Shared ownership to address challenges in the Danish real estate market

Denmark, like the rest of the Nordic countries, is facing a problem in its largest cities, where first-time homebuyers are increasingly unable to afford owner-occupied housing. To address this issue, the Danish government is considering a housing policy proposal that would allow homeowners to share ownership of their homes with entities such as real estate investors, mortgage providers or pension funds.

In Denmark, the political landscape is currently focused on the lack of owner-occupied housing, especially in Copenhagen. To solve this problem, the Oslo model of shared ownership is considered as a possible solution.

The purpose of the shared ownership model is to provide first-time buyers with a way into the real estate market. In Oslo, the municipality has established Oslobolig in cooperation with the real estate companies OBOS, Bane NOR Ejendom and NREP.. The Oslobolig model allows buyers to purchase part of a house and rent the rest from Oslobolig. Over time, the buyer has the option to gradually purchase a larger share until he/she owns the entire house (subject to a 10 year period).

In order to benefit from this shared ownership model, certain requirements must be met, such as:

• First-time buyers must have a total income of less than NOK 625,000, or others with an income of less than NOK 825,000
• The buyer must be able to finance his/her share in the usual way, i.e., by taking out a bank loan and making a proportionate deposit (at least 7.5% of the value of the property when buying 50%),
• The costs of ownership are shared proportionally,
• The buyer has the full maintenance obligation for the entire house/flat at his/her own expense.

Experience with shared ownership in Oslo is currently limited, as the model has only been in effect since 2022. It is therefore difficult to draw definitive conclusions about its impact on the housing market and first-time buyers. However, a similar model in England, which also allows partial home ownership, has been criticised for various issues related to unlimited operating expenses, tax deductions, liability, protection from creditors, and the resolution of disputes and defaults.

In Denmark, the model will require a number of different legal aspects to be addressed for the model to become operational, such as mortgage financing, valuation and public participation in housing supply. Consequently, several and substantial changes to the current housing legislation will have to be made before the Oslo model can find its way to Denmark.

Various stakeholders in the Danish real estate market have expressed their views on a potential shared ownership model in Denmark, with opinions being widely divided between optimism about the prospect and scepticism about the impact such a model could have on the Danish market.

The Danish government is expected to present a proposal for shared ownership in the housing market within the next 12 months.

Gorrissen Federspiel will be following this development closely.