To not see a problem with shared ownership?

[arithanaggerton]

A relative of mine is looking to buy a 25% shared ownership property as her and her 2 young sons have been turfed out by private landlords twice in 3 years, once while she was pregnant. She's been forced to move areas before so she can have cheaper rent and is now renting in a not very desirable area. She recently got an inheritance and topped up with her own savings she has 10k. She has found that this is enough for a deposit on a 25% shared ownership flat, 2 bedrooms on a lovely new build estate. She's stuck with 25% due to only qualifying for a tiny mortgage.

She's upset because her mum is begging her not to go through with it, saying that being a new build it will lose value the second she moves in, and that it's just glorified renting. Her mum says it will have no investment value. My relative understands all of this, but she just wants to move away from her current area to this nice new build estate, and have the security of knowing she won't be turfed out. She doesn't want more kids and so plans to be there 15+ years, so doesn't really care about the investment value. She'd be paying a little bit less in rent+mortgage than she currently pays in rent. My relative says that whilst she knows she won't properly own it, shared ownership will suit her and her needs. The flat and estate are lovely, with a communal garden, park, good school nearby. She just wants a good environment and stability for her kids. If she rents she'll end up in another tatty terrace in a bad area.

I've been thinking about it a lot and what my relative says makes sense. You're essentially paying a fee (the deposit) for getting a new build and having the security of knowing you won't be kicked out. If that suits you and you're going into it with the right expectations, I don't see the problem. I certainly don't see it as a scam but many people do. I think shared ownership exists for people like my sister, of course if you can afford a full mortgage you'd go for that over shared ownership any day of the week but that doesn't mean shared ownership should go.

@mam0918

What the hell are people doing to get constantly turfed out of rental properties multiple times per year?

Me and all my friends privately rent and no one has been turfed out of anywhere, while people do upgrade or move for work non have been thrown out and certainly non rented for less than a few years, I have lived in mine for 10 straight years.

When I rented I had to move every 18 months/two years, not by choice. A combination of the rent being put up more than I could afford, the landlord selling the property, the landlord wanting to move back in themselves/move family in, building renovation being done. It was really unsettling to never be sure how long I was staying anywhere. Since I bought I've lived in the same flat for ten years now, if it wasn't for shared ownership I would not have managed it.

I wrote a post about this on another thread so I will C&P some of it.

My choice was throw myself on the council's mercy pleading homelessness after the LL wanted to sell, or do SA. I went with SA.

Obviously I am grateful for the security but honestly it's a nightmare. I wish I'd thought harder about it all, but at the time it was like being stuck between a rock and a slightly less hard place.

You pay a premium anyway, this was confirmed to me by the estate agents when I got it revalued...

I got sucked in by the shared ownership thing. Say the place is worth £100k, so 25% should be £25k. But it's not, the price is actually £48k. So the 100% value would be £192k which is nowhere near what the property is worth. (Made up figures).

This is the thing that scares me. When I bought, they were selling this as "the future" and so valuations were adding on a premium. So in that example the bank will only lend you £25k but the price is £48k, and you pay the rest in cash. I can't remember the exact figures but I had problems because the bank wanted 20% deposit (£5,000, fine) and then I couldn't get a mortgage because it was below this set amount which would have included it in consumer protection or something? A bank won't do a mortgage for less than a set amount? And no matter which way I did the deposit there wasn't a product available.

So in the end a family member remortgaged for me, and I paid them back.

But this worries me so much about selling it in future - what if the main banks stop offering them or the rules change? Why would anyone who has £48k in cash for a deposit buy my shitty little flat? Unless, like your sister and I, they are desperate. Which feels kinda wrong to me.

The buyers also need to be approved by the HA and I need to pay all of the costs (inc theirs) to sell.

Everything is at the stage of needing fixed now. New windows, new bathroom, new kitchen, damp in the stairs. But it's just a black hole because whatever money I put in, I will never see, the HA will. If I sell to someone else, the HA keeps 75% of the profit.

And by spending that money now, it only forces the price up more when I can eventually afford to staircase up more equity, shooting myself in the foot and making me pay for the gun and the bullets and the funeral.

Above 👆🏻 was the part I really didn't think about. The kitchen looked fine (dated but fine) when I bought it. Now I'd be competing in the market with brand new high gloss ones, it would be obvious to any buyer it needs replaced and they'd do the maths I didn't think about.

Then there's the fees and charges and joint insurance etc - ridiculous. They charge me £15 for sending a letter that tells me my proportion of the fees is £2.76. Then there's the charges... mysterious things like stair cleaning (I have no stair) gardening (we all do our own, few bushes / trees in the joint carpark which are done once every 2 years at best). Loads more which have never benefited me at all, can only assume it's bc you are treated like a renter even though you get none of the benefits of renting. Insurance I have no choice over, it's literally a surprise every year.

It honestly feels like a bit of a money pit, especially when I add up all the things that need done (and I have looked after it, paid for repairs and maintenance etc)... it's the stuff like new windows, new boiler etc that I dread the thought of replacing because I'll never see that money back. All my neighbours are in the same situation. We all need a new kitchen and bathroom... but what do you do?

If I knew I was staying another 10+ years I wouldn't be bothered but ideally I would move if I could (to a house), so I resent having to spend significant money on it. It definitely works, and definitely helped me, but it's definitely not the future imo.

I sold my 50% share of my SO house in Feb. Had the house for 17 years as a single parent but doubled my equity and have now bought a house with DH. It worked for me.

I think some SO schemes are better than others. I bought years ago as a single person on a very low wage. It was the only way I could buy. I bought 25%, bought the rest and ended up selling after 5 years with 70k equity.
I went this a local charity SO, rather than one that's running as a business rather than a service.

Loved mine. Sold it 5 years later after meeting DP and made £15k after fees. The only issue I had was the fees to sell made it more expensive than normal. But the mortgage was low, the rent never changed and I could afford it on my own.

OP, I don't know if you've seen it but BBC Panorama did a programme on the pitfalls of shared ownership. It's still on iPlayer and worth watching just to see what you can get into. It went out towards the end of last year.

My first house was shared ownership. I bought 70% and the HA paid 30% which acted as the deposit. I didn't have to ask permission to do anything (except an extension, which I wasn't allowed to do). I also didn't have to pay rent on the 30%.
When I sold it I paid the HA 30% back. We both made a profit - I had 50k to put straight down on my next house.
So what I would say is that not all shared ownership schemes are the same. Some don't offer as much benefit as others, but mine was a total no brained and gave me a solid lift up when I wouldn't have been able to do it otherwise.

We brought a flat 2 bed 25% share. It Was OK however a few points .

*Our rent was increased with inflation etc .
*Service charges increased every 4 or so months we was paying £80 a month to start it was £160 when we left a year later.

• We got charged for cyclical works like painting the entire building, this was taken from a fee saved in the service charge each month however there wasn't enough and we had to find £900.

Just be careful and read the lease etc .

We didn't make alot of profit maybe 3k, however it was impossible for us to save more money while there to buy a bigger share so could never own more or own it outright, so we sold up and moved in with parents again .

Now just about to go for a normal mortgage after 2 years of saving nonstop.

Shared ownership is nothing more than a means at proping up the property market.

The fact that that shared ownership is a thing should ring alarm bells, it doesn't matter what side of politics you stand by there is far too many people who want their own property to increase in value over time whilst making sure their little village/town doesn't get new housing on the part of green land. It is always another town that should have it.

Housing is going to be the next 'brexit' style political devide topic over the next few years

@arithanaggerton

Never in a million years would I do shared ownership. People say you have security. All I see is people getting trapped in an overpriced newbuild that they will make not one single penny from.

@Viviennemary Its a bonkers idea. You pay rent on the proportion you don't own You pay for the repairs. If the house goes up in value they gain. You need their permission to sell and need them to agree a price. Wouldn't touch it with a bargepole.

This. ^

AVOID like the plague .

Read the national leasehold campaign group on fb for more info

Also think about ground rents , service charge and all the other adhoc bills and rules like paying a percent to to the HA when you sell

We bought our first home on 50/50 shared ownership. We sold with no profit but had gained a little equity. The only way we moved on was by buying as lower earners and then retraining to earn more- lots of luck involved there, not everyone can do that. Our neighbours are still there 10 years on, some feel trapped, others are perfectly happy.
It still beats the hell out of private renting, you just need to know you could be in it for the long haul.

[quote littlepattilou]@arithanaggerton

Never in a million years would I do shared ownership. People say you have security. All I see is people getting trapped in an overpriced newbuild that they will make not one single penny from.

@Viviennemary Its a bonkers idea. You pay rent on the proportion you don't own You pay for the repairs. If the house goes up in value they gain. You need their permission to sell and need them to agree a price. Wouldn't touch it with a bargepole.

This. ^[/quote]
What if you just want to know you have a safe place to live?

I had a shared ownership home. On the face of it, I did well out of it. After 20 years I had enough equity to buy a small house outright. That’s said, I would advise anyone thinking of buying that way to get a good solicitor to go through the contract with them. Things to look for:

How quickly can you staircase up if you want to?
If you increase your share, how soon can you sell?
How much will the rent go up each year? Mine was inflation plus 1%, but it depends where you’re buying from.
How often are cyclical repairs done and how much of the service charge goes into the pot each year?
Is there a residents’ association to support you with any problems.
Have you got savings to cover unexpected bills?
Make sure your insurance (probably contents only) covers any legal costs then if you have a dispute with anyone, you aren’t forking out for solicitor ms.

They can be very hard to sell as they dictate value and you have to pay them that back regardless of what you get for it, sometimes at a loss.

You also need to be very careful about what the service, leaseholder, ground rent and any other charges and how much they go up by each year.

However they can be a good deal if you just need and want a secure long-term home

It sounds like this would be a great option to give your sister and children some security.

It’s important she read the lease and that she understands the ins and outs but to address a few comments I’ve seen. Firstly; the panarama programme referred to was apparently on shared ownership but if you watch it really focuses on issues with leasehold properties in general, it didn’t really mention specific issues with shared ownership.

If and when she sells, the value is determined by an independent qualified surveyor; the HA has no say in this; it’s done by the valuer and that’s that. The HA does have a certain amount of time to try and find a buyer so that it can remain an SO property, but if they can’t find one in the time stated in the lease, you can usually take it to an estate agent to market to sell the share and depending again if you are able to, sell at 100% (and your sister get her share from the buyer and the HA gets theirs from the buyer). If and when she sells it will be in the lease what she has to pay, but usually it’s her own legal fees, and processing fee to the HA, and if she went to an estate agent; the estate agent fees.

Most HA allow improvements and will just say you need approval for things like new kitchen, bathroom, extensions etc. Having this approval also means if you staircase you can have two figures stated in the valuation - one as the property stands and one had you not done the improvements - and the purchase of extra shares is done on the not having done improvements value.

Rent and service charge will be reviewed, usually annually and this should be in the lease. Most service charges are based on actual expenditure so can go up and down each year.

She will pay repairs and maintenance on the property but that’s what comes with owning a house, you either want to be a renter and have your landlord pay, or own your property and you pay, so as you own it; you pay.

Depending on when she buys, she might buy on one of the new programmes (funded from April 2021 money), that would mean she could buy a property from a 10% share, staircase by 1% each year, and also get money towards repairs and maintenance. So it is worth looking into whether she would be able to use these new schemes/programmes.

My step-son has one. He has a small house on a new build estate. It’s provided him with security away from private renting and he has been able to get a dog which he’s always wanted.

He’s been there about 3 years now. He can afford the rent/small mortgage on his own.

There’s no way he would have been able to buy otherwise. He may never make much profit from it but it has given him a settled home in a nice area. And in some ways it’s not the investment side that matters, it’s more getting away from the whole private rent thing. He could stay there for the rest of his life if that’s how things turn out as the house is more than big enough for a single person. He can use other vehicles for investment - pension/ISA’s etc.

We did shared ownership for a house and 4 years later have bought the rest of the house. I was worried trying to buy the other half would be made tricky, but everything has gone very smoothly.
For us it's worked really well.

I don’t like shared ownership because it continues to prop up house prices and line the pockets of house builders.

But it’s the system we have for people who want to get onto the housing ladder sadly so I can see why people have little choice.

We did shared ownership and it worked for us. We are now in our own home

I think you should just do due diligence on the housing association

It’s definitely not a scam and is heavily regulated. People with less money always end up paying more for everything, the more money you have the cheaper investments and mortgages are.

Leasehold houses are an issue that’s true but it’s not just shared ownership. With Shared ownership you have the security of a housing association who are social housing providers- they use all their profits to fund more development and not line the pockets of fat cats. So way better than private landlords

It can depend on the authority. But a few things to to bare in mind:

Check how long the lease is, 100 years seems like ages, but if she would want it to be security for her child too, check who is responsible for applying to extend the lease, this can be expensive and well before the lease expires.

Some will require permission to do anything to the house, some will charge a fee to 'apply' for this

Some cap the % you can ever own to 75%

Service charges etc can go up, sometimes a lot

Check the deal re: security, it doesn't offer the same as being a home owner, you are still classed as a tenant, at least here anyway

Selling can be a pain in the arse as many will insist on first refusal, and then 'let' you market it if they don't find anyone

It can be good, but it's worth her really researching whoever will have the other share, the terms and conditions in great depth as they can vary.

Our service value was fantastic value

Or buildings insurance and water was covered in it along with all communal lighting grounds man etc. We pay more than that now for insurance and water alone

*Service fee