Homeowners who have shared ownership will be able to increase their share in smaller chunks
The government has unveiled plans to help get more young people on the housing ladder with an overhaul of the shared ownership scheme.
In his first major policy announcement the housing secretary Robert Jenrick revealed plans to allow people to increase their share of homes in smaller increments.
Under the proposals, people who rent with a housing association will be able to purchase as little as 1% of their home, rather than having to increase their stake in the property in 10% chunks.
The news has drawn criticism from housing experts who have labelled the proposal “worrying”.
Polly Neate, chief executive of Shelter, says: “Pinning his hopes on yet another complicated housing scheme is a worrying start for the new housing secretary. The government must realise that unworkable schemes, laden down with admin costs, are the wrong priority at any time – and are woefully inadequate when this country is facing the current housing emergency.
“If the new government is serious about getting to grips with our housing crisis then it must follow through on its commitment to get building. That’s why we’re calling for three million more social homes over the next 20 years, to give more families the sort of step-up they actually need in life.”
The high costs to purchase an additional stake in a shared ownership property – known as staircasing – could also make the scheme unworkable.
According to the Homeowner’s Alliance, it costs around £2,000 each time to purchase an additional stake in a shared ownership property due to the costs of conveyancing, stamp duty and mortgage fees.
Tamara Hooper, policy manager at the Royal Institute of Chartered Surveyors, adds: "Changes to shared ownership may make a difference to some, but it is a complex legal process and the purchase of 1% may be more complicated and ultimately more expensive than if the 1% had not been brought.
“We look forward to government releasing more detail about how this announcement will work in reality.”
The Labour Party dismissed the plans, saying more needed to be done to build affordable homes.
Labour's shadow housing minister Sarah Jones says: "Tinkering with the details of shared ownership is meaningless when lack of investment from government means low cost homes for ownership simply aren't getting built.
"The Tories have failed to deliver the low-cost homes we need to get people on the housing ladder. Just 1% of all homeowners have accessed shared ownership, and the number of these and other low-cost homes being built each year has almost halved since its peak under Labour.”
Mr Jenrick says the “radical changes” to shared ownership will make it “simpler and easier for tens of thousands trying to buy their own home”.
He says: “Building the houses this country needs is a central priority of this government. We know that most people still want to own their own home, but for many the dream seems a remote one.
“My mission is to increase the number of homes that are being delivered and to get more young people and families onto the housing ladder, particularly those on lower incomes."
The changes are expected to come into effect from early next year.
What is shared ownership?
Shared ownership offers you the chance to buy a stake in a property owned by a housing association or private developer in England.
You will need to be eligible for a mortgage on your share of the property, which is generally 25% to 75% of its value, and pay a discounted rent on the remaining share.
To be eligible, your household earnings must not exceed £80,000 a year (£90,000 in London).
Under the existing rules people using shared ownership buy a minimum of 25% of their home and then pay a subsidised rent on the rest.
They can increase their stake in tranches of 10% at a time, a process known as “staircasing” which can cost as much as £45,000 a time.
How will the new plans work?
The ministry gave the example of a family in a £450,000 shared ownership four-bedroom property buying an initial 25% stake with a mortgage for £112,500, paying subsidised rent on the remainder.
They would then have to save up £45,000 at a time to increase their stake and decrease their rent – which is beyond the reach of many.
Under the new plans, shared owners would be able to save up 1% at a time – or £4,500.
Having run a mortgage department, run a housing advice centre, sold some of the very first shared ownership properties, created shared ownership leases and managed shared ownership amongst other roles during a varied career in the housing world, I feel able to suggest that starting home ownership with a lower value existing home with the same outlay that a new shared ownership would necessitate will always offer a more satisfying route up the housing ladder. Having had to resolve people's S/H pitfalls, the former option wins hands down. New stuff always seems to appeal over a second hand home, but it's a fateful trap,