At first glance, shared ownership housing seems like an attractive proposition. It’s often marketed as a way onto the property ladder for first-time buyers. The buyer gets a share in the property and pays rent on the remaining portion. But in reality, shared ownership housing is a terrible idea, complete with drawbacks and potential disaster.
Selling a shared ownership property with less than 80 years remaining on the lease is almost impossible. So, instead of appreciating like most homes, your shared ownership property can plummet in value. To try to get around this, new 990-year leases were brought in in 2021 for new properties. This does not retroactively apply to older shared ownership properties, That;s why it is a terrible idea to buy a property with less than 99 years remaining.
You Are Still A Tenant
Shared ownership leaves buyers in a twilight zone where you do not fully own the property and still have to pay rent. You do not have any rights to alter the property without permission. Shared owners are responsible for the service charges to cover communal areas. You can be evicted if you break the often strict rules of the leaseholder. In some cases, you might even forfeit the share you have paid for if you are evicted.
The Costs of “Staircasing”
Increasing your share in the property is known as staircasing. And it’s expensive. Staircasing allows you to buy additional shares in the property. The major problem is that these shares are priced at the current market value, not the original purchase price. If property values have risen, you will pay more to increase your share, making it an expensive business. Additionally, each step of staircasing comes with legal fees, valuation fees, and administrative costs.
Little Control Over the Property
Any modifications or renovations, and sometimes even decorations, require permission from the housing association or developer, and there may be strict rules on what is allowed. Most shared ownership properties are leasehold, meaning the buyer does not own the land on which the property sits. Leasehold is expensive and a legal nightmare when things go wrong, as they may. You will also pay service charges and the costs involved with shared ownership.
Maintenance
Shared owners are often responsible for 100% of the maintenance costs and repairs of the property, even though they only partially own it. This can lead to buyers paying massive amounts each month for a property they only partially own. And because buying the entire property may be out of reach, these costs will be ongoing.
Service charges can double or triple, and residents can do little about it. Click here to read the story of Alex, whose service charges on his shared ownership property tripled from £500 to £1700 a month overnight. This massive increase in service charges is not uncommon, and there is little shared ownership residents can do about it. If you fall behind with rent or service charges, you can and probably will be evicted. In the worst case, you will lose the money you have already invested in the property and end up homeless.
Resale Difficulties
One of the most significant drawbacks of shared ownership is the difficulty of selling the property. Shared ownership homes can be much harder to sell than their fully-owned counterparts. The limitations and restrictions put off most buyers.
And if that isn’t enough, you might not even have the opportunity to sell the property for the best price. Often, the housing association has the right to find a buyer or buy back the property themselves before it is offered on the open market. So they can make a low-ball offer, and you might have to accept it.
Shared Ownership Is a Terrible Idea
You should have realised that shared ownership is a terrible idea by now. It will cost you money and won’t provide the security you desire. You effectively get the worst of both worlds.
The marketing of shared ownership often highlights the benefits without explaining the pitfalls. Estate agents are often guilty of pushing these properties to unsuitable buyers without full disclosure of what’s involved before the buyer makes an offer.
There are numerous horror stories of people who have become trapped in shared-ownership agreements, so much so that MPs are seeking to overhaul the system.
Very few people manage to purchase their shared-ownership properties outright, as the price of a share keeps increasing with the market.
Limited Financial Benefits Over Renting
The initial outlay for a shared ownership property, including a deposit, legal fees, and other associated costs, can be substantial. However, renting a property can be much cheaper in the long run. Tenants are also not responsible for their own (and everyone else’s!) repairs.
If you end up with a shared-ownership property with bad neighbours or in a poor neighbourhood, you are stuck. Tenants have the flexibility to move.
Shared ownership can become a trap, and it’s absolutely not all it’s cracked up to be. Given the many pitfalls, it is worth considering alternative living arrangements. Shared ownership is a terrible idea.
Leave a Reply