What is Staircasing (Shared Ownership)?

Full Definition

Shared ownership allows a buyer to purchase a share of a property (commonly starting between 10% and 75% of its value, depending on the scheme) from a housing association, paying a mortgage or cash on the share purchased and a subsidised rent (usually around 2.75% per year) on the remaining share still owned by the housing association. Staircasing is the process by which the leaseholder later buys additional shares, increasing their percentage ownership and correspondingly reducing the rent payable on the smaller share that remains with the housing association, up to and potentially including buying the final share to own the property outright (100% staircasing), subject to the specific lease terms. Each staircasing transaction generally requires a new valuation of the property (usually paid for by the leaseholder, using a RICS-qualified surveyor nominated or approved by the housing association) to establish the current market value, since the price of each additional share purchased is based on the property's value at the time of that staircasing transaction, not the original purchase price -- meaning a leaseholder staircasing in a period of rising house prices will pay more per percentage point for later shares than they did for their original share, and vice versa if prices have fallen. Recent reforms to some new shared ownership leases allow staircasing in smaller increments (as low as 1% at a time in some newer models, rather than the traditional minimum of 10% or 25%), making it more affordable to staircase gradually. Stamp Duty Land Tax on shared ownership purchases can be paid either as a single payment based on the total market value of the property at the outset (electing to pay SDLT once upfront, covering all future staircasing without further SDLT due, subject to certain conditions), or on a "staircasing" basis where SDLT is paid only on the share initially purchased, with further SDLT potentially becoming due as additional shares are bought, once cumulative consideration exceeds the relevant SDLT threshold. Because staircasing decisions involve a fresh valuation and, potentially, further SDLT, mortgage arrangement fees, and legal costs each time, leaseholders should factor in these transaction costs, not just the headline share price, when deciding how and when to staircase.

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