Experts warn against 'major flaw' in Shared Ownership as complaints sky-rocket

EXPERTS have warned against Brits buying Shared Ownership homes as complaints rise and the scheme suffers from one “major flaw”.

Over 250,000 live in shared ownership homes and there were 1,564 complaints to the Housing Ombudsman last year, up from just 324 in 2020.

Shared ownership schemes involve purchasing a share of a property and paying rent on the rest.

But experts told Newspage you could be left “trapped” due to rising rents and service charges.

Justin Moy, Managing Director at EHF Mortgages, told Newspage the scheme has a "major flaw" that means you could ultimately lose money. 

He explained: "Shared Ownership is a great opportunity to get on the property ladder, but you do need to be careful with what you entering into. The appeal of a smaller mortgage and deposit needs to be balanced with some of the complexities of leasehold proeprties, and in particular service charge costs. 

“But one major flaw is the need to provide the housing association a three to four month exclusive option to market the property, typically not on Rightmove or any of the portals where the majority of prospective buyers can be found. This mandatory action gives the seller less opportunity to grab a decent price, making it harder to move and ultimately losing money.”

Kundan Bhaduri, Entrepreneur at The Kushman Group, said the scheme is a “beautifully marketed trap”.

He added: "Shared ownership, this Government's ‘solution’ to unaffordable housing, has ensnared 250k households so far, with Ombudsman complaints rocketing 400% to 1,500. As a landlord and developer witnessing the South East’s distorted market, it is clear this scheme often delivers the worst of all worlds: renter's obligations married to the financial anxieties of a depreciating, unsellable ‘asset’ plagued by escalating service charges YoY. 

"This isn't a ladder for most; it is a beautifully marketed trap, a symptom of a political class allergic to the obvious fixes – axing stamp duty, shredding prohibitive planning laws, and truly unleashing supply. Instead, we have these convoluted financial instruments, lauded by those who’ll never live in one. 

“One must seriously ask: are we any wiser after 2008’s lessons on complex financial engineering in housing, or are we simply sleepwalking, with bureaucratic zeal, into another near-identical crisis, just with a different, ostensibly ‘affordable’, label?”

David Stirling, Director at Mint Mortgages & Protection, said you could be left feeling “trapped” if it goes wrong.

He added: “Buyers should go into a shared ownership arrangement with their eyes open. It should be seen as a positive stepping stone onto the property ladder, but with complications. Feeling trapped in the property and unable to staircase or move with limited control are some of the major pitfalls.”

Pete Mugleston, Mortgage Advisor & Managing Director at Online Mortgage Advisor, explained how it can actually be a positive option.

"The big issue with Shared Ownership is that you don't own 100% of the house, with 75% being the maximum you can purchase. This leaves homeowners not only having to pay back their mortgage, but also pay rent on the remaining 25% of the property they don't own. 

"You can buy more shares in your property, but this can only be done in increments, and if your property goes up in value, these shares will cost more and more. For anyone considering it, get independent legal and financial advice to fully understand your rights and obligations. 

“Shared Ownership can work well in lower-cost developments with transparent fees and responsive management, especially for people with steady income planning to staircase over time.”