Part rent part buy: Shared Ownership explained

Getting together a deposit for a home is getting increasingly difficult as UK house prices continue to rise. For many first-time buyers, only buying a part of their first home might be the way forward. We explain how part rent part buy – also known as shared ownership – really works.

What is part rent part buy?

Part rent part buy is a government-led initiative that lets first-time buyers purchase a ‘share’ of their intended home. They then rent the remaining percentage from the housing association that owns the property. This is why it’s called shared ownership – both the housing association and the individual(s) living in the property part-own it.

How does part rent part buy work?

Under a part rent part buy purchase, first-time buyers don’t buy the whole value of the property. Originally, buyers could buy between 25-75% of it. However, major changes to the shared ownership model were introduced in mid-2021. Now, the minimum stake buyers can purchase is 10%.

Do you still need a deposit for part rent part buy?

Buyers looking to secure a part rent part buy property still need to provide a minimum 5% deposit. However, you will only need the deposit to cover the share that you want to buy.

For example, to buy a £200,000 house under the normal purchasing route you would need a £10,000 deposit (5%). If you only wanted to buy a 10% share of the same property under the part rent part buy scheme, your minimum deposit would only be £1,000. This is a 5% deposit on the 10% share.

Can you buy more of a part rent part buy property?

With part rent part buy, after buying your initial share, you can then buy more shares in the property later. This is called staircasing, and it’s designed to let first-time buyers gradually buy their home bit by bit.

How does staircasing work?

With the recent changes to part rent part buy, staircasing allows you to buy additional shares in your home as small as 1% at a time.

Every time you want to staircase, you will need an up-to-date market valuation of the property. This is usually done by a chartered surveyor. Then the housing association will know how much to charge you for the added share you want to buy.

There are usually other fees involved. Buying an added share of your home is technically a property purchase, so you will likely need a conveyancer. Plus, you may need to restructure your mortgage, or pay stamp duty

The HomeOwners Alliance says that the average fees involved in staircasing transactions are around £2,000. However, this varies greatly depending on your property, chosen firms and other factors.

How do you calculate rent on part rent part buy?

Usually, the annual rent on part rent part buy property will equal 3% the value of the unsold equity. So, if you bought 10% of a £200,000 house, 90% of the equity would still belong to the housing association. They would then probably charge you around £5,400 per year in rent (3% of £180,000), or £450 per month.

If you buy more shares later on, through staircasing, then your rent will be reduced to reflect the new balance of ownership.

Is part rent part buy property leasehold or freehold?

Even if you buy a share of your home under the part rent part buy scheme, it will still be leasehold. This is because the remaining share is owned by the housing association, who then rents that share to you.

If you manage to fully buy out the remaining share in the future, you will have the option to buy the freehold.

Who is eligible for part rent part buy property?

To be eligible for the part rent part buy scheme, you need to be a first-time buyer. If you are making the purchase with a partner, they need to be a first-time buyer too. You also need to have a maximum household income of £80,000 or less – or £90,000 in London.

What are the advantages of part rent part buy?

Part rent part buy offers the advantage of getting you onto the property ladder sooner than you might otherwise manage. The key benefit is flexibility – you can buy more of your home when it best suits your financial situation. The more you buy, the less you pay in rent too.

Another advantage of the recent changes to the scheme is that for the first 10 years, you can claim up to £500 from the housing association in repair costs per year.

What are the disadvantages of part rent part buy?

The downside of part rent part buy is that you still have to pay a range of fees as a leaseholder, as well as staircasing fees if you want to buy more shares. Also, no matter how big or small your owned share is, you still have to pay 100% of any service charges.

Another issue is that you cannot exercise the “right to manage” your building. The property will always be run by the housing association. This means that you will have to ask permission to let or sublet your property, and to make significant changes to it.

Between mortgage, rent, service charges and other fees, you may end up spending more money than you save. This is why it is important to have a long-term financial plan to manage your mortgage and potentially staircase.

Is part rent part buy worth it?

Part rent part buy is a useful alternative path to homeownership if a traditional deposit and mortgage is unaffordable. Rather than continually renting, you can begin to invest your money in your home. If you want to slowly build up equity over the long term, the scheme is more flexible now than ever before.

However, it’s important to think through the different costs that might apply to you. Also, consider if the restrictions imposed by having a housing association part-own your home are something you can live with.

It’s a balancing act, but with the right approach, part rent and part buy can be a worthwhile option.

If you need to know more about housing associations, or the benefits of leasehold vs freehold, or any other key factor in buying property, check out our dedicated guides.

HomeViews provides verified resident reviews of the UK’s housing developments. We’re working with developers, house builders, operators, housing associations and the Government to recognise high performers and help improve standards in the built environment.

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