Britons warn of dangers of shared home ownership scheme as Australian government mulls Help to Buy plan

Paul Afshar says his biggest regret is buying his one-bedroom apartment through a shared home ownership scheme.

"Initially I was over the moon. Unlike a lot of my friends, I didn't get any financial help from my parents, so being able to get a foot on the property ladder, I was elated," he tells the ABC.

"Then it became the start of a 17-year nightmare."

To break into the property market, Mr Afshar purchased a 25 per cent share of his apartment in East London for 195,000 British pounds ($386,000) in 2007 and split the rest with his local housing association.

But he says it wasn't long before the arrangement, which was meant to make his home ownership journey more affordable, had the opposite effect.

Despite owning a quarter of the property, he has to pay 100 per cent of the cost of repairs.

In the past five years, his service charges — which cover general maintenance and building insurance — ballooned from $150 a month to $800 a month.

On top of that, he still has to pay his mortgage and rent to his local housing association, which is his landlord, for the remaining share of the property.

"You go to sleep at night thinking, 'God, are the costs going to go up again? Am I going to have to somehow find that money again?' It's awful," he says.

"Your home should be your safe place, and it doesn't feel like it when you have this constant threat hanging over you. It puts a lot of pressure on people."

The Albanese government took its version of a shared home ownership scheme to the last election in 2022, but the legislation still hasn't gained the support needed in parliament.

The proposal, which would allow first home buyers to buy a property with a smaller deposit by splitting it with the government, is expected to return to parliament this month and housing experts say there are lessons to be learned from overseas.

The impact of the UK's shared home ownership scheme

The United Kingdom has had its shared ownership scheme since the 1980s and while it works for some people, many say signing up was a mistake.

The policy has been controversial because residents are liable for 100 per cent of building defects and repairs, despite only owning a portion of the home.

A UK parliamentary inquiry earlier this year warned that shared-ownership homes were drastically failing to deliver affordability.

"It's a scheme in theory that should work, and it has worked for some people, but there are pretty low satisfaction levels among shared home owners in the UK," Sue Phillips from the UK Shared Ownership Resources Network says.

Only 2.8 per cent of people who enter the scheme go on to buy the entire home, according to research by estate agency Savills.

"One of the big problems is that the deposit is initially affordable, but many shared owners find their total housing costs can become increasingly unaffordable as time goes on," Ms Phillips says.

That's been the case for Wendy Monaghan.

She bought a 30 per cent share of her two-bedroom home in Woolwich on the Thames River in London's south for 280,000 British pounds ($555,000) in 2005.

But after three attempts to buy the entire property and attempts to sell it, she says she is now trapped because of spiralling costs.

"We are currently paying over 6,000 pounds for service charges on top of the mortgage, on top of rent, and we are not high earners at all," she says.

"We should have been able to afford this and yet we can't."

She says she would hesitate to get involved in any scheme that is to help first home buyers again.

"If we had our time again, we wouldn't do it, we would have stayed renting," she says.

The scheme has helped some first home buyers, particularly residents outside of London.

Lisa Kemp was seven months pregnant when she was given two months' notice that her landlord was selling the house she was living in.

After struggling to find somewhere new to rent, she investigated shared ownership.

A year later, in 2016, she found a house in Norfolk in the UK's east and bought a 40 per cent share of the property.

"It was a dream come true and before that we honestly didn't think we would ever buy a house so to have secured even 40 per cent was amazing," she says.

"Fast-forward to 2024 and we had built up enough equity to pay for a deposit on the open market for a house that better suited our needs."

While based on the same premise, there are key differences between the UK's shared home ownership scheme and Australia's proposed national Help to Buy program.

In the UK, residents buy a share from a not-for-profit housing association that they then must pay rent to on top of their mortgage and other charges.

In Australia, the buyer would co-own the property with Housing Australia but wouldn't be required to pay rent to the government for their share.

A buyer could pay a deposit as small as 2 per cent, with the scheme limited to 40,000 places.

Under both schemes, residents are responsible for the total costs of ongoing property maintenance and repairs, regardless of the share of the property they own.

Experts push for planning reforms over subsidies

Karl Fitzgerald from Grounded Community Land Trusts made a submission to the Australian Senate's 2023 parliamentary inquiry looking at the Help to Buy policy.

He says Australia should have learnt more from the United Kingdom's shared home ownership scheme, which has been heavily criticised.

"Successive reports have said the UK policy did not make homes more affordable for society in general, or address other pressing problems in the housing sector," he says.

"It hasn't helped housing affordability in the UK, it has increased prices more than the subsidy itself — it's a seller's subsidy more than a homebuyer's win."

Matt Bowes from the Grattan Institute's Associate Housing and Economic Security Program says while there is a lot to be learned from housing policies around the world, Australia is far more reliant on private housing than other countries.

"Unlike the UK, our social housing is very low and the options open to us in terms of housing supply are more limited," Mr Bowes says.

While a shared home ownership scheme can be beneficial, he says the government's focus should be on boosting housing supply through planning reform and supporting renters.

Some already in shared ownership schemes, like Paul Afshar, say they feel stuck, unable to afford to buy their home because of growing costs while also finding it difficult to sell.

"If I had the power to rewind time, I would have waited another five to eight years to save the money and buy the flat outright," he says.

"It was a mistake."