Future home dreams shattered in the traps of shared-ownership

Rising rents and negative equity prevent families from selling up and moving on, reports Laura Shannon

First-time buyers desperate to become homeowners have complained of being locked into part-buy part-rent schemes with little hope of selling on.

Shared ownership deals allow vendors to buy a share of a new-build property with a smaller mortgage and therefore smaller deposit, while paying rent on the share they don't own.

The scheme's popularity has boomed in recent years as high house prices, strict mortgage lending and the need for chunky deposits make it difficult for young first timers to buy a home outright.

But, after using the scheme as a compromise between renting and ownership, some shared-owners are regretting the decision.

Negative equity, in which the money owed on the mortgage is more than the value of the property, has affected many owners who bought properties before the market took a nosedive in 2007.

This hasn't just affected shared ownership, but typically had an impact on new-build properties. Shared-owners have also been left reeling from rising rents, mounting costs for repairs or maintenance to communal areas and inflexible contract terms in their agreements with housing associations, which run the schemes.

Matt Griffith, a spokesman for the PricedOut campaign, which represents first-time buyers trying to purchase property, says there is concern over shared ownership's performance. "There are serious questions about whether shared-ownership buyers are exposing themselves to exploitation under ambiguous terms and conditions and unclear financial charges.

"The feedback we are receiving is that these buyers often feel they are over a financial barrel with little effective way of redressing this imbalance."

Buyers opting for shared ownership have tried to escape sky-high rents in the private sector and instead carve a route to full home ownership. But in the first few years after buying an affordable home, only a quarter or so of owners subsequently go on to buy more shares in the property, known as "staircasing".

The majority who don't "staircase" may be hindered by negative equity or inflation-linked rent rises. Both make saving enough to buy more shares that bit harder. Rent is initially capped at 3 per cent of the share owned by the housing association, but annual rises thereafter are linked to the higher retail prices index (RPI)measure of inflation. Adding to the part-owners' woes are escalating service charges, a costly burden for those whose home is a flat.

It's hard for shared-owners to find an answer to their quandary. For example, growing families who need more space, but who can't sell might not be allowed to rent out the property as an alternative solution. This measure is designed to prevent affordable properties from being snapped up by landlords, instead of people who need their own home.

But there may be other unfavourable restrictions buried in contracts.

Tom, who didn't want to disclose his surname, says his parents have been plagued with problems when trying to sell their shared-ownership flat in Scotland. The couple, in their seventies, need to move because Tom's mother can no longer use the stairs.

He says: "With no extra capital it proved impossible for them to sell, so they decided to sell back to the housing association and pay 100 per cent rent on the same place as tenants. As tenants they could then apply to be allocated something downstairs on health grounds."

Before selling back to the association they had to pay thousands of pounds to "upgrade" the property, as tenancy regulations had changed since they bought the flat eight years ago.

Quotes for work from the housing association's approved suppliers were too expensive. When the couple used independent, yet fully registered companies, they were obliged to pay inspection fees once it was completed.

Legal experts warn that adverse terms in shared-ownership agreements are often only exposed when it's too late. Attention to small print is sacrificed at the start because buyers want to get moving and the agreements take too long to digest.

David Knapp, the head of residential property for Hart Brown solicitors, said: "The devil is in the detail and often the problems experienced are a result of inadequate understanding of papers. Too many buyers feel they do not have the right or are embarrassed about raising questions."

Mr Knapp argues that tenants should also receive better help when trying to establish what they have to pay and what rates they can challenge once they're living in the property.

"Problems arise when landlords use pet suppliers for services, with owners unsure of their legal rights in challenging the costs," adds Mr Knapp.

Yvette Ruggins of Affinity Sutton Housing Association and the chairwoman of the National Housing Federation's Home Ownership advisory panel, disagrees. She says: "Housing associations are rigorous about getting value for money and have to consult with shared owners if expenditure exceeds a certain amount."

Location is another factor affecting shared owners wanting to move. In London, there is higher demand for affordable homes because property prices are much steeper than elsewhere. But people in more remote areas could struggle to sell. According to the latest report by the Tenant Services Authority, 3,285 affordable homes remained unsold from October to December last year. This is compared with just over 2,000 homes sold. About 1,200 homes have remained unsold for more than six months.

However, Ms Ruggins says that selling an affordable home is no more of a problem for shared owners than it is for regular homeowners.

"No property scheme is perfect, but shared ownership has been going for years and is immensely flexible in helping people onto the property ladder," she said. "the criticism about it being difficult to sell is a myth."

Anyone unhappy with their housing association can contact the Housing Ombudsman (housing-ombudsman.org.uk or call 0300 1113000).

Case study: Glen Curry, Birmingham

 

Mr Curry, 28, wants to sell his Birmingham-based city apartment but is trapped in his shared ownership deal.

He bought a 50 per cent share at the height of the market in 2007, but the collapse in property prices effectively meant around £30,000 was wiped from the value of his flat, leaving him in negative equity.

"I'm at a dead end. I can't sell because I'm in negative equity, I can't rent it out as the rules don't allow it and I can't transfer my negative equity to another mortgage as it's above the lender's limits.

"I have no option but to stay where I am."

To top off this threefold lock-in, Mr Curry, who works for a national charity, has to go through the housing association's list of RICS valuers to find out his property value – an extra expense he can't afford.

"It's money I haven't got just to find out I may not be able to do anything," he adds. "It is frustrating that I thought I was doing the right thing at the time, getting on the property ladder. Now I'm stuck."

Ruth Cooke, a finance director for Midland Heart, said sub-letting is only occasionally an option for short periods.

"Negative equity is an unfortunate position for anyone to be in and is entirely due to the difficult housing conditions in the economy at present," she added.

Discover more property articles at Homes and Property
Suggested Topics
Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
voicesIs a huge gamble on oil keeping the First Minister up at night?
Life and Style
tech

Apple has been hit by complaints about the 1.1GB download

Life and Style
life

Sport
A 'Sir Alex Feguson' tattoo
football

PROMOTED VIDEO
Arts and Entertainment
Lionel Messi in action for Barcelona
filmWhat makes the little man tick?
Arts and Entertainment
Meera Syal was a member of the team that created Goodness Gracious Me
tv

Actress to appear in second series of the hugely popular crime drama

Arts and Entertainment
tvReview: An undercooked end (spoiler alert)
Life and Style
i100

Arts and Entertainment
Pharrell dismissed the controversy surrounding
musicThe singer said 'the last thing I want to do is degrade'
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs General

Data Analyst / Marketing Database Analyst

£24000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

Business Analyst – 2 year fixed term contract – Kent – Circa £55k

£45000 - £55000 Per Annum 31 days holiday, pension, healthcare, annual bonus: ...

**SEN Primary Teacher Serf Unit **

£110 - £120 per day: Randstad Education Preston: We are looking for an experie...

Experienced Foundation Teacher

£100 - £222 per day: Randstad Education Bristol: We are currently recruiting f...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week