Shared Ownership service charge and rent: What does each cover?

There’s a common misconception that Shared Ownership comes with ‘hidden costs’ but this couldn’t be further from the truth. The Shared Ownership scheme is there to help buyers purchase a new home, not catch them out. However, it’s important that you familiarise yourself with the costs associated with buying through Shared Ownership so there’s no surprises during the process or further down the line.

The two most important costs are the Shared Ownership service charge and rent. We’ll explain what each covers and any questions you might have about them.

• What is a Shared Ownership service charge?
• How much is service charge on Shared Ownership?
• How is the Shared Ownership service charge paid?
• What is Shared Ownership rent?
• How is Shared Ownership rent calculated?
• Can Shared Ownership rent increase?
• What happens if I can no longer afford to pay my rent for my Shared Ownership property?

What is a Shared Ownership service charge?

The Shared Ownership service charge refers to the fee that residents of Shared Ownership properties pay to cover the costs associated with the maintenance and management of the building or communal areas.

Shared Ownership is a scheme that enables buyers to purchase a share of a new property, roughly 25% to 75%. They’ll then pay rent on the remaining share, which is typically owned by a house association. So, in addition to the service charge, buyers are also required to pay monthly rent on the share they don’t own.

How much is service charge on Shared Ownership?

The amount of service charge you’ll pay on Shared Ownership will vary depending on a few factors, such as the property type, the communal spaces and amenities available, and, of course, the housing association.

How is the Shared Ownership service charge paid?

Typically, the service charge for Shared Ownership is paid along with your monthly rent payments. The housing association should communicate its preferred method of payment before you sign an agreement.

What is Shared Ownership rent?

As outlined above, Shared Ownership is different to the service charge. Shared Ownership rent is paid by the resident to cover the portion of the property that they don’t own. As of 2024, the rent limit is 3% of the value of the share that the buyer does not own, however, most landlords charge 2.75%.

How is Shared Ownership rent calculated?

Shared Ownership rent is calculated as a percentage of the value of the share owned by the housing association, that the buyer does not own.

Let’s look at an example to see how this would work in practice…

You’re buying a house through the Shared Ownership scheme that is valued at £200,000. You own 50% of the property and the housing association owns the other 50%. This means you have to pay rent on the £100,000 that the housing association, or landlord, owns. If the rent percentage is 2.75% (of £100,000), the annual rent would be £2,750, or around £229 per month.

Can Shared Ownership rent increase?

Shared Ownership rent is variable, which means it can increase over time. Your landlord will set out dates within your lease where your rent can be reviewed, which is typically once a year. During these reviews, your rent can be increased but cannot be decreased. The amount it can be increased by will depend on your lease agreement. If you signed your lease before 12 October 2023, the maximum rental increase allowed is the percentage outlined in the Retail Prices Index (RPI) plus 0.5%.

However, if you signed your lease on or after 12 October 2023, the landlord can increase your rent either by the RPI percentage plus 0.5% or the Consumer Prices Index (CPI) plus 1%.

What happens if I can no longer afford to pay my rent for my Shared Ownership property?

Before committing to a Shared Ownership property, we strongly recommend that you assess your finances to ensure you can afford to pay your rent. Take into account rent, mortgage payments, bills, and any other related costs.

If you’re struggling to pay your rent, the first step is to inform your housing association. In some cases, you’ll be able to apply for benefits to help cover payments, set up a repayment plan, or staircase down. Staircasing down means selling back a portion of your share back to the housing association, therefore, reducing your ownership share and your rent.

Dreaming of owning your own new home?

There’s no doubt that Shared Ownership is transforming the housing market, making affordable housing more accessible to home buyers. The dream of owning your own home is more attainable than ever, so don’t miss out. 

Browse thousands of new homes for sale in the UK under the Shared Ownership scheme!