Part-ownership isn't a stairway to home heaven

Poor choice, little opportunity for mobility, high fees...the schemes introduced to help low-earners on to the property ladder could do much better. Felicity Cannell investigates

The property ladder is becoming a misnomer for many. For those who are in shared ownership, the next steps are often too steep to ascend. But pressure remains to get a foot on that first rung.

As private-sector renting is expensive, and borrowing rates are low, why not start paying off a mortgage instead of paying into a landlord's pension?

For some first-time buyers, shared ownership is the only way to start, but the schemes have had a bad press, with cases of landlords – usually housing associations (HAs) – demanding high maintenance charges and delivering poor customer care. The schemes have been blamed for diverting attention from the lack of affordable housing; for inflating prices at the bottom end; and for allowing developers to get planning permission simply by offering up a small number of properties to HAs. And moving up is restricted, not only by the high costs involved, but also by the low level of stock available.

Traditionally, shared ownership involved owning up to 40 to 50 per cent of a property from the outset – the original scheme, which surfaced nearly 20 years ago, was nicknamed "50-50" – but since the property price boom and the credit crunch, lenders now demand a 10 per cent deposit and 25 per cent shares are the usual starting point. Part-owners then have the chance to increase their share by "staircasing", often in chunks of 10 per cent. Each increment involves a new valuation of the property, which the part-owner has to pay for, as well as legal fees and mortgage arrangement fees. Along with mortgage payments, part-owners pay a subsidised rent on the share still owned by the HA. This is usually capped at 3 per cent of the value of the share retained by the HA.

Shared ownership gives people a chance of investing in a property instead of paying rent. "It's always good to start paying off your own mortgage," says Helen Adams, from the website First Rung Now. "And shared ownership also gives you a buying history, so if at a later date you go for a bigger mortgage you've proved that you can take on the responsibility."

But starting at 25 per cent ownership means there's a huge chunk left to find if you want to own outright, leaving many sharing indefinitely. The Joseph Rowntree Foundation (JRF) has found that fewer than half of all part-owners ever reach 100 per cent ownership. "Shared ownership is seen as a transitional stage on the way to full home-ownership, but for many people it's become permanent. So being able to move within the sector is vital, to meet changing needs or aspirations, to change jobs and, importantly, to provide opportunities – by freeing up smaller properties – for new households to get a foot on the housing ladder," says Alison Wallace of JRF.

The problem that these homeowners face is that not all HAs are providing opportunities for mobility. Instead, if they haven't managed to reach 100 per cent, they sell up, move into the private sector, or even move back into rented accommodation. As circumstances change, these households should have the same opportunities to trade up, downsize, or relocate as owners in the private sector. The problems are both the limited variety of stock, and finding it.

"There's currently very little provision for that," says Stephen Dwelley, who runs a shared ownership mortgage website, Share to Buy. "People are coming to us asking how to find a property in Luton, for example, when they currently own in London. These homeowners should have the same sort of access as full owners, when they want or need to move. But it's not out there."

Family Mosaic Housing Association, which operates across London and Essex, is engaging in more shared-ownership developments in which the majority of buyers won't be first-timers, and is also launching a sales website for current owners to find a new property. Part-owners can upscale to larger properties through the system if they can afford the jump, owning a similar share, or even reducing their share if they own more than 25 per cent.

If it's a relocation, Family Mosaic will co-ordinate with the new region's HA so that the buying and selling happens in tandem.

"In this instance, there's not a lot of difference in the buying and selling process compared with the private sector", says Chris Roads, from Family Mosaic. "Only that we still retain a share in the property and we have to manage the allocation obligation to ensure that the new [first-time] buyer is eligible to move into the property being sold." However, this only makes more sense than staircasing on their first property, if household size demands the space. The "agent" fee charged by Family Mosaic to sell a property is a hefty £2,000, whether the share is 25 per cent or 75 per cent. That means when selling a minimum share of a £200,000 flat, for instance, the seller is paying, in effect, "estate agent" fees at 4 per cent.

HAs are becoming aware that larger properties are needed for part-owners to upscale, and there is currently a shortage.

"There's no escaping the fact that the majority of properties available are apartments", says Kush Rawal, from Thames Valley HA. "That's because shared ownership is primarily for giving people access to the housing market. It's then assumed that part-owners will staircase up, or move on".

With average houses now costing over five times the average income, buying a home in the conventional way is beyond the reach of many, despite the two-year stamp duty holiday on property below £250,000 announced in last week's Budget.

The Government is heavily promoting shared ownership and uptake seems to be strong. But it's causing congestion. Wider access to family homes is needed for part-owners to climb the next rung.

Home alone: A choice of one house

Rebecca Adams and her partner, Ben Wright, investigated shared ownership after accidentally stumbling across a resale property in Tiverton, Devon.

"A three-bedroom house came up in a search of our price range and I discovered the price of £82,500 was actually a 50 per cent share. I realised this was a way we could afford something which we could live in long-term. If we'd bought a one-bed flat we'd have to sell up when we start a family."

After deciding to go down the shared-ownership route, the couple found that their choices were limited. "The only other properties available were smaller new-build apartments in developments with extra expenses like service charges and ground rent. This was the only house on the market at the time we were looking. The only other thing which has caused us a problem has been the housing association which owns the other half – the unexpected charges which I don't understand. It's a shame because the scheme's designed for people with not much money. They also took a long time, although after talking to friends who've bought outright, our purchase has perhaps been quicker!"

Sport
Thiago Silva pulls Arjen Robben back to concede a penalty
world cup 2014Brazil 0 Netherlands 3: More misery for hosts as Dutch take third place
Sport
Robin van Persie hands his third-place medal to a supporter
Van Persie gives bronze medal to eccentric fan moments after being handed it by Blatter
News
Ian Thorpe had Rio 2016 in his sights
people
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

PROMOTED VIDEO
News
scienceScientists have developed a material so dark you can't see it...
News
Monkey business: Serkis is the king of the non-human character performance
peopleFirst Gollum, then King Kong - now the actor is swinging through trees in Dawn of the Planet of the Apes
Arts and Entertainment
Blackman: Landscape of children’s literature does not reflect the cultural diversity of young people
booksMalorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Voices
Mrs Brown's Boy: D'Movie has been a huge commercial success
voicesWhen it comes to national stereotyping, the Irish know it can pay to play up to outsiders' expectations, says DJ Taylor
Arts and Entertainment
Curtain calls: Madani Younis
theatreMadani Younis wants the neighbourhood to follow his work as closely as his audiences do
Life and Style
Douglas McMaster says the food industry is ‘traumatised’
food + drinkSilo in Brighton will have just six staple dishes on the menu every day, including one meat option, one fish, one vegan, and one 'wild card'
Life and Style
Once a month, waistline watcher Suran steps into a 3D body scanner that maps his body shape and records measurements with pinpoint accuracy
techFrom heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
News
Soft power: Matthew Barzun
peopleThe US Ambassador to London, Matthew Barzun, holds 'jeans and beer' gigs at his official residence. He says it's all part of the job
Sport
Joe Root and James Anderson celebrate their record-beaking partnership
cricketEngland's last-wicket stand against India rewrites the history books
News
Gavin Maxwell in Sandaig with one of his pet otters
peopleWas the otter man the wildlife champion he appeared to be?
News
Rowsell says: 'Wearing wigs is a way of looking normal. I pick a style and colour and stick to it because I don't want to keep wearing different styles'
peopleThe World Champion cyclist Joanna Rowsell on breaking her collarbone, shattering her teeth - and dealing with alopecia
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Information Security Manager (ISO 27001, Accreditation, ITIL)

    £70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

    Biztalk - outstanding opportunity

    £75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

    Trade Desk Specialist (FIX, Linux, Windows, Network Security)

    £60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

    Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

    £35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

    Day In a Page

    Iraq crisis: How Saudi Arabia helped Isis take over the north of the country

    How Saudi Arabia helped Isis take over northern Iraq

    A speech by an ex-MI6 boss hints at a plan going back over a decade. In some areas, being Shia is akin to being a Jew in Nazi Germany, says Patrick Cockburn
    The evolution of Andy Serkis: First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes

    The evolution of Andy Serkis

    First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes
    You thought 'Benefits Street' was controversial: Follow-up documentary 'Immigrant Street' has got locals worried

    You thought 'Benefits Street' was controversial...

    Follow-up documentary 'Immigrant Street' has got locals worried
    Refugee children from Central America let down by Washington's high ideals

    Refugee children let down by Washington's high ideals

    Democrats and Republicans refuse to set aside their differences to cope with the influx of desperate Central Americas, says Rupert Cornwell
    Children's books are too white, says Laureate

    Children's books are too white, says Laureate

    Malorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
    Blackest is the new black: Scientists have developed a material so dark that you can't see it...

    Blackest is the new black

    Scientists have developed a material so dark that you can't see it...
    Matthew Barzun: America's diplomatic dude

    Matthew Barzun: America's diplomatic dude

    The US Ambassador to London holds 'jeans and beer' gigs at his official residence – it's all part of the job, he tells Chris Green
    Meet the Quantified Selfers: From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor

    Meet the 'Quantified Selfers'

    From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
    Madani Younis: Five-star reviews are just the opening act for British theatre's first non-white artistic director

    Five-star reviews are just the opening act for British theatre's first non-white artistic director

    Madani Younis wants the neighbourhood to follow his work as closely as his audiences do
    Mrs Brown and her boys: are they having a laugh?

    Mrs Brown and her boys: are they having a laugh?

    When it comes to national stereotyping, the Irish – among others – know it can pay to play up to outsiders' expectations, says DJ Taylor
    Gavin Maxwell's bitter legacy: Was the otter man the wildlife champion he appeared to be?

    Otter man Gavin Maxwell's bitter legacy

    The aristocrat's eccentric devotion to his pets inspired a generation. But our greatest living nature writer believes his legacy has been quite toxic
    Joanna Rowsell: The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia

    Joanna Rowsell: 'I wear my wig to look normal'

    The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia
    Bill Granger recipes: Our chef gives raw ingredients a lift with his quick marinades

    Bill Granger's quick and delicious marinades

    Our chef's marinades are great for weekend barbecuing, but are also a delicious way of injecting flavour into, and breaking the monotony of, weekday meals
    Germany vs Argentina World Cup 2014 preview: Why Brazilians don't love their neighbours Argentina any more

    Anyone but Argentina – why Brazilians don’t love their neighbours any more

    The hosts will be supporting Germany in today's World Cup final, reports Alex Bellos
    The Open 2014: Time again to ask that major question - can Lee Westwood win at last?

    The Open 2014

    Time again to ask that major question - can Lee Westwood win at last?