Are Help To Buy And Shared Ownership Schemes Screwing First Time Buyers Over?

If you're planning on using a help-to-buy scheme to get a foot on the housing ladder, you need to read this first...


by Vicky Spratt |
Published on

Let’s face facts - when it comes to housing we’re all pretty desperate now. Particularly if we live in London and don’t have parents who can cough up large sums of money. The housing crisis, coupled with the hamster wheel that is private renting and shared housing, has instilled a sense of urgency in young people. Those of us who can save deposits are clamouring to take whatever we can get, while those of us who don’t earn enough to save or pay so much rent that saving is no longer realistic just keep calm, carry on and pretend we’re not freaking out internally on a daily basis.

With this in mind, it’s not hard to see why shared ownership has long been touted as the answer to the housing crisis for younger generations or why George Osborne’s brainchild, Help to Buy, was offered up as another solution. In the great race to get a little toe on the housing ladder, both schemes provide a solution for those who simply can’t get a big enough deposit together to own something outright (and let’s face it, those people are now in a dwindling minority). Owning your own home, even if in part, is seen as better than renting and this, often, the cheapest way to become a home owner.

However, The Debrief has been contacted by both new shared ownership and Help to Buy owners who would describe their buying experiences as less than positive.

For the uninitiated, shared ownership enables you to buy a slice of the pie, albeit a slightly smaller slice than you would if you went down the traditional route.

Kate Webb, Head of Policy at Shelter, explains that it’s been ‘around since the 1970s and has been a very small part of the housing market since then. It has definitely exploded in terms of its profile in the last few years.’ Initially, Kate tells The Debrief, shared ownership was ‘aimed at helping people – often single women who couldn’t buy on their own or people on low incomes, but earned too much to qualify for social housing and wanted something more secure than private renting.’

Shared ownership properties are, more often than not, new builds or re-sales. Buyers only own a share of the property, this means they have smaller mortgages, hence the smaller deposit. However, they have to pay rent on the share of the property that they do not own and, often, a service charge for the building. Help to Buy comes in two forms, the shared ownership scheme and a government equity loan which tops up your deposit.

While both schemes have obvious and important benefits, The Debrief has heard that they come with their own set of unique problems.

One young female buyer, who wished to remain anonymous, contacted The Debrief to raise her concerns about her newly purchased new build flat in London bought using the Help to Buy equity loan. Together with her boyfriend Emma* had saved enough for a deposit. ‘Neither of us have any inheritance or handouts’, she told The Debrief, so this past year especially was a lot of hard work ensuring we had the costs covered.’

‘The Help to Buy properties are very competitive to find, so when we found this place it was a real panic to ensure we secured it’ she explains. In the midst of this panic, she and her partner encountered several issues. ‘We had some problems. For example, [the property] was valued at £25k less than the asking price by our mortgage lender.’ When she questioned the developed, she says she was ‘told this was a stand alone case and were forced to find a new lender who would price it higher. We’ve since found out now that we have moved in that many other buyers had their properties down valued – we had all been lied to by the sales office.’

Then there were problems with the plans. ‘Our flat is ground floor, and was sold to us with a private terrace and entrance’ Emma explains. ‘We exchanged based on these plans, as well as being sold this as a key selling point when we began the buying process at the beginning of last year. When we went to see our flat for the first time we realised that they had built not only a public walkway through our terrace, but also made it a fire exit.’

Emma says that when she raised this she once again hit a brick wall with the developer. The Debrief has seen a copy of an email send to Emma from the development’s sales office which simply says:

‘I am not prepared to discuss this any further and we need to get you exchanged. If you are not happy then we can refund your reservation fee and re sell the plot.’

‘They fully admitted this was their fault’, Emma says ‘but knew that we were homeless (the build was 4 months behind schedule, and we could no longer stay in our temporary accommodation as it was 3 days until Christmas).’

‘On the day of completion, they forced us to sign a new contract halting our terrace because they knew our belongings were packed up in a van with nowhere to go. When I asked them how what they were doing wasn’t illegal they just said we could either do this or we would lose the property. We had no choice but to sign. We’ve lost not only land, but privacy.’

How did this experience impact on Emma and her partner? ‘I feel really stupid for what has happened, and so sad that our years of saving have been spent on a business that will so happily trample over their customers to cover up their own mistakes. They have offered us £100 in shopping vouchers…for the loss of over 90 square feet!’

Emma feels that those with small deposits, buying through schemes like shared ownership and Help To Buy, are not valued in the same way as other buyers because they are on the back foot already. ‘I want to make people aware of how the housing shortage is affecting the home buying process’, she says.

The Debrief spoke to other buyers from Emma’s development, which also includes Shared Ownership properties. They also wished to remain anonymous. The key complaint among both those who used Help to Buy and shared ownership schemes, was that, like Emma, when they raised concerns about the value of the flats they were buying after Brexit or when a mortgage lender valued it at less than the developer’s price they were completely shut down, told there was no room for negotiation and that they would lose the flat if they asked more questions.

Additionally, another young woman who bought in the same development, told The Debrief that fixtures and fittings were missing, left hanging from ceilings and unfinished when she moved in. When she complained to the developer, they were unhelpful and reluctant to finish the job.

Buying a home, whether you buy a quarter, half or all of it, is supposed to be an investment. If you are using a scheme such as shared ownership and/or Help to Buy, it’s even more necessary that you make money so that you can, eventually, increase the share that you own.

In 2007 the housing market nosedived, affecting many owners who bought homes at inflated prices. Both shared ownership and new build properties were affected.

For buyers like Emma, the fear that they might face negative equity (when the money you owe on your mortgage is more than the value of the property) or not make enough of a profit to buy a larger home when they want to move on and start a family is very real. For the others, regardless of how large your deposit is, you are still hanging over a huge sum of money when you buy a home. Being greeted with changed plans or an unfinished property on moving day would leave more than a bad taste in anyone’s mouth.

The feedback The Debrief has received from Emma and others in her block is that they were made to feel that, financially speaking, their backs were up against the wall.

Kate Webb explains that the problem with any scheme aimed at getting people onto the housing ladder at the moment is that it is ‘linked to a runaway market’. ‘The new build market is a bit murky and a bit over inflated’ she says, ‘there’s no negotiation. The price is advertised, you bid for the property and you pay the price. This is a good and a bad thing – you don’t get the bidding the wars you get elsewhere but you also can’t negotiate.’

She says another issue is that ‘there is a premium on new builds and [developers] have a bit of a captured market because of this’. Essentially, developers hold all the cards because there is so much demand for affordable housing because people know it’s they only way they can escape the private renting trap and get some stability. However, she points out, even shared ownership and help to buy properties, are increasingly becoming out of reach for working renters on middle and low incomes as renting costs soar. We also need more 'rented products', like rent to buy schemes, she says 'so we're not excluding people who can't get a deposit together in the first place. And for that, we also need genuinely affordable rents which people on ordinary incomes can afford.'

Have you experienced problems purchasing a home with Help to Buy or through shared ownership? Have you struggled to sell a shared ownership property on? We’d like to hear from you @thedebrief.

You might also be interested in:

Renters Are Still Waiting For The Government To Finalise Their Ban On Letting Fees

The Reality Of Trying To Rent In London

Y:CubeIs Here. Would You Live In It?

Follow Vicky on Twitter @Victoria_Spratt

This article originally appeared on The Debrief.

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