Bad news, fellow young people hoping to own a house: “shared ownership” is kinda crummy.
The dream behind shared ownership is that you, penniless young person who might just be able to save a deposit by 2050 assuming you don’t do anything silly like have a social life or go on holiday, only buy part of the property, usually around a quarter or a third. That partial purchase reduces the amount of cash you have to stump up for a deposit, and you then split your monthly outgoings between paying rent on the three quarters you don’t own, and paying down the mortgage on the quarter you do own.
If (hopefully, when) you pay off the mortgage on the first chunk of the house, you can increase your share, and start the whole thing again. Eventually, you own the whole house. Congratulations!
Except it doesn’t tend to work as well as that, as the Guardian‘s Liam Kelly reports:
As Giles Peaker, editor of the Nearly Legal housing law blog, wrote on the Guardian Housing Network this week, there is no such thing as shared ownership. Rather than a way on to the housing ladder, shared ownership was, he said, “just a tenancy, with an expensive downpayment for an option to buy the whole property at a later date”.
One shared owner found this out the hard way when, after falling behind on her rent, she was evicted from her part-owned property and a court ruled she had no right to the £30,000 she had already paid for her share.
Kelly describes a litany of problems with the scheme, which tends to end up combining the worst aspects of homeownership and renting. Tenants are tied down to one property, responsible for keeping it repaired and maintained, and need to pay a much larger deposit to secure it; but at the same time, they aren’t insulated from rent rises or jumps in service charges, and the bulk of the money they pay each month isn’t building equity for anyone other than the developer’s shareholders.
On top of that, there’s problems unique to shared-equity. The market for second-hand part-owned homes it particularly illiquid, so good luck selling your share for anything like what you spent on it.
If everything goes well, you may be the one in five who actually ends up taking full ownership of their house. If it doesn’t… you won’t.
Content from our partners
Related
