England will see the shared ownership scheme being overhauled in a bid to increase the amount of people getting onto the property ladder.
To start with, the initial share purchase which used to be 25% has now been cut to 10% to make purchasing more affordable. If buyers want to increase their share in the property, they can now do so in 1% increments with slightly reduced fees rather than having to purchase a 5% or 10% share each time.
Also, to prevent new owners being burdened with costly repairs and upkeep, landlords will take responsibility of maintenance for a period of 10 years.
How does a shared ownership work?
The scheme allows to make homebuying more affordable for those who wish to get their foot on the property ladder by allowing them to purchase a percentage of a property and paying rent on the percentage that they do not own. As their financial situation improves, this will allow them to purchase more shares, known as staircasing until the point where they own the property outright.
The shares can be bought at the current market price, so if market value decreases or increases, the price at which the shares can be bought will reflect this.
As all shared ownership properties are leasehold, the buyer will have to pay a ground rent or ‘service charge’.
There are criteria for buying into a shared ownership property:
• You must be a first-time buyer
• You cannot afford to buy a property outright
• Your household earns less than 80,000 a year
If you own less than 100% of the property and you decide you want to sell it, the housing association has a right to find a buyer. Also if you do own 100% of the property, the housing association has the right to first refusal to purchase the property back from you – even for a duration of up to 21 years after you have acquired 100% of the property.
The scheme is available through the new Affordable Homes Programme and changes are due to take effect in 2021. Also under this programme will come the right for tenants in social housing to be able to purchase a share in their home.
This scheme sits alongside other government initiatives such as the Help-To-Buy scheme, Starter Homes and ISAs schemes and are designed to give younger people more opportunities to purchase their own homes.