10 September 2020

NEW Shared Ownership model announced


The Housing Secretary has announced a new model for Shared Ownership to help more people onto the property ladder by vastly reducing the minimum initial share, and launching a consultation to ensure new homes deliver the accessibility that families need.

The new Shared Ownership model announced today will:

  • reduce the minimum initial share you can buy in a property from 25% to 10%
  • allow people to buy additional shares in their home in 1% instalments, with heavily reduced fees
  • introduce a 10-year period for new shared owners where the landlord will cover the cost of any repairs and maintenance

A Right to Shared Ownership will be available on the vast majority of rented homes delivered through the new programme, providing tenants with a pathway into ownership by giving them the right to purchase a stake in their home.

The government last year claimed that the policy – which was introduced in the 1970s – is being shaken up to make it “fairer, more affordable, and more consumer-friendly”.

The new model aims to get more people on the housing ladder by making changes to aspects such as minimum initial shares and stair casing increments. But what does this mean for landlords?

Lower minimum initial stake

People looking to get on the property ladder via shared ownership will now be able do so with less money. Under the plans, new buyers can purchase a property with an initial stake of just 10% – down from 25% in the current model.

This will mean that people can purchase a property with lower deposits. It will also lead to lower combined rent and mortgage costs, the government says.

So while a family buying a £200,000 property previously had to provide £50,000 as minimum stake, they will now have to spend a minimum of £20,000.

The government says the change “will make shared ownership accessible to more people and support those for whom realising the ambition of homeownership is most challenging”.

The Ministry of Housing, Communities and Local Government has estimated that more than 300,000 additional households will now be able to access shared ownership homes as a result of these changes.

Stair casing in lower increments

Under the new proposals, announced alongside funding for the Affordable Homes Programme, the increments at which shared owners can increase their equity in the property have been significantly reduced.

For shared owners looking to ‘staircase’ – incrementally increase their share of the property – they will now be able to do so in tranches of just 1%, down from 10%.

The government noted that saving for a 10% share can be difficult as a result of house prices rising faster than wages. But under the new model, shared owners can buy as little as 1% with “heavily reduced fees” for up to 15 years.

The change comes despite warnings that legal costs involved in stair casing make it impractical. Shared owners can be made to fork out around £1,000 each time they staircase.

Under the new rules, landlords will be prohibited from charging administration fees on shares bought as part of this gradual stair casing model, the government says.

Thanks for reading

You can read the full text of the government news release here:

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