Shared Ownership Definition
Shared ownership is a government-backed scheme that helps people who cannot afford a full mortgage and deposit to buy a home. You purchase a share of the property (typically between 25% and 75%) and pay rent on the remaining share to a housing association.
The scheme is available on new-build homes and some resale properties through housing associations in England. Similar schemes exist in Wales (Shared Ownership – Wales), Scotland (New Supply Shared Equity) and Northern Ireland (Co-Ownership).
How Shared Ownership Works
The process works as follows:
- You buy a share of between 25% and 75% of the property's market value
- You take out a mortgage on the share you buy and pay a deposit (typically 5–10% of your share)
- You pay rent to the housing association on the remaining share, usually set at 2.75% of the unsold share per year
- You can buy additional shares over time (staircasing) until you own 100%
- Most shared ownership properties are leasehold with a 990-year lease
Eligibility Criteria
To qualify for shared ownership in England, you must meet the following criteria:
- Household income of no more than £80,000 per year (£90,000 in London)
- Be a first-time buyer, or a former homeowner who cannot afford to buy now, or an existing shared owner looking to move
- Be unable to buy a suitable home on the open market without assistance
- Not own another property at the time of purchase
- Be able to demonstrate you can afford the ongoing costs (mortgage, rent, service charges)
Members of the armed forces receive priority for shared ownership under the Armed Forces Covenant.
Staircasing: Buying More Shares
Staircasing is the process of buying additional shares in your shared ownership home. Each time you staircase, your share increases and your rent decreases proportionally. Key points:
- You can buy shares in increments of as little as 10% (5% under the 2021 model)
- The price of each additional share is based on the current market value, determined by an independent RICS-qualified surveyor
- When you reach 100%, you own the property outright and stop paying rent
- You will need to pay legal and valuation fees each time you staircase
- Stamp duty may apply depending on whether you deferred it at purchase
Costs of Shared Ownership
- Deposit: 5–10% of your purchased share (e.g. £6,250–£12,500 on a 25% share of a £250,000 home)
- Mortgage payments: On your share only
- Rent: Typically 2.75% of the unsold share per year, rising annually (usually by CPI + 1% or RPI + 0.5%)
- Service charges: £1,000–£3,000+ per year for flats
- Buildings insurance: May be included in service charges
- Repairs: You are responsible for 100% of internal repairs from day one (under the 2021 model, the housing association covers a 10-year initial repair period)
Advantages and Disadvantages
Advantages:
- Lower deposit and mortgage than buying outright
- A route onto the property ladder in expensive areas
- Rent is typically below market rate
- You benefit from any increase in the property's value on your share
- Option to staircase to full ownership over time
Disadvantages:
- You pay both a mortgage and rent
- Rent can increase annually above inflation
- Restrictions on alterations and subletting
- Selling can be slower - housing association has first refusal
- If property values rise, staircasing becomes more expensive
- Service charges can be high and may increase significantly