Shared Ownership Income Caps Rise: Read the Lease First

Housing Minister Matthew Pennycook has raised the shared ownership income caps for the first time since 2016, Today's Conveyancer reported last week. From the new year, the household income limit will rise from £80,000 to £90,000 outside London, and from £90,000 to £110,000 in London. A couple earning £44,000 each outside London, previously shut out, could now qualify. But in the same announcement the minister acknowledged the scheme's problems, from affordability and transparency to service charges and resale. So if the new caps bring shared ownership within your reach, the lease deserves as much attention as the price.

What You Actually Own Under Shared Ownership

Shared ownership lets you buy a share of a home, usually with a mortgage, and pay rent to the housing provider on the rest. It's often described as a halfway house between renting and buying. Legally, though, you're a leaseholder, even if the property is a house.

That means your rights come from the lease, not from general assumptions about home ownership. It will set out what you can alter, whether you can let the property, who is responsible for repairs and how you can sell. Your conveyancing solicitor should take you through these terms before you exchange contracts, because at that point you're legally committed.

How Shared Ownership Rent and Service Charges Can Rise

Two costs can climb after you move in. The first is rent. The announcement leaves in place the model lease provision allowing annual increases of CPI plus 1% until 2036. With inflation at 3.5%, a £500 monthly rent would rise by 4.5% to £522.50, or £270 more over a year.

The second is the service charge, which the minister singled out for sharp increases that are putting shared owners under financial pressure. In many blocks, you pay the whole service charge even if you only own a share of the home. Before committing, ask for recent service charge statements, the current budget, details of any reserve fund and notice of planned major works.

There is some good news. The first phase of the reforms links new grant funding to better long-term affordability and cost transparency, includes an option to opt out of fees for optional services, and says fees charged to shared owners shouldn't be a source of profit. Ask your provider how these apply to the home you're buying, because they may not reach every existing lease.

What Staircasing Really Costs

Staircasing means buying further shares in your home, ideally reducing your rent as you go. The catch is that each new share is priced at the home's current market value, so if prices rise, so does the cost.

You'll also usually pay for a valuation and legal fees, and possibly mortgage costs too. Stamp Duty Land Tax can add a further layer, and the choice you make when you first buy matters: you can generally pay on your initial share or elect to pay on the full market value upfront. It's worth getting advice before you decide, as that decision affects what's payable if you staircase later.

The government says the second phase of its reforms will look at reducing staircasing barriers, but nothing has changed yet. Assume today's costs when you run the numbers.

Selling a Shared Ownership Home

Selling is often where the difficulties show up. Your lease may give the provider a nomination period in which to find a buyer first, and fees can apply. Resale support, including those nomination periods and provider fees, is also on the list for phase two, as is a review of buybacks for owners who can't afford to stay or sell. If you might need to move within a few years, check these terms now rather than when you're trying to leave.

What to Do Before the New Caps Apply

The written statement says the caps take effect in the new year but gives no exact date. Outside London the change comes through the Homes England Capital Funding Guide, and in London through the London Plan's next monitoring report, so ask your provider which limit it's applying when you apply. In the meantime, gather your income evidence and start comparing the costs of shared ownership with buying a smaller home outright.

What Should You Do Next?

Shared ownership can be a sensible way onto the ladder, as long as you know what you're signing. Our first contact team can match you with an experienced conveyancing solicitor near you in the QualitySolicitors network, who can review the lease, explain the long-term costs and answer your questions in plain English. Get in touch and we'll help you find the right person.