at the start of the process. Better payment plans should be developed to ease the burden. Admin fees and legal costs should also be waived.

The sector would do well to be cautious about the reputational risk here. The media is on the hunt for leasehold scandal stories. When I tweeted about this issue back in March, it was less than an hour before a property reporter at a major broadsheet got in touch to ask me to tell them more. I declined but others wouldn’t. Each negative article about shared ownership takes buyers away.

8. Scrap ground rent

Similarly, the mood music of government, the media and the public at large is set firmly against ground rent. As a result, I was surprised to learn that should I ever staircase up to 100% ownership, I will be obliged to pay a ground rent of £250 a year. This isn’t at the scandalous levels but it isn’t a peppercorn either.

The sector would be well advised to do away with ground rent. It only takes one angry residents’ group to make a news story out of it and if you wonder what the reputational risk of that would be, just ask the house builders.

9. Treat owners like owners

The lease agreement on the first property I tried to buy banned pets and satellite dishes. The one on my current property means I must agree to paint the entire house every five years in a colour of the housing association’s choosing.

People save for years to get shared ownership so they can escape from overbearing landlords.

I do not believe a giant housing association has any real interest in banning my son from having a guinea pig or insisting I paint the living room magnolia.

But clauses which say the opposite should be dropped. Shared ownership is presented as offering the benefits of homeownership. That’s what the sector should offer.

Peter Apps, news editor, Inside Housing