The idea of planting your first foot on the housing ladder for under £100,000 might seem like a dream, but it’s one being sold as a reality to thousands of Londoners every week.
“Get on the ladder” for just under £74,000 in the “property hotspot” of Acton, read a piece in the Evening Standard’s property section this month [July].
On offer this week is the chance to buy into Platinum Riverside, a (literally) shiny new high-end development in Greenwich. The price of a one-bedroom flat begins at just under £84,000. Amazing, it seems.
There are, of course, several catches to these apparently unbelievable offers. And many are hidden away in the fine print.
The most obvious drawback is the one most clearly declared. Both the Greenwich and Acton developments — and many like them across London — are marketed and sold as ‘shared ownership’.
Under these deals, you buy a share of a flat instead of the whole thing. The seller, usually a charitable organisation known as a housing association, then charges a 'rent' for the bit left in its hands.
For the Acton apartment, for instance, your £74,000 buys you a quarter of a one-bedroom flat worth £300,000. This roughly works out as £357 in mortgage payments and £507 in rent — a total of £864 a month. Not bad, you might think.
But a deeper dig into typical shared ownership deals uncovers several hidden costs and drawbacks that are rarely spelled out in marketing material.
Shared owners are treated as if they own the whole property in a way that is unfair: they must front the entire expense of maintaining their homes.
In others, they are treated more like tenants. If you fall behind on your rent, you can be evicted. In one case, a female shared owner in arrears even lost the bit of her home that she had already bought.
Another drawback is a ban on renting your home out to anyone else in all but exceptional circumstances. While lodgers are allowed, the draconian rule on sub-lets has left some Londoners feeling like “prisoners” in their own homes.
The biggest catch comes in the form of “service charges” attached to most shared ownership homes. These cover the costs of maintaining areas outside the front door, like corridors, lifts and communal gardens.
Service charges for the flats in Acton already seem sizeable at £93 a month but are actually relatively cheap. There have been reports of charges as high as £380 a month and bills have been unexpectedly hiked by of up to 73%.
While rent increases are capped by the London Mayor for his First Steps shared ownership brand, he exerts no control over service charges. Housing associations are largely free to charge what they can.
This makes these bills an unpredictable cost that can easily push the monthly bills for homes marketed and sold as 'affordable' well out of reach.
Like all other drawbacks and catches, this hidden cost should make everyone think twice about shared ownership — and scratch well beneath the surface of the marketing material.
Buying a bit of a home might help many fulfil an otherwise impossible dream of owning a home. But it can also trap you in an unaffordable and fretful nightmare.