Shared ownership: a low-cost way onto the housing ladder?

Rising property prices and recent changes to the financial markets mean it’s now harder for some first-time buyers to secure a mortgage. Shared ownership offers a lower-cost route onto the property ladder by allowing buyers to part-buy and part-rent their home.

Shared ownership schemes are usually managed by housing associations, which receive funding from Homes England.

A buyer may initially purchase a 25%, 50% or 75% share in the property; however, the exact share available will vary depending on the individual housing association’s constitution and the schemes it offers. Rent is paid on the remaining share – the larger the share purchased, the lower the rent.

Until the property is owned outright, the buyer’s relationship with the housing association is set out in a shared ownership lease. The form of lease is set by Homes England. Although the property hasn’t been purchased outright, the buyer has the usual rights and responsibilities of a full owner, which are set out in the lease.

Shared ownership schemes also give buyers the option to purchase further shares over time (known as staircasing rights) and eventually purchase the property outright (known as final staircasing). Buyers may also sell or transfer their share to a third party, subject to any restrictions and requirements in the lease. It should be noted, however, that some schemes prevent staircasing above 80% to keep affordable housing available in certain key areas.

Shared ownership schemes are mainly designed for people who can’t afford to buy suitable homes in any other way. Priority is therefore usually given to people on local authority or housing association waiting lists.

As new housing developments must usually allocate at least 10% of their homes to affordable housing in accordance with the National Planning Policy Framework, most local authorities will have shared ownership properties available.