Shared Ownership

Original Scheme

The Shared Ownership Schemes were initiated by the Housing (Miscellaneous Provisions) Act 1992.  The local authority may grant a shared ownership lease geared in such a way that the local authority and the lessee have valuable respective interests in the property.

The local authority s charges a rent in respective of the retained share of ownership and the tenant pays a mortgage on the remaining share. The local authority may pay a subsidy towards rent and/or loan charges.

The Shared Ownership Scheme was designed to assist persons whose means were below a certain level in purchasing a home.  It is now closed to new entrants.

Under this shared ownership scheme, which is now historical, the proportion of ownership that is being purchased may be increased by adding to the mortgage or purchase by cash.  Full ownership must be purchased within 30 years.  Further financing may be undertaken to undertake the full purchase.

The property may be sold within the relevant period. The authority is entitled to part of the value of the property relative to its shared ownership element at the date of sale.  If a discount was provided by the local authority, this must be refunded. The extent of the refund depends on the period of ownership.

Scheme Terms

The scheme allowed persons to start buying a part share of the house, increasing the proportion progressively until it was completely owned.  Buyers made payments to the mortgage and paid the rent with the local authority on the local authority\’s equity part at a rate of 4.3 per cent.

Applicants under the scheme needed approval in principle for shared ownership by the local authority. A new or existing house had to be identified.  A newly constructed house was permitted.  Local authorities might sell existing houses under the scheme.  The house must be suitable or meet local authority standards.

The upper limit for the purchase price was set by the local authority.  Local authorities also set the maximum percentage of income that could be apportioned to rent or mortgage payments.

Qualification

Under the scheme, people had to show

• they are in need of housing and
• income satisfied was below certain levels or
• they must be on the registered housing waiting list with the local authority or
• a housing authority tenant purchaser who wanted to buy a private house and return a local authority house to the local authority
• a tenant for more than one year of a housing association house under the capital loan scheme.

Shared ownership schemes involve the purchaser taking at least a 40 per cent stake and renting the remainder from the authority. Qualifying households must be

If the property is sold within 20 years, a clawback applies, and the local authority is paid a reduced proportion of the proceeds over time, depending on the date of sale and its equity.

Local authorities may subsidize mortgage payments of shared ownership. A subsidy may be partly available in relation to the rental element. The rent paid is at a fixed, relatively low percentage of the notional local authority share. The shared ownership purchaser may acquire a further element of equity by purchase.

Under the scheme, the purchaser was required to purchase at least 40% of the share. The single income threshold of €40,000 a year applied.  In the case of two household incomes, the threshold was the gross income before tax of the higher earner multiplied by 2.5.

If the household income was below €28,000,  it was possible to qualify for a rent subsidy for up to between €1000 and €2,500 per annum.  There was a requirement for a deposit which could be waived.

Affordable Housing Scheme

A number of affordable housing schemes were aimed at assisting purchasers whose income was below certain levels to purchase a property.  Existing schemes were closed in June 2011.

Under the affordable schemes, the local authority must be paid a percentage of the proceeds of the sale (clawback) if the sale took place within 20 years.  This is reduced by ten percent after year 10, reducing to zero by year 20.  Clawback is calculated with reference to the market price at the time of sale.

There were three distinct types of affordable housing provision schemes. Under one scheme, the local authority provided land on which new houses were built and sold.  If there are more eligible applicants than houses, the local authority determines priorities, taking into account the circumstances.

The scheme required

• housing need and satisfaction of the income test
• registration on the Housing Authority list
• local authority or tenant purchaser who wanted to buy a private house and return the existing house.
• tenant of more than one year of a home provided by a housing association under a capital loan and subsidy scheme who wanted to buy a private house and return the existing house to the association.

The income test only applied to the first heading above.  The second, third, and fourth headings do not apply an income test.  Applicants, in all cases, must have sufficient capacity to make the repayments.

Some local authorities had higher or lower limits than others, partly reflecting  housing costs.

Local Authority Mortgages

Local authority mortgages were available, and some banks provided mortgages for affordable homes.  Loans could be at up to 97 percent of the price.  Repayments could not be more than 35 per cent of net income after tax and social insurance.  Where private sector mortgages were given by particular institutions, pre-approval was required from the local authorities.

A special stamp duty of €100 applied to the purchase of affordable homes after 2011. Where the gross income in the household was less than €28,000  a subsidy of between €1,050 to €2,550  was payable directly to the local authority.

The 2021 Act

The Minister may contribute funds to a special purpose vehicle (SPV) for the purpose of operating and administering an Affordable Purchase Shared Equity scheme. This scheme involves the SPV in supporting  eligible purchasers of private homes by purchasing an equity share in homes.

It also provides that the Minister may agree the terms by which the equity support may be provided in a memorandum of agreement with the SPV. The Memorandum of Agreement may provide for terms in the following areas

• purchaser eligibility and financial means,
• the homes that may be considered eligible under the scheme,
• the amount of funding that can be provided
• the security required in respect of the funds provided,
• conditions in relation to the redemption by the purchasers of the support provided,
• conditions in respect of interest charged in respect of the funding provided,
• conditions in relation to the recovery of funds provided,
• fees or charges that may be applied by the SPV, and
• conditions in relation to contractors to qualify to provide dwellings.