WHAT IS SHARED EQUITY/INTERMEDIATE HOUSING?
Shared Equity is designed for people who aspire to home ownership but who are unable to afford the full market price. Purchasers must be able to pay a mortgage, so they are usually in employment. However, they do not earn enough to buy a suitable house on the open market.
Shared Owners buy a share of the equity and the developer or a housing association (also known as Registered Social Landlord) retains the remaining
portion. Shared owners benefit from rising property values just as they would on the open market (and, equally, may experience falls in value).
Is there a need for shared equity/intermediate housing?
In our experience, most villages need shared equity housing but the need depends largely on income levels and property values in the area. By mixing the
size and type of houses the development will cover the range of income and age groups in the local community. Shared equity meets the needs of single people, couples and families who would not receive priority help from their Local Authority housing department. However, their ability to stay in the place where they have strong connections is often seen to hold great benefits for the community.
Grant-free shared equity
Revitalise Homes uses its own model of grant-free shared equity. Because we do not use public funds to subsidise the homes, we do not have to offer to shared owners the right to “staircase”, i.e. buy further portions of equity.
In other words, the equity is “fixed”, which means that the same discount is passed on to future purchasers, helping to keep the property affordable for more than one generation of occupiers.
How Revitalise Homes shared equity works
When we build a house for shared equity, we sell it at an affordable price.
The house is valued as if it was being sold on the open market and the sale price is shown as a percentage of this figure.
The percentage is fixed at the time of the first sale and the value of a purchaser’s share is linked to the open market value of the house, which can rise or fall as a result of any market fluctuations.
So, when the house is re-sold and the open market value has increased by, say, £10,000, and the purchaser’s fixed share was, say 70%, there would be a gain of £7,000.
On the other hand, if at the time of re-sale, market values are lower than at the time of purchase, the occupier would bear the same percentage of any reduction.
The shared owner does not pay any rent on the share of the equity retained, but he or she is responsible for all the repairs, maintenance, insurance of the property.
There will be a service charge for maintaining parts of the development which everyone shares, e.g. common landscaped areas, parking areas.
There is no limit on the length of time a person may stay in the house, but in normal circumstances no extensions or major alterations are permitted, as this would increase the property value and make the house too expensive for the
next purchasers.
If the purchaser wishes to sell at some time in the future, it must be to someone approved by Revitalise Homes and at the original percentage of the new value.
Revitalise Homes will not make any claim on any profit that may be made when selling this share. Revitalise Homes is able to provide shared ownership in areas where some local people can afford a mortgage to meet up to 80% of open market values because:
1. The full cost of provision (which should always be between 50% and 70% of open market value of the houses) is covered by the purchase price and there is therefore no residual loan for Revitalise Homes to service.
2. We usually work on
exception sites which can be acquired at low cost.
Keeping it affordable, keeping it local
It is not possible to control the rise in value of the houses, but they will always be available for re-sale at well below open market value. This ensures that applicants who qualify under the local connection and are in housing need are able to purchase a house at a much lower price than in the open market.
Working with local people
Revitalise Homes seeks to work with Parish Councils to ensure that local people understand and support proposals and that developments are designed to meet local needs. An open and consultative approach is adopted in order to explain proposals and receive feedback.
