The Property Pod – Ep 1 What is shared ownership?

Welcome to the Property Pod, brought to you by Shared Ownership Week!

We’re happy to be joined by Nick Lieb from Share to Buy, who is helping us dissect the subject of Shared Ownership.

First and foremost, what is Shared Ownership?

Nick: In a nutshell, Shared Ownership is a scheme that is designed to help people get onto the property ladder. The way that it works is that you buy a share of a property, and you pay a mortgage on that share, and you pay rent on the remaining share that you don’t own. Usually this is to a housing association like Legal and General Affordable Homes, where we are today.

That sounds a lot simpler than I imagined. The idea of sharing makes it sound like you have to share it with somebody else. Can you define what it means?

Nick: I hear that all the time. If there’s one thing that I would say is the biggest misconception about Shared Ownership, it’s that it means that you buy a share, and some random stranger buys the other share, and suddenly you’re living together! But that’s not it at all, the share is literally the amount of ownership that you have. For example, if you’ve got a 30% share, the remaining 70% still owned by the housing provider is the share you pay rent on. You’re the only one in the property, and you and your guests are the only people who can get into it.

I’m a 31 year old professional working full time - can you explain the kinds of criteria you need to be able to get Shared Ownership?

Nick: If you are someone who is working full time and renting privately, you’re right in the sweet spot for Shared Ownership. Renting can be expensive, particularly in London, but generally all around the country, the rent keeps going higher and higher. We always get asked questions like, why would I want to do Shared Ownership when I want to buy a property outright? But if you can afford to buy a property outright, you don’t need Shared Ownership - that’s not who it’s for. It’s literally for people that would like to buy a property, but can’t afford to do so on the open market. They can’t find a property that meets their needs because of the financials that are involved.

Shared Ownership isn’t just for everybody - so if you’re earning over £80,000 as a household, or £90,000 in London, then you’re over the limit for how much you can earn to do Shared Ownership. The eligibility criteria makes sure that it’s going for people who wouldn’t be able to buy on the open market. So if you’ve got a joint salary of £130,000, you can probably afford to buy a property on the open market. Shared Ownership is for those professionals or people that are on modest to good incomes.

So what is the process, and how do you check at Share to Buy?

Nick: I work for Share to Buy, and we’re a property portal similar to Rightmove and Zoopla which I'm sure you looked on when you were looking for your rental apartment. But we specifically cater for Shared Ownership and affordable home ownership options, rather than having Shared Ownership as one of the other options. Shared Ownership is the biggest and most established option, but our website has all of the properties that are available for that scheme on our site.

So you can come to our portal, see all of the guides, tools and calculators that we’ve got - it’s all specifically designed for people that are in your situation and trying to understand what their options are. There are other places where you can find out that information, but Share to Buy try to have everything in one place to give you the education and information you need to make that choice about whether Shared Ownership is right for you.

“There’s people all along the process to hold your hand and get you through it”

It can be quite intimidating going into that home-buying space. What is different about the scheme that helps welcome people and introduce them to this option?

Nick: The vast majority of people that do Shared Ownership are first time buyers, but it’s not exclusively for that group. It can also be for people that are down-sizing, people that might have had a relationship breakdown and so are buying a second property. As long as the previous property that you might have owned you no longer own, then you can do Shared Ownership.

But given the vast majority are first time buyers, the companies involved know that as well. If you’re buying your tenth property, you’ve seen it and done it all before - you understand what the process is. But if you’re a first-time buyer, it all seems scary, it’s the biggest thing you’ve ever bought, and buying a property is a life-changer. So what we try to do at Share to Buy is have all of the information available on the website. But also when you get into the process you’ll be speaking to sales professionals that are specifically used to selling Shared Ownership properties, as well as mortgage brokers and solicitors. There’s people all along the way of the process to try and hold your hand and get you through it.

Do you have first-hand experience with Share to Buy yourself?

Nick: Yes, I myself bought a Shared Ownership property with my partner 7 years ago. We are actually about to sell that Shared Ownership property, but it’s been an incredibly positive experience for us. Once you're in your Shared Ownership property, you can actually buy more shares if you want to and can afford it at the time. So say you go in with a 30% share, that doesn’t mean that you’re stuck at 30% forever. If you want to, you can potentially staircase all the way to 100% - staircasing is the process of buying more shares.

Or, you can do what we did - we stuck at our 50% share that we had originally, but we have been paying the mortgage for 7 years. This means that month by month, there’s been an

amount of money that’s been going back to us in terms of the equity that we’ve been building up in the property. So now that we’re ready to move on to the next property, we’ve got 7 years of mortgage payments that are coming back to us. So we now have that deposit to buy on the open market. There’s different ways that people approach living in a Shared Ownership property. Some people want to go all the way to 100%, while some people are happy to stick at the share that they started off with.

Is there a benefit to eventually staircasing if you wanted to?

Nick: When you staircase, the more of the share that you own, the less rent that you pay. So if you can get to 100%, then you’re no longer paying rent to the housing association. At that point, you own the property just like you would any other property that you buy on the open market.

That does sound quite appealing. So if I wanted to do Shared Ownership for a property of £300,000, can you break down the figures?

Nick: Sure. In London, £300,000 is probably going to get you maybe a one bed apartment or maybe a two bed if you’re going a little bit further out than the central zones. As a buyer you’re probably going to need about a 10% deposit for a property, and if a property is worth £300,000, that means you’ll need a deposit of £30,000. If you’re paying rent and you’ve got other outgoings, that can be really difficult to try and save up.

“Saving up £4500 or £9000 [for a deposit] is a lot more achievable than the £30,000 you need on the open market”

Nick: With Shared Ownership, it helps because it makes that entry to the market a lot lower. The deposit that you need is just on the share that you’re buying. So say for example you’ve got that £300,000 property and you’re buying a 30% share. The value of the share that you’re buying is £90,000, so if you need a 10% deposit on £90,000, that's £9000 for a deposit. With Shared Ownership you often also get mortgage deals that are available with 5% deposits, so that might be £4500. As a first-time buyer or somebody that wants to get into Shared Ownership, to save up £4500 or £9000 is a lot more achievable than saving up the £30,000 you would need on the open market.

Once you’re in your Shared Ownership property, you’ve got your monthly costs. You’ll be paying a mortgage on the share that you’ve bought, and rent to the housing provider on the share that you haven't bought. There might also be service charge depending on the property that you live in. Those costs can be the equivalent of the costs that are on the open market - sometimes it can be lower or even higher. This depends on the share that you are buying, and what the rent costs are at the time. But where Shared Ownership really helps is with the situation you are in and that thousands of other people are in. Paying that monthly cost isn’t the issue - it’s saving up the deposit, and Shared Ownership makes it so much easier because the amount you need for a deposit is a lot less than on the open market.

If I started this process today, roughly how long would it take?

Nick: If you have a deposit ready, you can go to Share to Buy to find a property, and there’s new build properties out there, or you can buy a resale property. A resale property is a Shared Ownership home that someone has bought previously and they’re now selling. It is still a Shared Ownership property if they haven't staircased to 100%.

Once you’ve found the property, the rough average is around three months between you reserving the property and moving in. but there’s variations within that depending on whether the person that you’re buying from if it’s a resale is in a chain, or whether the development that you’re buying is actually bought off plan or when the development’s ready. So there’s various different things that can impact how long it takes.

“It’s really nice to put down your roots and have that security”

As someone who travels around quite a lot, I'm always looking for a certain sense of stability and a place that feels like home. Rentals always feel temporary - there’s nothing necessarily secure I feel about renting.

Nick: When I was in my 20s I moved between rentals on average every 6 months for about 5 years. It’s good because you can whittle your possessions down to pretty much the clothes on your back, so when you do move it’s quite easy to do. But now when I'm moving after 7 years, we’ve got 2 lorries worth of stuff to move. But it is really nice to put down roots every now and again and have that security.

Are you moving to another Shared Ownership property?

Nick: No, but you can move from one Shared Ownership property to another. Particularly if the Shared Ownership property you bought is a one bed, and since then your life’s changed and you’ve maybe had another child. In that case there are ways that you can go to another Shared Ownership property.

And is Shared Ownership something that you can do around the UK?

Nick: Shared Ownership is nationwide in England, and there’s various other schemes available in the other countries in the UK. But Shared Ownership and Share to Buy is focussed on England. There’s properties, developments and homes available all over the country for Shared Ownership. In some areas there’s more, as you’d expect in the cities and the affordability hotspots where there tends to be more of a need for Shared Ownership. But it also changes depending on where you are in the country, what types of properties are available. In London there are a lot of apartments and townhouses, whereas when you get further out into other parts of the country, there tends to be more houses than apartments. Generally speaking there will be a bit of a mix.

“If you’re in London and you’re looking to get on the housing ladder, we definitely recommend coming to the London Home Show”

How can other people find out more, not just online?

Nick: We’ve run an event for 10 years called the London Home Show, and the next one’s coming up in September. The London Home Show is the Share to Buy portal made in person. We have all the different housing providers there, and experts like solicitors and mortgage brokers. We have technology firms there that have apps for first time buyers and ways that they can help them save more money.

There’s a wide variety of different talks over the course of the day for people to get information and ask their questions to the experts. It’s free to attend, it’s in Westminster on the 23rd of September, so if you’re in London and you’re looking to get on the housing ladder, or interested in Shared Ownership, we definitely recommend coming to the London Home Show.

That sounds brilliant and the fact that it’s free and open to anybody to come along to.

Nick: You do have to register in advance though, so make sure you head over to the Share to Buy site to do that.

What would be your one big tip for someone about to do Shared Ownership?

Nick: I think while you’re in the process, what I would say is just research, and don’t feel shy about reaching out and asking a question to the experts. No one's expecting you to become an expert yourself. There’s specialist companies out there whose remit it is to help people who are trying to buy using Shared Ownership. So do your research, take your time, and speak to the experts.

“There are properties in London that you can buy with Shared Ownership with a minimum deposit of £2000”

What is the cheapest deposit I could possibly need to stay in the City?

Nick: There are properties in London that you can buy with Shared Ownership with a minimum deposit of £2000. And if you compare that to the open market where you might need a deposit minimum of 20, 30, even £40,000, you can really see the benefits of the Shared Ownership scheme.

What is one thing about Shared Ownership that could surprise people?

Nick: Shared Ownership is actually over 40 years old. It was introduced in 1980, so it’s been around for decades. It’s older than me, it’s older than you, and it’s helped thousands of people get onto the property ladder around the country in that time.

“Once you’ve got your home settled, it’s the building block for the rest of your life”

How do you personally define what a home is?

Nick: Our home for the last 7 years has been that property that we mentioned earlier. And having that foundation is what home means to me. Once you’ve got your home settled, it’s the building block for the rest of your life. When we moved into our Shared Ownership property, that was the catalyst for the past few years for us growing and becoming adults.

I was doing the whole house share and generally kind of moving further and further out of the part of London that I wanted to live in. We've now got a Shared Ownership property in Forest Hill which is zone 3 in London, and it’s a nice area where we wanted to live. It’s a property that we would never have been able to get if we were trying to do it on the open market, so Shared Ownership was perfect for us.