4 min read

Buying The House You Rent

Shared ownership has helped many people, who may have otherwise struggled, to get on the property ladder. However, it hasn’t extended to those in social housing who may have never had the opportunity of buying the house they rent … until now.

A scheme from the Ministry of Housing, Communities and Local Government allows some social tenants to buy a share in their home. But what is the scheme, and how does it work? This guide explains all.

What does The Ministry of Housing, Communities and Local Government do?

This government department is responsible for addressing regional economic imbalances, promoting economic growth, improving access to housing and supporting communities.

The main focus of this department is on reducing inequality and ensuring that everyone across the country can access the same opportunities. Within that remit is housing, with the department hoping to reform many sectors, including renting.

How does the new scheme work?

The ‘Right to Shared Ownership’ scheme offers some residents in social and affordable housing the opportunity of buying the house they rent by purchasing a share in their home for the first time. The government has published new guidance for tenants to access the scheme, providing an alternative route to homeownership. Tenants can buy an equity stake of their property between 10% and 75%, giving them greater control over their homes.

What about eligibility criteria?

To be eligible for the scheme, tenants must have resided in their current home for at least 12 months and have been a tenant of a home for Social Rent or Affordable Rent for at least three years.

The home must also be eligible for the Right to Shared Ownership, which usually means it was delivered through the Affordable Homes Programme 2021-26 and is let at Social Rent or Affordable Rent.

The scheme applies in England only and some homes are exempt.

What is the purpose of the new ‘Right to Shared Ownership‘ scheme?

This scheme is part of the government’s drive to assist more people in achieving homeownership. The aim is to give eligible social and affordable rent tenants another route into homeownership by allowing them to buy an initial share of the home they already live in.

Shared owners can gradually increase their equity stake in the property, possibly eventually buying 100% of the home. This helps buyers by lowering the financial impact of purchasing a property by obtaining a lower mortgage and deposit.

How does the application work?

Eligible tenants can apply by submitting an application form to their landlord, who will conduct a series of eligibility checks. Since 2010, the government’s broader Shared Ownership programme has enabled thousands of people to take their first step onto the property ladder, with over 136,600 new shared ownership homes built.

What is Shared Ownership?

Shared Ownership is a government scheme allowing eligible individuals to part-buy and part-rent a property. It enables you to purchase a share of a home (usually between 10-75%), with the option of increasing your share in the future through a process called “staircasing”. The remaining share is typically owned by a housing association, local council or other provider, which charges the individual rent on the portion of the property they don’t own.

The scheme was designed to help first-time buyers and those who need help to purchase a home outright get onto the property ladder and is available on new and existing properties. Previously, it was only aimed at those looking to buy and move into a home, but the latest developments from the government have expanded this to include eligible social tenants.

Mortgage Quotes

Social housing is provided by local authorities and housing associations and is intended for people who can’t afford to buy or rent. To qualify for social housing, individuals need to meet specific criteria, which may include:

Residency. They must legally live in the UK and should have the right to remain in the country.
Income. Income must fall below a certain level, which varies depending on the area and number of people in their household.
Housing needs. Must have a genuine need for social housing, such as being homeless or living in unsuitable or overcrowded accommodation.
Legal status. Must not have a history of antisocial behaviour or rent arrears, and shouldn’t have been convicted of certain criminal offences.

The specific eligibility criteria for social housing may vary depending on the local authority or housing association providing the housing. Demand for social housing often exceeds supply, meaning that waiting lists can be long and eligibility criteria can be strict.

How is this shared ownership scheme different from others?

There are several schemes designed to help people get on the property ladder. Previously, social tenants only had the Right to Buy scheme, where council houses could be purchased at a reduced price. However, increasing house prices meant buying your home (even for a discount) was off limits for many social tenants.

With this Right to Shared Ownership scheme, you won’t need to buy the entire house if you’re an eligible social tenant. Subsequently, the barrier to entry is lower, and you can instead buy a portion, increasing shares as you go. It should help more social tenants become homeowners.