to fully buy my shared ownership property and rent it out

[WyclefJohn]

I bought a percentage of a shared ownership flat about 5 years ago. My financial situation has improved, I have moved away, and I am now able to buy the whole flat, and I could rent it out as an investment. I have checked with the housing agency and they say this is fine. The flat lies in an area of mainly social housing.

Would I be unreasonable or unethical to do this? The alternative is I sell my share, and give someone else the opportunity to buy a shared ownership flat. To some extent I am removing a property from social housing.

(Full disclosure: I posted about this the other day, but I didn't clarify the nub of the problem and only got a few replies)

In order to quality for SHARED OWENSHIp you have to be a key worker, be on the housing list, have been in your ( generally not greatly paid ) job for years etc. and earn under a certain amount. It has nothing to do with the council. Or social housing. Or passing the property to council tenants. Or expecting to give another key worker an opportunity to buy a share, that is the job of the housing association.

To clarify things, it is a shared ownership scheme through a HA. The rent portion was below market rate. But it was SO. Many of the neighbours are social housing though.

I didn´t have to be any of those. I wasn´t a key worker, although I did work in the public sector. I wasn´t on any social housing list. I had a reasonable salary, but on my own, not spectacularly high.

I have no idea what schemed shared ownership you are in, can 'anyone' do it? What were the conditions to get it? What HA? It seems very unusual.

I just think the rules were different. I needed to live in the area, have a job, and have a salary that was below a threshold. Don´t want to give away where I was, but I think SO schemes vary from place to place. Definitely a big scheme with one of the big HAs in my region.

Sounds like the same as mine. I think you're kind for considering others but you should do what's right for you. Just be mindful re my post above. Where I am, the attraction of the below market rent element has pushed up the price of 25% shares over the true value. So if you start with a 25% share, then you purchase the rest at the right price, you'll have paid over the odds.

Housing associations are private companies. They are providers of social housing, but you seem to think you’re stealing from the government- you’re not.

There are many types of shared ownership scheme, not just key worker (they’re probably the monitory) they all have different rules depending on the purpose but generally, in London, you need to earn under £60k and not own another property to be considered.

I see your point about selling it back to the HA so they can sell it to another person who need help buying. But then, they’ve built hundreds in the time you’ve been living there. They don’t expect it back, full staircasing is part of their business, they expect it.

OP, see it as if you buy it outright then you are investing FAR MORE cash into the HA than if you sold it on for a share. That will be of way more help for HA to provide more affordable housing.

@Emma198 I don't understand why the 25% shares are inflated, everything is meant to be valued independently at market rate before purchasing? I can't see lenders agreeing to mortgages of higher value than the property is worth. I'm shared ownership so intrigued by this.

When the units is built you buy the 1st trache (say 25%) an independent surveyor values the unit at 100% and the buyer is changed 25% of that by the HA.

It’s usually the opposite- the true value can go up in the time between the surveyor valuing and the sale happening as there many be a long time between the 2 if the build is unfinished when offer.

The only way the 25% could be inflated is if the surveyor over valued it

I bought my 25% share on the open market, and sold it again 5 years later. Estate agent explained that valuers value 25% shares at higher than 25% of what they would value full property. He was right - flat in same development but in better condition was on for 150k, my 25% share got valued at 41k, so property as a whole 15k more than a property that was the same size in same development but with new bathroom and kitchen whereas mine both needed done. In addition, estate agent said that people with large deposits but who couldn't get mortgages for whatever reason are buying these shares outright for much higher than they're valued. He was right again - cash buyer bought mine for 55k and now will be paying c250 quid rent a month for other 75%.

When I bought it, inwas valued at 36k and I paid 39k, getting a mortgage and putting the additional on myself. Of course mortgage companies won't lend more than market value - did I say they were?

I explained that that's how it happened in my case so unsure why you're saying I'm wrong? I clearly understand how it worked in my own case.

The reason why valuers are valuing the 25% shares as higher than 25% of the full value is down to demand apparently- hugely in demand where I was and this is being reflected in the value. It does make staircasing nonsensical though which defeats the whole object a bit, but property market is just mad in the city centre.

Its valued at 100% then split into whatever % you wish to purchase.

Sprinkles, perhaps I'm not being clear. But I'm not going to explain myself again.

Ps mortgage companies won’t be part of you paying more than market value either (unless you have a very large deposit, which you clearly didn’t) you can’t just say your cash goes towards the real value and my cash goes to the excess I want to pay. It doesn’t work like that. I think you must’ve been informed incorrectly. I’ve worked in shared ownership for many years.

No offence Sprinkles but if that's true I'm a bit worried. My mortgage company lent me the agreed % of the value, and I put the rest up myself. Not uncommon when someone really wants a property. In fact, with the house I own now, it got valued slightly less than we had offered and mortgage company said they'd still lend 90% of the value and we'd have to pay the 10% of the value plus the extra, or lower the asking price.

Regardless of what you "know", I'm saying that in the case of my shared ownership flat, it was definitely valued at more than 25% of what the whole property was worth.

Thanks for the advice Emma - in my case, I was fairly confident that I paid the correct amount - it was valued by a solicitor and I paid my percentage. But I can understand how it might be different.

Be a good landlord and allow people on part HB. I'm 25, I'm a domestic abuse survivor, a university student, I work part time for the NHS and am a single parent to a toddler. I have good rental references, and a guarantor. I have a little bit of HB helping me, as well as tax credits and student loan - all a pretty considerable done but none of which are included in affordability sums - only my 800pm wages when average 2beds are 1100. I found it impossible to find somewhere after my last landlady sold up. I know many decent, working single mums that are in similar situations. We were looking at homelessness, even though I can afford my rent and I take pride in keeping a beautiful home. It was the most terrifying time of my life. I've been homeless before, as a young teen, and homeless hostels were not somewhere I wanted to force my young child to live in. The reality of them is truely awful.

If you're concerned on the ethics, rent it to somebody like me. Even if it costs a little extra in landlord insurance. If I'm ever privileged to own a property and be able to rent it out, I'll be doing the same. You could literally be saving a family's life. My landlord did to us. And I've repaid him well by paying my rent on time for two years, and keeping the house and garden beautiful.

It’s fairly common knowledge- paying more than a property is worth is a poor investment so why would they want to be involved in that?

There is legal recourse if your share was overvalued- it’s highly regulated. You could probably still take action and get your overpayment back.

But then it's not a 25% share then is it? I'm not saying it didn't happen to you but I'm a bit worried if the price is being inflated purposely because it's shared ownership. Does that mean if you want to staircase to 100% then the full value is still inflated? Because that would immediately put you into negative equity/lose value as soon as you own it outright.

Are you in London?

Perfectly reasonable thing to do. The HA makes a profit on the sale, which it can then invest in further properties. It enables them to refresh their housing stock to meet current needs. It’s also better for communities for private and social housing to co-exist. I see no ethical problem here.