Shared ownership con. Young lashed to the yoke and regretting every second

ruggedtoast

http://www.theguardian.com/housing-network/2015/jul/03/shared-ownership-buyers-frustrated-charges

Locked out of the traditional housing market, squeezed by private landlords and outbid by pension rich buy to let landlords, shared owners have the highest of hopes when they move into their Barratt boxes.

Hopes that soon turn to ashes as the grim reality of what they have signed up for sinks in.

But the shared owners used other words, too, to describe their experiences. “Frustration” was a term regularly heard, along with “hassle” and disappointment”. So why is the model causing so many problems?

To make matters worse many owners find their investments unsellable, locked into contracts with housing associations and unable to stair case they have no option but to remain in limbo.

Yet again the young's dreams and aspirations to own a small affordable house are sacrificed on the altar of wealthy homeowner greed. House prices must never fall and every Deed must be an early retirement lotto win.


A young person contemplates their SO purchase


A Shared Ownership new build in East London


Some baby boomers try and remember the last time they had to make a mortgage payment, and on which property

One can only wonder how long this shillyshallying will continue. Sooner or later the government may as well just introduce a 'young persons' tax'. 85% of salary deducted at source and passed straight to the generations above them. In return they can receive a token to live in a shared house with 6 other people for a month.

mayonnaise

Shared ownership is a complete con indeed.
There is no 'ownership'. It's part rent, part short term lease. Often 90 or 99 years.
On top of that, there is no statutory right to extend such lease under the Leasehold Reform Act 1993.
Basically, it's renting without the benefits of renting.

One must be totally and utterly financially illiterate to have signed up for this.

wotsthat

One of the biggest benefits of buying is the day when the mortgage is paid off and housing costs plummet. With SO this is designed out and makes it almost pointless.

Near me you can pay £65.5k for 50% of a nice 2 bed flat. The other 50% costs £220/ month which is a 4% yield. There's a service charge of £70/ month on top.

It seems like very poor value especially when there are plenty of terraces here available for less than £70k probably more suitable for someone starting out.

Carl31

Ive always said shared ownership is the worst parts of owning and renting put together


You only own a bit of it, and for that you have to take on the full cost of maintaining someone elses share, as well as paying them rent to do so


It completely plays on this countries obsession with 'having to own', tricking people to believe its better to own 'something' than nothing, at whatever cost

mwpt

mayonnaise wrote: »

Shared ownership is a complete con indeed.
...
One must be totally and utterly financially illiterate to have signed up for this.

And yet I have friends looking into it as a way onto the London ladder. A couple, in their 30s. The guy works full time and has a side business, the girl runs her own business. They don't seem to struggle financially otherwise, they just can't afford to buy of a similar quality to what they're renting.

I've basically said "be careful and do the sums" when they mentioned shared ownership, but I don't want to say more. Giving people advice about that sort of thing can cause hard feelings.

wotsthat

mwpt wrote: »

And yet I have friends looking into it as a way onto the London ladder. A couple, in their 30s. The guy works full time and has a side business, the girl runs her own business. They don't seem to struggle financially otherwise, they just can't afford to buy of a similar quality to what they're renting.

You don't have to be destitute to be financially illiterate.

mwpt wrote: »

I've basically said "be careful and do the sums" when they mentioned shared ownership, but I don't want to say more. Giving people advice about that sort of thing can cause hard feelings.

SO is designed to appeal to vanity as it seemingly allows people to buy houses that are nicer than they thought they could afford. There's a cost to square this circle and it's not obviously apparent if people only look at the costs in month one (which I fear is where most people start and end).

They could always consider doing what I did which was buying a house which wasn't as nice as I deserved but was able to buy all of it. Seems rather an old fashioned approach these days.

It may be that renting actually represents best value for them. Especially when comparing against SO rather than buying and considering the apparent low rental yields in London.

mwpt

wotsthat wrote: »

They could always consider doing what I did which was buying a house which wasn't as nice as I deserved but was able to buy all of it. Seems rather an old fashioned approach these days.

I think you're out of touch.

Btw, that is what I did.

MARTYM8`

Carl31 wrote: »

Ive always said shared ownership is the worst parts of owning and renting put together


You only own a bit of it, and for that you have to take on the full cost of maintaining someone elses share, as well as paying them rent to do so


It completely plays on this countries obsession with 'having to own', tricking people to believe its better to own 'something' than nothing, at whatever cost

Effectively its like very expensive council housing - you are paying a premium for having security of tenure. Except the problem is that once you have paid off your 25% share mortgage - you still have a rent that goes up and up each year on the remaining 75% you don't own by inflation with no negotiation as you might with a private landlord.

And what happens when you retire and cannot afford the rent and service charge anymore - I saw one case where the housing association repossed the property as the tenant fell behind with their rent and the tenant wasn't even entitled to get paid back the share they owned. So they lost the lot.

As you say - all the disadvantages of owning (boiler breaks or bathroom needs replacing - you pay 100%) with almost none of the benefits.

In 15 years time I can see there being a big compensation industry - a bit like PPI. Were you missold ashared ownership property - claim some compo. Cos its a far far worse scam than PPI!

MARTYM8`

mwpt wrote: »

I think you're out of touch.

Btw, that is what I did.

Buying a house is fine - but if we are talking about London that doesn't come cheap unless you want to live in Dagenham or the less nice parts of Bexley or East Ham - and even there houses are starting to creep towards £300k and more.

chucknorris

Carl31 wrote: »

Ive always said shared ownership is the worst parts of owning and renting put together


You only own a bit of it, and for that you have to take on the full cost of maintaining someone elses share, as well as paying them rent to do so

I've never looked at shared ownership before, so I didn't know that they had to fully maintain the property. I had naively thought that the cost would be somehow shared. But when I was trying to decide if I would like to sell a half share, I couldn't see how it would work (it would be so easy for the occupier/half owner to get his plumber mate to claim that he repaired a leak etc). Knowing that the occupier maintains the property, I could see how this could work. Sell a half share with a low(ish) rent to subsidise their additional maintenance costs, and I would gain from reduced input (no finding tenants, reduced capital gains tax and no maintenance to do).

MARTYM8`

chucknorris wrote: »

I've never looked at shared ownership before, so I didn't know that they had to fully maintain the property. I had naively thought that the cost would be somehow shared. But when I was trying to decide if I would like to sell a half share, I couldn't see how it would work (it would be so easy for the occupier/half owner to get his plumber mate to claim that he repaired a leak etc). Knowing that the occupier maintains the property, I could see how this could work. Sell a half share with a low(ish) rent to subsidise their additional maintenance costs, and I would gain from reduced input (no finding tenants, reduced capital gains tax and no maintenance to do).

Shared ownership schemes are offered by developers, housing associations and local councils - not really private landlords? I suppose there is nothing to stop a private landlord selling half his flat and offering a subsidised rent on the share they own but why would they.

The point is shared ownership is 'affordable housing' - its effectively subsidised. Although when you look at the mouthwatering monthly charges for such schemes in inner London (£2k a month including rent and service charges) it certainly isn't cheap.