Shared Ownership.  Is it actually affordable? 

The Shared Ownership models employed in England and Northern Ireland have key differences which greatly affect affordability according to Mark Graham – Chief Executive of Co-Ownership

‘Is shared ownership really a good route to home ownership and is it actually affordable?’  These questions have been raised recently following a report from MPs on the House of Commons Levelling Up, Housing and Communities Committee otherwise known as DLUHC.

The report highlights many of the challenges people have faced when taking on shared ownership properties in England. Digging into the detail of the report it’s clear that the root of the issues relates to service charges and the sheer unaffordability of the housing market in the south of England.  Let’s take a closer look at a London example before considering the differences with Co-Ownership in Northern Ireland.

A typical shared ownership studio apartment, yes that means it has no separate bedroom, in London will cost around £450,000 to buy. If you take a 20% share of the property under the English shared ownership scheme you will need a deposit of £9,000, your mortgage would be £455 per month and your rent, which you pay to the housing association, would be £750 per month. This is based on a 30-year mortgage with an initial fixed interest rate of 5.4%. That makes your monthly costs £1,205.

But that’s not all.

As a shared owner you are responsible for repairs to the property and services charges which could be around £300 per month. The total monthly costs are therefore £1,505.  Your rent will increase with the rate of inflation each year, but you have no control over how the service charge increases each year. Apart from the usual building maintenance of common areas and the maintenance of lifts etc. you can over time also be hit with large increases in your service charges to address building maintenance. The most egregious example of this being the fire safety cladding issue. So, what started as affordable can quickly become unaffordable.

Shared Ownership

Being able to buy the whole property at some point in the future is one of the main selling points of shared ownership.  If you can only afford to buy a 20% share in the property to start with then being able to get a mortgage to buy out the other 80% will be a stretch or in some cases impossible. In that type of housing market full home ownership is just not affordable for most people.

Overall, I don’t think the report offers a balanced view of shared ownership across England it focuses almost entirely on those who have had a bad experience and many people in England will have had successful outcomes.  However, it is worth reflecting that even in London, shared ownership may be a better option than living long-term in the private rented sector.

In Northern Ireland it is very different. We have a different model and we have a much more affordable housing market. In Co-Ownership the average cost of the homes people buy is just under £150,000. It is typically a 3-bed semi-detached or town house. For example, for a £150,000 home the rent would be £156 per month, the mortgage £421 per month, totalling £577 per month. This is based on a 30-year mortgage with an initial fixed interest rate of 5.4%. You may not need a deposit as we have two mortgage lenders which do not require one with Co-Ownership. Because we largely buy houses, most people will not have a service charge and if they do it will probably be to maintain the amenity land (the grass and the shrubs) in the development and therefore be very low. Our model in a more affordable housing market makes shared ownership a much more attractive option.

The lowest starter share we have here is 50%. This is possible because homes here are more affordable and, in my view, it means that people feel more like a homeowner from day one. Around 90% of our customers will buy out and in recent years around half our customers buy out within 10 years.

So is shared ownership really a good route to home ownership and is it actually affordable? Our experience in Co-Ownership shows that it is. In Northern Ireland it is currently more affordable than either a full mortgage or renting privately and our data shows that for most of our customers it is a successful route to home ownership.

Co-Ownership is Northern Ireland’s regional body for shared ownership and is part-funded by the Department for Communities


Share This: