Housing Service

HOUSING OPTIONS GUIDE - CHAPTER 4

4. SHARED OWNERSHIP & LOW COST HOME OWNERSHIP

4.0 What is 'Shared Ownership' and how does it work?

'Shared ownership' is a cross between renting and owning a house, where the occupier purchases a share (typically 25% or 50%) in the ownership of the property but pays a reduced rent on the remainder. A number of local housing associations provide the option to share ownership. (Not currently available through East Ayrshire Housing Associations). The rent goes to the housing association and the mortgage contribution to the building society, bank or other lender.

Shared ownership housing is aimed mainly at people who cannot afford to buy a house outright on the housing market, but are still keen and financially able to make a start on the home ownership ladder and invest some of their money in their property. The occupier's housing costs can vary according to the type of mortgage and the size of the ownership share (e.g. 25%, 50% or more).

Shared ownership occupiers have the right to buy further 25% tranches of the equity up to and including 100%, which means that they then become the sole owners of the houses. For further information contact local associations to identify the location of any local shared ownership scheme. (None at present in East Ayrshire)

How to apply for shared ownership housing and the eligibility criteria

• Applicants apply for shared ownership property by completing and returning a shared ownership application form (this is a separate form from the one used to apply for the association's rented accommodation). There is often a minimum income level required before an application will be accepted.
• Associations normally give priority to applicants who are living in public rented sector housing (i.e. associations, Council tenants) because the effect of a successful allocation to one of these applicants is to free up an affordable rented unit for another household in housing need.
• Associations are also expected to give priority to applicants who have never owned or part-owned a home before and who are seeking to step onto the home ownership ladder for the first time. Consideration will, however, be given to applicants who have previously been owner-occupiers, where the personal circumstances warrant it (e.g. significant deterioration in the applicant's financial circumstances or a relationship breakdown).
• Applicants who can afford to buy a house outright on the open market are not eligible for shared ownership housing, nor are those who could not properly afford to purchase a 25% or 50% share of the equity.
• The procedure associations use for considering shared ownership applications, therefore, includes a careful assessment of the applicant's financial circumstances, which requires verification from the applicant's bank or building society that he/she can truly afford and sustain all the costs involved.

Specific local information about the practices of associations, notification to applicants, prioritising applications and procedures for viewing will be available from local housing associations. See section 2 for a list of Housing Associations operating in East Ayrshire.

4.1 Other low cost home ownership options

Communities Scotland has a grant, known as the GRO grant, available to private housing developers, housing trusts (not registered housing associations) and building societies to go towards the cost of providing houses for owner occupation. The housing for sale provided by such a grant may be new build or provided following the renovation of existing buildings.
There are three types of projects which Communities Scotland may be prepared to support.

• projects which contribute to tenure diversification by introducing or increasing owner occupation in priority housing estates of neighbourhoods, as part of an area-based regeneration programme.
  
• projects which contribute to regeneration programmes in older urban neighbourhoods, particularly where these are characterised by a limited supply of good quality houses for owner occupation and/or by limitations in the range of available house sizes and types relative to demand.
  
• projects which contribute to the provision of housing for owner occupation at affordable prices in pressured market areas (usually in rural locations) where the supply of such housing is limited in quantity, or where access for lower income households wishing to become occupiers is constrained by market forces.
  

Grants are limited to the minimum necessary to secure the success of the project. Each project is appraised by Communities Scotland on its own merits.

A comprehensive information pack for developers is available from Communities Scotland, Thistle House, 91 Haymarket Terrace, Edinburgh, EH12 5HE.

The grants may be conditional on priority being given to Council or housing association tenants or those on their waiting lists, those on low income and first time buyers. Completed properties are generally advertised for sale by the developer, but information may also be available from the Communities Scotland Regional Office.

4.2 HomeStake

What is HomeStake?

HomeStake is a new scheme aimed at helping people on low incomes who wish to own their home but who cannot afford to pay the full price for a house.

How does HomeStake operate?

Grants are given to Registered Social Landlords (RSL's) to help them build new homes specifically for the HomeStake scheme. The RSL's will fund part of the price of the house and the buyer funds the remaining balance. The stake that can normally be taken by the buyer is between 60-80% of the price of the property, according to the maximun mortgage the buyer can obtain and the personal contribution they can make.

In the majority of cases, the buyer will have the option to increase their stake two years after their initial purchase to 100%. However in certain circumatances RSL's will be allowed to keep a 20% stake in the property. After 2 years, if the buyer's stake is less than 80%, they can increase the stake to 80% (or more if the RSL has opted to withdrawn their 20% stake). This first increase must take the buyer's stake to a minimun of 80%. Unfortunately the buyer's stake cannot be decreased at any time.

In a small number of locations and circumstances, existing owners whose homes are going to be affected by a demolition programme, may be able to access the HomeStake scheme to assist with the purchase of a replacement house in the same area. There is no fixed minimum stake that must be taken in this instance, however, the whole value of the existing house is to be invested in the HomeStake property.

What responsibilities does a HomeStake owner have?

When a home is bought through HomeStake the buyer owns the property outright - they have full title to the property and will not pay any form of rent to the RSL. The buyer will be responsible for all maintenance, insurance and repair costs, as well as their mortgage repayments and Council Tax payments.

Selling a HomeStake property

If for example the buyer has an 80% stake in the property when they want to move, then they will get 80% of the selling price including any profit when it is sold. The RSL will get their remaining 20% including any profit they gain from the sale. The RSL will use any profit to provide more affordable housing.

Point to note

All potential buyers wishing to participate in the HomeStake scheme are strongly advised to seek independent financial and legal advice before agreeing to participate in the scheme.

Further information

Further information can be found on the Communities Scotland Website:

www.communitiesscotland.gov.uk

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