My preference is for a share

Some developers that already offer sharedequity housing have questioned whether the scheme is needed. Alistair Baker, chief executive of Merlion, a private developer, says: “The entire shared-equity housing provision can be supplied by the private sector without a single penny of taxpayers’ money.” Mr Baker argues that instead of working with social landlords such as housing associations, local authorities should be looking to the private sector.

However, this is not the direction that the Government has taken. It has pledged to develop a three-way partnership between the buyers, the Government and mortgage lenders. First-time buyers unable to afford the full purchase price of a property can buy a share in the home of between 25 per cent and 75 per cent. They pay a subsidised rent on the remaining share of the property and have the option to purchase that share once they can afford it.

Important questions about the scheme have yet to be answered. Specifically, no lenders have yet committed themselves to joining the scheme. Most major lenders, including Halifax and Abbey, have welcomed the plan in principle but are waiting to see what, exactly, is in it for them. “The credibility of the Chancellor’s announcement would have been seriously enhanced if any lenders had already come on board,” says Ray Boulger, senior technical director at the mortgage broker Charcol.

Melanie Bien, associate director of Savills Private Finance, another broker, says lenders will need to offer competitive deals if shared ownership is to be a success. “If rates aren’t comparable with standard deals, the scheme will struggle,” she says. Nor will the scheme work if rent on the equity share portion of the remainder of the property is too high. That said, the scheme must be commercially viable for the lender.

Eligibility is another area that needs to be addressed. “It will also be crucial to make sure the right people can access the scheme,” Ms Bien says. “The idea behind it is to enable more people to get on the housing ladder, no matter who they are, whereas the Government has until now been almost obsessed with key workers and helping them on to the housing ladder. Many would-be first-time buyers simply fall through the gap.”

Mr Boulger points out that the “key worker” focus has presented its own problems because the Government has failed to define exactly what a key worker is. “What is the difference, in this context, between a nurse and a hospital cleaner?” Mr Boulger asks. “Without the cleaner, the nurse would be unable to work, but you never hear the Government including cleaners when they talk about key workers.” Existing shared-ownership schemes, which are offered by housing associations and not-for-profit organisations, tend to prioritise those in council housing or on local authority waiting lists, but eligibility criteria vary from scheme to scheme. Gordon Macleod, 27, a sales executive, recently purchased a 60 per cent stake in a two-bedroom, two-bathroom property in a development in Didsbury, Manchester, through a shared-ownership scheme run by Plumlife, which is part of the Manchester Methodist Housing Group, a non-profit organisation.

“The scheme was recommended to me by a friend at work,” Mr Macleod says. “I thought that I had no chance of getting a place. I had been living in the area, renting a place, for about three years, but I thought it would be for council tenants only. Eventually, I checked the criteria in desperation — I was totally priced out of the area — and found that I did qualify. It was a great relief because I had pretty much given up hope.”

Mr Macleod says that although the application process went smoothly enough, obtaining the finance was difficult. “It was awful,” he says. “I thought that everything had been sorted out, but as soon as the bank realised that it was a shared-ownership scheme, they reduced the amount that they were prepared to lend me.”

Based on Halifax’s first offer of £90,000, Mr Macleod had planned to purchase a flat on the top floor of the development. But when the bank reduced its offer to £75,000, he realised that he would have to scale back his ambitions. “I would have thought that because this is a Government-backed scheme, banks would have supported it,” Mr Macleod says.

Halifax says that its policy is to lend up to 97 per cent of the value of the share of the house that is owned by the individual, while also taking into account the borrower’s ability to afford the rent on the remaining element. A Halifax spokesman says: “It sounds as though in this particular case we may not have been aware of the fact that it was shared ownership.”

Melanie Bien explains: “Not all lenders offer shared-ownership mortgages because they are considered more risky than conventional lending as a third party the housing association is involved, and the borrower is someone who might otherwise struggle to buy a property.” She advises prospective shared owners to approach their own bank first. “That should then be compared with what else is available. Rates vary, so shop around.” Housing associations and specialist mortgage brokers will be able to suggest sympathetic lenders.

Contact the Housing Corporation for details of shared-ownership schemes in your area: www.housingcorp.gov.uk, 0845 2307000.

Split decision

Metropolitan Home Ownership runs The Eclipse in Haringey. It has 30 one-bed and 32 two-bed flats available to key workers who work in London. Prices start at £155,000 for a one-bed property; you must earn a minimum of £21,300 a year to qualify for a 25 per cent share. Two-bed properties begin at £200,000; you need to earn a minimum of £27,500 for a 25 per cent share. 0845 2304422.

East Choice Housing Association operates in East London and Essex and has a new development at Oakfield Place, Barkingside, where 14 one-bedroom flats are going for £80,750 (50 per cent shared ownership). 020-8522 3434, www.east-choice.co.uk