Help to Buy and FirstSteps shared ownership schemes: England
Last updated: 27 April 2017
At a glance
- Shared ownership involves taking out a mortgage to buy a share of a home from a housing association or local council landlord, while paying rent on the landlord’s share. Borrowers can opt to buy more shares over time, up to full ownership. Our shared ownership factsheet (pdf) provides more detail.
- Shared ownership is an attractive option for lower income households including social tenants who can afford to buy a share of their home and households that do not qualify for social rent, but want to step-up to full ownership over time.
- There are two government funded shared ownership schemes:
- In England – Help to Buy Shared Ownership.
- In London only: FirstSteps Shared Ownership.
- Government wants to see more shared ownership because it helps makes homes more affordable for first time buyers. It supports the supply of new-build affordable housing and enables housing associations to use sales proceeds to support their social rented businesses.
- Shared ownership is less prevalent in Scotland and Wales, where shared equity schemes are preferred. Shared equity involves buying all of the property from the outset, with an equity loan covering part of its value. Our shared equity factsheet (pdf) provides more detail. In Northern Ireland, the co-ownership scheme is the main form of equity sharing.
- Lenders are active in lending to shared owners, but would like to see more streamlining to reduce complexity due to the number of different schemes.
- A list of shared ownership mortgage providers is available from Moneyfacts. It can also be downloaded at the foot of this page.
We support calls for a simpler and more streamlined approach to shared ownership, so that it can be more easily understood and accessed by borrowers.
We recognise that some borrowers do not want, or are unable, to move on to full ownership, as house price inflation in some areas can make it difficult for owners to buy the landlord’s remaining share. We want government to recognise shared ownership as a tenure in its own right, and not necessarily a stepping stone to full ownership.
We want Government to work with all stakeholders including the CML, lenders, the National Housing Federation, the Chartered Institute of Housing and others to address and overcome barriers to a major expansion of shared ownership. The CML’s forthcoming research report highlights these and identifies the key opportunities and challenges for lenders in shared ownership, going forward.
We want to see consistent use of the standard Homes and Communities Agency (HCA) model lease, with the Mortgagee Protection Claim and minimum 25% share purchase maintained as absolute “red lines”. If not adhered to, lenders could review their policies and might no longer lend for shared ownership, which would not be in the wider public or government interest.
Lenders expect new private providers of shared ownership to adopt behaviours and approaches that are consistent with those of registered providers (housing associations), particularly in relation to how they treat cases where a sharing owner is in rent arrears. Lenders expect all providers to follow the approaches and protocols set out in our Joint Guidance on Shared Ownership Arrears and Possession.
Why this is important for lenders
Shared ownership is an important way of ensuring that new homes remain affordable to low-to-middle income households, particularly in higher property value areas.
Government is keen to see an expansion of shared ownership and greater lending activity to support customers in this market.
Shared ownership can be seen as a specialist or niche market. As such, it can require more administrative and underwriting support. It also requires more capital, because of increased risk, to cover the loan being advanced on the purchased share.
Shared ownership is available on leasehold properties, using a model lease developed by the Homes and Communities Agency, available as part of the Agency’s Capital Funding Guide (CFG).
The standard lease includes clauses which help protect lenders’ security. Lenders commonly require the use of the HCA standard lease.
Despite its complexity, shared ownership lending is a popular market for a number of lenders, especially firms which are well resourced with developed broker channels.
Lending for shared ownership can also be seen as having a strong social value, in supporting lower income households into affordable home ownership.
Because most homes for shared ownership are newbuild, the demand for business to support Help to Buy equity loan, which is also for newbuild properties, means that some firms might be approaching exposure limits for newbuild lending generally. This can cause tensions between lenders’ need to manage risk, and government expectations.
Government and housing professionals more widely have been calling for changes to the approach to shared ownership, to simplify it and make the customer experience closer to mainstream ownership.