The initial share purchase has been cut by more than half to 10%.

The shared ownership scheme in England is being overhauled to help more people get onto the property ladder.

The government is reducing the minimum initial share people must purchase from 25% to 10%.

Those using the scheme will also be able to purchase additional shares in their property in 1% instalments, with slightly reduced fees. Previously they had to buy in 5% or 10% instalments.

To further boost the affordability of home ownership, landlords of properties in the scheme will cover the cost of any repairs and maintenance for new owners for a 10-year period.

What is shared ownership?

The initiative aims to make buying a home more affordable by enabling people to purchase a share in a home and pay rent on the part they do not own.

A shared owner can gradually increase the amount of the property that they own by purchasing additional shares, known as staircasing, until they own it outright.

These additional shares are purchased at the market price, meaning that if house prices in the area increase or decrease, the value of the remaining shares in the home will reflect that price change.

All shared ownership properties are leasehold, so those living in them also have to pay an annual service charge.

To qualify for shared ownership, you must be a first-time buyer who cannot afford to purchase a property in the traditional way. Your household income must also be less than £80,000 a year.

When you come to sell the property, the housing association has the right to find a buyer for it if you own less than 100%. If you own the property outright, it has the right to buy it back from you, known as first refusal, for up to 21 years after you acquired full ownership.

When do the changes come into effect?

The new model will apply to all new-build shared ownership homes delivered through the new Affordable Homes Programme, which is due to begin in 2021.

The majority of rented homes built under this programme will also come with the right to be part of shared ownership to enable social housing tenants to purchase a stake in their home.

What’s the background?

The shared ownership scheme sits alongside a number of government initiatives to help people purchase a property, including the Help to Buy scheme, Lifetime ISAs and Starter Homes.

The changes to shared ownership are designed to help more young people get onto the housing ladder.

The government says 87% of people would choose to own a property if they could, but the number of those aged under 35 who were homeowners had declined to just 27%, down from 65% in the 1990s.

Top three takeaways

  • Shared ownership is being overhauled to help more people get onto the property ladder

  • The minimum initial share is being reduced to 10% from 25%

  • Those using the scheme will also be able to purchase additional shares in their property in 1% instalments

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