What Does Shared Ownership Mean in the UK?
Unlock UK homeownership with shared ownership. Explore how this scheme works, from buying your share to managing costs and selling your property.
Shared ownership in the United Kingdom is a government-backed initiative helping individuals purchase a home. It provides an accessible pathway to property ownership for those with smaller deposits and incomes by allowing them to acquire a portion of a property while paying reduced rent on the remaining share.
What Shared Ownership Means
Shared ownership involves purchasing a percentage of a property, typically 10% to 75% of its full market value. A housing association owns the remaining share. As a shared owner, you secure a mortgage for your portion and pay subsidized rent to the housing association.
Properties under shared ownership are always leasehold, meaning you own the right to occupy the property for a fixed, long term. Unlike freehold ownership, you do not own the land outright. As a shared owner, you are both a part-owner and a tenant, responsible for mortgage payments on your share and rent on the housing association’s share. This scheme allows for a more affordable entry into the property market.
Qualifying and Applying
To qualify for a shared ownership property in the UK, individuals must meet specific eligibility criteria. Applicants must be at least 18 years old and have a household income below a certain threshold, typically £80,000 per year outside of London, or £90,000 within Greater London. The scheme is primarily for first-time buyers, but exceptions exist for those who previously owned a home and can no longer afford a suitable property. Applicants should also demonstrate a good credit history and not be in rent or mortgage arrears.
Once eligibility is confirmed, the application process begins by finding available shared ownership properties, often through housing associations or online property portals. After identifying a suitable home, interested parties register their interest and undergo a financial assessment. This assessment ensures the purchase is affordable, considering both mortgage payments on the owned share and rent on the unowned portion. The process then moves through stages similar to a standard property purchase, including legal and financial checks, leading to the completion of the sale.
Costs and Increasing Your Share
Shared ownership involves several ongoing financial commitments. You are responsible for mortgage payments on your purchased share, similar to a traditional mortgage. You also pay rent to the housing association on their retained share, typically calculated as an annual percentage of their owned equity, often around 2.75% to 3% of the property value. This rent is reviewed annually, with increases usually tied to inflation, such as the Retail Price Index (RPI) plus a small percentage.
Beyond the mortgage and rent, shared owners also incur service charges, which cover the maintenance and upkeep of communal areas and the building’s structure. Ground rent may also be payable. As a leaseholder, you are generally responsible for internal repairs and maintenance of your property.
A significant feature of shared ownership is “staircasing,” allowing you to purchase additional shares in your home from the housing association over time. This can lead to owning a larger percentage, or even 100%, of the property, reducing the rent you pay. Staircasing involves obtaining a new property valuation, arranging new mortgage financing for the increased share, and incurring legal fees. It is possible to staircase in small increments, such as 1% at a time, making it more flexible. Stamp Duty Land Tax (SDLT) may need to be paid on the additional share, or it can be deferred until you own 80% or more of the property.
Selling Your Shared Ownership Home
When a shared ownership property owner decides to sell, the process involves specific steps due to the shared ownership structure. The housing association typically holds a “right of first refusal,” meaning they have the initial opportunity to find a buyer for your share. This usually involves the housing association marketing the property for a specified period, often around eight weeks, to another eligible shared ownership buyer.
If the housing association is unable to find a buyer within the agreed timeframe, the shared owner generally gains the right to sell their share on the open market through an estate agent. The property is marketed like any other, but the sale is still subject to shared ownership terms and the buyer meeting eligibility criteria. Legal and administrative processes will be involved in transferring the lease and ownership share to the new buyer, including ensuring all outstanding costs, such as service charges or rent arrears, are settled.