To be confused how people can afford shared ownership

I’m in a SO and consider myself extremely lucky to be here. I am in the south east, so rent is extortionate. I own 50% and mortgage/rent is under £700pm, that includes service charge. I’ve been here 10 years and rent has barely gone up in that time. They have also let me extend and convert the loft. Yes there is a LOT of red tape but if I was renting a house of this size in my area it would be over £1400pm, which is unaffordable for me on my own (and would therefore be covered by universal credit). I have 3 friends in SO and their experience is the same. I’ve also sold a shared ownership and whilst the estate agent was shit (lied to me about selling one before when they actually had no idea what was involved) it was smooth and quick with almost 30 interested parties.

So no scams here.

We bought a flat under a shared ownership scheme and honestly wouldn’t recommend it unless you are absolutely certain you will get a decent payrise every year to be able to afford the yearly increase on rent & service charge which started off reasonable and a few years later was astronomical.

We’d also get letters from the HA every now and then to say they’d miscalculated fees / had a deficit and needed X amount more money off us. Thankfully DH & I could always cover it but it caused a lot of stress for a lot of our neighbours.

Also when it came to sell, you have to pay estate agent fees on the total value of the property rather than your share (which is fair enough as it’s still the same amount of work for EA) but it really ate into any value the property had gone up by. It was also really stressful and complicated trying to sell and made a lot of extra work for the lawyers.

Maybe we got unlucky with such a dire HA but I wouldn’t recommend to anyone now - also our block was full of young people with professional jobs who just couldn’t afford a massive deposit (we’re in the SE) so definitely not people topping it up with benefits!!

@DistinguishedSocialCommentator I never paid rent on the 30% owned by the HA. They were like a silent partner who ultimately made their profit from either the sale of the whole house or market value of their share, had I ultimately bought them out.
So I still don't see why it's obvious that they would refuse any house improvement which would increase the value and therefore their profit. Unless they were worried about cowboy builders and potential damage to the structure? Idk.

OP, generally the scheme I had was very good. I was only paying a mortgage, not rent at all, there were no time constraints on when I had to buy the HA share etc. I don't think all shared ownership agreements have similar terms so it's hard to compare. You'd have to look at the small print really carefully. I was very lucky.

Speaking as someone who is in the process of selling their shared ownership property and made 30k of equity in four years I can confirm they are not a scam. That being said, different housing associations will have different rules and ours was quite lenient compared to others. I think it's a great scheme to get on the ladder - but I do think that it's best for people who want to stay in the house they are buying just because of the complexities of selling a SO.

I think people should also be aware of their lease agreement going in. The rent goes up each year and this in turn can make it unaffordable for some if your financial position hasn't changed.

Sorry I am agreeing with you my post was in response to @Lilacdew

For a normal mortgage they'd be 1500 a month. Similar for normal renting. Shared ownership truly is the way. I think the haters just don't understand it and think it sounds like a scam which I would probably think too if I didn't know better

I think you are agreeing with me? Properties around here worth 300k would apparently be about 1500 a month according to Rightmove but shared ownership 300k is about a 1000 a month.

Not really. The full value of our SO property was 500k. Our household income at the time was 70k which wasn't enough to get a mortgage for the property, despite our 50k deposit. The property was also very reasonably priced for the area. There were no three bed houses in the area that we could afford to buy without SO.

Getting a large enough deposit together is normally the obstacle there.

Normal mortgage on a property worth the same price would be about 500 pound more a month where I am. You'd need a higher deposit too

What I've never understood about them is: if you can afford to pay all that rent on top, is an equally large mortgage not available, so you own a place outright?

Well your original comment claimed "many" of them are getting the rent portion paid by benefits which is bs btw. You wouldn't pass the affordability checks. I can believe someone had a decrease in income AFTER moving into their home and had to apply for benefits but it's not going to be "many".

The affordability checks are really in depth btw. I know because I've done this what experience of shared ownership do you have other than assumptions? Just curious

I bought 30% of a SO flat in the mid 2000s. I eventually bought the remaining 70%, sold it and used the £200k equity to buy a house. It worked out well for me, a nice flat in a modern building that I wouldn’t have been able to afford on the open market in a million years. However the Housing Association was an absolute nightmare and they almost derailed my sale. The flat was in a gentrified part of East London, hence the rise in value, but there was a huge amount of anti-social behaviour in the area and in the end I couldn’t wait to leave.

I don’t know how people afford it nowadays though. In the area I bought in, a 1 bed SO flat is now around £600k so even if you purchased just 25% you’d be looking at a sizeable mortgage plus rent and the Service Charges are now sky high. To put it in perspective, my 2 bed flat was £180k in 2006 which back then I thought was an eye watering sum😂

There is a lot of snobbery on MN towards Shared Ownership and any kind of socially housed tenant.

My cousin has one on 30% ownership. She is a single mum, works full time, but low wage. Family were able to club together to gift a deposit portion. They did this because she was struggling through a series of poor rental properties with damp etc, which was terrible for the kids. Now she has a brand new 3 bed house + garden in a council HA complex. UC does cover the rental portion (at reasonable council rent) though they were not allowed to assume this for affordability checks. What she now pays for monthly mortgage is magnitudes less than rent in the low quality flats she was in previously - that UC covered (so a win all round?). Not a day goes by that she doesn't thank her lucky stars that SO exists!

It is 60% owned by a HA, and it is in a section where other HA homes are (some affordable housing, some shared ownership)

the shared ownership housing is on the front with affordable rent round the back (easiest way to describe). With full paying properties opposite, so is quite a mix.

I have no idea if the houses behind me are claiming benefits (I’m going to assume so as i think there are certain criteria to able to apply for a HA home but may very well be wrong) but none of my neighbours are.

Ok, thanks for posting at me and I hope this also helps the posters I quoted.

It is indeed obvious for those that have every owned a property.

FYI - we have never lived in rented or part rented property

FYI - when it is part rented like the poster I responded to, the minority owner in the case of the poster still have a full hold, say over what goes and what does not and that is a fact, fact backed up by their refusal to allow an extension

HTH

"The reason you could not get consent to extend is obvious, ie the building did not belong to you, 100%"

Well I owned 70% @DistinguishedSocialCommentator! If it was a business I'd be the majority shareholder. So not 'obvious' imo - a home improvement which adds value makes sense for a HA as a business, since it presumably increases the value of their share too. It's not like I was asking them to help fund it.

Not the question you asked, I know but have a look at the First Homes scheme. In my area (East of England), this is becoming a very popular product for affordable homeownership.

Where i worked in London - most HA developments were on benefits and some of the worst tenants I'd me, vs cocuil renting. In the same borough, they insited all new developments has so-called 10% adorable housing. Often the other property would be fully owned by the people that lived there and on other developments, it was part-buy mixed with a majority of rentals

It is not typical but I had the misfortune to meet a handful of tenants over the years who were kicked out of council property for various reasons and the new homes they got into were often trashed quite quickly - I'm sure the majority of HA renters are good people but my experience of HA developments sticks in my mind

I didn't know you could do this until a friend who bought a shared ownership property had a (genuine) change of circumstances which meant she could only work limited hours. She then used her income to pay the mortgage element, and most of the rent element was covered by benefits.

But if she had been renting it probably would have cost more in benefits and/or thrown added pressure on housing lists, so overall it still seems a better solution for everyone.

The reason you could not get consent to extend is obvious, ie the building did not belong to you, 100%

No benefits in my household either - neither are any of the neighbours i know. Its purely from a deposit situation, we were privately renting before (very lucky our landlord was amazing and gave us very cheap rent which enabled us to save a little bit) but we would never have been able to buy a property int he next 5 years atleast if it wasnt for shared ownership.

I brought 40% of my 3 bedroom £265,000 house in the Midlands.
5k deposit, 103k (ish) mortgage.
£500 for my mortgage monthly
£385 for rent & servce charge so £885 in total.

3 bedrooms to rent in my aread would be £1,200+ pcm.

Mortgage is a 5 year fixed (risky i know but preferred having a certain payment each month)

We have only just lived there a year so no interest changes in my rent YET, so we will see.

Exactly this

@Leah5678 If your income is low enough to get universal credit then it's not high enough to pass the checks.
Earned income yes, but as I mentioned above they take other sources of income into account including certain benefit income, maintenance and any deposit you can put down. It will also depend on the value of the property you are purchasing. A cheaper property will clearly require lower household income.