Is Shared Ownership better than renting?
Shared Ownership is an affordable home-buying scheme designed to help people step onto the property ladder who otherwise wouldn't be able to afford a home on the open market.
You will buy an initial share of your home (usually 25%) and pay rent on the percentage you don't own. This means that you need a much lower deposit, as it's based on the share you buy only, compared to buying on the open market.
Shared Ownership has helped thousands of people buy their own home, but is it right for you or are you better off renting? Take a look below as we compare what it means to rent privately vs buy a home with Shared Ownership.
Contents
Cost of buying with Shared Ownership vs renting
Shared Ownership
With Shared Ownership, you usually buy an initial share (25%) of the home and pay rent on the part you don't own and a service charge to cover communal spaces. The rent part is usually subsidised meaning the monthly cost to buy with Shared Ownership may be cheaper than renting.
You do need to get a mortgage, so will need to put down a deposit, however, this is a lot less than if you were buying on the open market.
Renting
With renting, you won't be subject to the legal costs of buying a home like solicitors, however you usually need to put down a deposit (Which would be lower than buying a Shared Ownership home).
The amount of rent you pay is subject to what your landlord deems reasonable and has less control than rent charged through Shared Ownership, and in recent years average rents have spiralled to very high levels in London.
New research on the costs of Shared Ownership vs renting
New research has shown that Shared Ownership is a more affordable option than private renting across the UK in most cases. Studies show that in 93% of local authorities, Shared Ownership is projected to be less expensive than renting after 10 years.
This affordability is amplified when considering long-term financial benefits, with shared owners typically gaining around £29,000 in equity growth due to capital repayments and house price increases, and £42,000 in London.
Beyond lower monthly costs, Shared Ownerships allows buyers to build equity and provides a pathway to full homeownership, making it an appealing alternative for those struggling to afford market-rate properties.
How secure is Shared Ownership vs renting?
Shared Ownership
One of the main benefits of Shared Ownership compared to renting is security. When you buy a Shared Ownership home, as long as you keep up with your mortgage payments and don't go into rent arrears, you have the full rights of an owner-occupier.
You will usually have a lease term of 125 to 250 years depending on your lease agreement. This means you cannot be evicted from your home giving much more security compared to renting.
Renting
There is a lot less security when it comes to renting privately. With renting, you will sign a rent agreement (usually 1 or 2 years) as a minimal rental period.
However, the landlord can give notice to end a rental agreement and you will need to move out and find another place to live.
This can be quite stressful and gives less security in some instances when it comes to controlling how long you can live in your rental home.
How flexible is Shared Ownership vs renting?
Shared Ownership
Buying a Shared Ownership home makes you an owner-occupier usually with a lease term of 125 to 250 years.
So as long as you keep up to date with payments you can live freely in your home for this period with the option to extend your lease term further.
Whilst you do have the option to sell your home at any point and move if you wish, this is a more complex process than just moving from a rental property.
Renting
One of the main benefits of renting is the ability to move freely between rental properties.
Ending a rental agreement is quite straightforward forward which allows you to move to different locations at short notice if you need to. This is great if you are moving jobs or simply want to try living in a new area without the complexities of selling a home.
Can I decorate a Shared Ownership and rental home?
Shared Ownership
As you are an owner-occupier, Shared Ownership allows you to freely decorate your home to match your style.
Whether you prefer a Scandinavian interior or art-deco style, you can decorate to your heart's content.
Another benefit with buying a new build Shared Ownership home, is that you will often have a blank canvas to work from, making decorating easier to do.
There may be restrictions on structural changes like removing an internal wall and will need to seek permission from the housing provider before making any bigger structural changes.
Renting
When renting a home, you will usually not be able to decorate the interior without getting prior approval from your landlord who can say no.
This is therefore more restrictive than buying a Shared Ownership home and you may find that a rental home style does not match your own.
If you do get permission, you will also be putting money towards decorating someone else's home without adding value in the long run for yourself.
Conclusion - Is Shared Ownership better than renting?
In summary, Shared Ownership is a fantastic option for those struggling to buy on the open market, but want to get out of the rental cycle and start to build equity in a home of their own.
It gives you the security of home ownership whilst being able to purchase with a much smaller deposit than buying on the open market. You can also decorate freely and stamp your mark on a home that is yours.
Of course, renting can give you greater flexibility with moving around, so do consider what is most important to you before deciding whether buying through Shared Ownership or renting privately is right for you.
Frequently asked questions about Shared Ownership vs renting
- Shared Ownership: You buy a percentage of the property (usually between 25% to 75%) and pay rent on the remaining share. Over time, you have the option to buy more of the property (this is known as "staircasing") until you eventually own 100% of it.
- Renting: When renting, you do not own the property at all. You pay rent to the landlord in exchange for living in the property.
Yes, you can. If you want to sell a Shared Ownership home but don't own it outright, you must give Peabody eight weeks to find a buyer before listing it on the open market. This process ensures the property is sold to someone eligible for Shared Ownership. The benefit to you is that Peabody has a large pool of potential buyers, and their success rate is high, with 98.8% of properties sold during the eight-week period. Additionally, Peabody's fees are lower than those of a typical estate agent, and they will help you with the sale.
To be eligible for Shared Ownership, you must:
- Be 18 years or older.
- Have a household income under £90,000 in London or £80,000 outside London.
- Be a first-time buyer or in the process of selling your current home, with no other property ownership.
- Not be able to afford to buy a home on the open market.
- Have a good credit history and no rent or mortgage arrears.
You can read the full criteria on our Shared Ownership eligibility page.
Homeowner Stories
Discover a collection of homeowner stories from previous Peabody New Homes purchasers and find out how we were able to help them onto the property ladder and find their dream home through Shared Ownership.
"It feels amazing to be paying my own mortgage instead of someone else’s. I also plan to staircase in the future to increase my ownership share. Never in my wildest dreams did I imagine owning such an incredible property in such a perfect location - but here I am."
"I wasn’t actually planning to buy my first home quite so soon, but when I saw an Instagram ad for Zone at Oval Village, I immediately fell in love"