If you’re hoping to buy your first home, you might have come across the term ‘affordable housing’. In theory, ‘affordable housing’ refers to properties that are offered for sale or rent for below their market value – usually as part of a scheme backed by the government or local council. These initiatives are usually aimed at specific groups of people, such as local residents or those who earn below the national average wage. But with so many different schemes and eligibility rules, there is some confusion over how the schemes work and who can qualify. Here, we’ll try to demystify the concept of affordable housing and explain how you can get on the property ladder.
What does ‘affordable housing’ mean?
Broadly speaking, affordable housing schemes aim to make cheaper homes available for people who can’t afford to buy or rent at market rates.
The government defines affordable housing as ‘social rented, affordable rented and intermediate housing, provided to specified eligible households whose needs are not met by the market’.
But in a briefing paper released in August 2017, the House of Commons Library said there is ‘a great deal of ambiguity’ in the way the term ‘affordable’ is used in housing – there is no standard definition and approaches differ between local areas.
How many affordable homes are available?
The most recent official data shows that a total of 41,530 affordable homes were provided in 2016-17, with their tenure as follows:
- 24,350 affordable rented homes
- 11,810 affordable home ownership, shared ownership and intermediate rent homes
- 5,380 social rented homes.
Affordable housing in new-build developments
Around 92% of affordable homes provided in 2016-17 were new-builds – and this trend is set to continue.
In early 2017, the government made a proposal to amend the National Planning Policy Framework, so that at least 10% of the homes on developments of 10 or more units would be classified as ‘affordable’.
As it stands, local authorities can insist that developers include affordable housing on their sites as a condition of granting planning permission.
For example, London mayor Sadiq Khan plans to make developers in the capital set aside 35% of their new-build properties as ‘affordable’ housing.
Types of affordable housing
- Shared Ownership
- Starter homes
- Rent-to-buy
- Social rented housing
- Affordable private rented housing
- Intermediate rent
Pros and cons of affordable housing
If you can access an affordable housing scheme, it could help you get on to the property ladder or access more affordable rents.
Home-ownership schemes, such as the upcoming Starter Homes Initiative, will reduce the overall burden of buying a home by reducing the overall cost, while the likes of shared ownership provide opportunities for buyers with smaller deposits.
On the other hand, the confusion around what is and isn’t ‘affordable’ has provoked criticism, with some campaigners claiming the definitions are not always effective in helping low-income or first-time buyers.
Critics suggest using a housing-cost-to-income ratio would be a more effective way of ensuring affordable housing is truly affordable from area to area. As a rough guide, the housing charity Shelter proposes that ‘affordable’ should classify as no more than 35% of your net household income.
How else can I get on the property ladder?
If you do have some money set aside for a deposit, you could consider buying a home using a 95% mortgage, guarantor mortgage or the government’s Help to Buy scheme.
Help to Buy equity loans allow buyers to purchase a new-build home with a 5% deposit.
The government provides an equity loan of up to 20% (or 40% inside London), allowing buyers to take out a smaller mortgage.
Help to Buy has been very popular with homebuyers in recent years, but there are suggestions that it causes the price of new-build properties to become inflated.
