Yoshimura Miki* explains why staircasing to 80% might not be a great idea.
“In many ways I’m happy with my decision to go down the shared ownership route. I don’t have to keep moving or be at the mercy of a private landlord; I’ve got more security now. But there have been some downsides too.”
Before I bought my shared ownership flat I’d been subletting a council flat. It had just been refurbished, but the owner wanted it back once the work was finished. I couldn’t afford to rent privately and I didn’t want to commute for work, so I applied for the shared ownership scheme. In 2018 I got approval for a 100% mortgage with no stamp duty to pay as a first-time buyer. In fact, I secured a 35% share in a one-bedroom new-build flat in central London with a £100 cheque!
I was thrilled to be moving into a new home that no-one else had lived in before. A home which didn’t need any work done to it… However, I didn’t know how I was going to pay for everything I needed. I considered taking on a weekend job to supplement my income. Fortunately, after three years, I changed jobs and had a bigger salary. But up until then I was using credit cards and credit union loans to pay for furniture and so on.
Pros and cons of shared ownership
In many ways I’m happy with my decision to go down the shared ownership route. I don’t have to keep moving or be at the mercy of a private landlord; I’ve got more security now.
The value of my property has increased so I have equity that I wouldn’t have had if I’d carried on renting. But there have been some downsides too.
Staircasing to 80%
I wish I hadn’t staircased to 80%. Now I realise that I shouldn’t have staircased unless I could afford to staircase all the way to 100%.
It’s virtually impossible to sell an 80% share to a new shared owner, and my experience is that private buyers don’t want to buy in a development with social housing tenants.
I’ve experienced some anti-social behaviour from neighbours. Landlords have to take so many households from the council waiting list and, in my experience, these have been vulnerable people with complex needs. So I don’t think mixed developments work. Blocks should be either social rent tenancies or shared ownership.
Sales prices are over-inflated
Shared ownership sales prices are questionable. 25% at £125,000 seems affordable. But, when you look more closely, £500,000 as the full value is very expensive. Housing associations can inflate sales prices because people are only buying smaller percentages initially. Are the ‘not-for-profits’ really not-for-profit?!
As a shared owner, you need the value to go up so you have equity but then that makes buying the remaining shares unaffordable.
My advice to anyone considering shared ownership
What advice would I give to someone considering a shared ownership home? It depends on your circumstances, of course, but I’d suggest thinking of shared ownership as buying a secured tenancy and not as owning your own home. Don’t staircase unless you want to stay there long-term or you can afford to buy all the remaining shares. Don’t even think about staircasing to 80%!
How I’d improve shared ownership
The shared ownership scheme could definitely work better for shared owners. Landlords should purchase properties back – regardless of the % share owned – to sell on to new shared ownership buyers. This would enable existing owners to move on when they can afford to. And it would maintain existing social housing stock to allow other people to get on the housing ladder.
When it comes to staircasing and selling it would be fairer to allocate costs between the landlord and shared owner according to the % share owned.
*Not her real name.
Featured image: iStock