With house prices rising at a faster rate than most salaries and people continuing to struggle to get onto the property ladder, shared ownership is a potential solution for many, yet is often overlooked despite having been introduced 30 years ago.
The research from the Leeds Building Society has identified a number of key myths around shared ownership including the belief that a shared ownership mortgage is more difficult to place than an ordinary mortgage.
It also found that people think that shared ownership properties are in less desirable areas, that it’s more expensive than renting, that it’s difficult to qualify unless you’re on a very low wage, or a key worker and that it is like a consolation prize and not real ownership.
‘In a nutshell, the lack of understanding around shared ownership boils down to these five distinct points,’ said Louisa Sedgwick, head of intermediary distribution for Leeds Building Society.
‘In reality, these beliefs are inaccurate and there is an abundance of information for intermediaries, and the borrowers they serve, available from housing associations, the Government and lenders to help them understand how shared ownership could work for them,’ she added.
She pointed out that while many housing developers or associations are linked to specific intermediaries in certain areas, there’s nothing to stop individuals approaching their own broker about shared ownership.
‘At this stage, many clients will have been assessed, certainly in terms of eligibility for shared ownership, by the relevant Housing Association before going to consult an intermediary, meaning the process for the broker can actually be fairly straightforward since they only need to place the mortgage,’ explained Sedgwick.
‘A mistaken public perception exists that shared ownership homes may be badly maintained, poor quality properties in poor, or less desirable, areas. Again, this is far from the truth.
London provides an interesting example and showcases the fact many shared ownership properties offer a desirable home and community environment to live in,’ she pointed out.
‘Properties available through the scheme can be found in prestigious and sought after areas such as Notting Hill. What’s more, the availability of shared ownership properties extends far beyond London to desirable areas across the UK including Harrogate, Chester and York.
‘Shared ownership schemes are found across the UK as housebuilders are often obliged to include a proportion of affordable housing, some of which will be for shared ownership, regardless of where they are developing,’ she added.
In terms of cost she explained that while many believe the monthly payments required to live in a shared ownership property hover somewhere between those paid for a full mortgage and rent, in reality, monthly payments for shared ownership properties could be lower than either full ownership or private renting.
Indeed, a report published by the National Housing Federation in 2013 highlighted average shared ownership monthly payments were lower than rent or full ownership in all regions of England, with the exception of the North East, where monthly private rent payments are the lowest.
The report also said that at a national level, the average monthly payment for a shared ownership property is £688, compared to the private rented sector average of £893 and in most regions, the average share purchased varies between 38% and 46% and as the property’s value increases, so does the value of the borrower’s share.
It is also generally believed that to qualify for a shared ownership property, you need to have a very low income or be a key worker, that is a public sector employee working in an essential service such as police officers, firefighters or NHS clinical staff. In reality, the concept is open to a much broader section of society.
‘Simply put, anyone with a household income up to £60,000 per annum can qualify or up to £71,000 a year in London for a one or two bedroom property, or up to £85,000 a year for a property with three or more bedrooms. Shared ownership is a great opportunity for young professionals and couples to make the first move to buying their own home,’ said Sedgwick.
She added that it should be recognised as a useful and mainstream category of tenure in its own right and the myth that these homes are difficult to sell is far from the truth. ‘Shared ownership properties are demand driven, very much like the rest of the housing market. The housing association which holds the remainder of the property may want to buy back the owned share to maintain its stock levels. If not, the property can then be sold on the open market,’ she explained.
‘Whilst shared ownership is not the sole answer to the ongoing housing crisis facing the UK, it does provide first time buyers and those on low to mid wages with an opportunity to get their foot on the property ladder and a home they can call their own,’ she pointed out.
‘What’s more, the buying model is an integral part of the Government’s affordable housing strategy and with that in mind, it’s worth reiterating the point that some equity, large or small, in many ways is better than none,’ she concluded.
