Affordable Housing is a term used to describe a wide variety of new properties. It needs to be understood that this is not exclusively housing aimed at people on lower incomes. In fact those living on state benefits, with low incomes, or with difficulties borrowing large sums of money would not be able to afford to occupy much of the property provided under this title. People often think that affordable housing means housing for reasonable rents or co-ownership but this is only part of what the Government regards as Affordable Homes.
This post looks at what the Government defines as affordable housing in its latest National Planning Policy Framework so that it is clear what the range of affordable options a developer may put forward are. NB I have highlighted text below to clarify.
Affordable housing for rent: meets all of the following conditions: (a) the rent is set in accordance with the Government’s rent policy for Social Rent or Affordable Rent, or is at least 20% below local market rents (including service charges where applicable); (b)
the landlord is a registered provider, except where it is included as part of a Build to Rent scheme (in which case the landlord need not be a registered provider); and (c) it includes provisions to remain at an affordable price for future eligible households, or for the subsidy to be recycled for alternative affordable housing provision. For Build to Rent schemes affordable housing for rent is expected to be the normal form of affordable housing provision (and, in this context, is known as Affordable Private Rent).
Starter homes: is as specified in Sections 2 and 3 of the Housing and Planning Act 2016 and any secondary legislation made under these sections. The definition of a starter home should reflect the meaning set out in statute and any such secondary legislation at the time of plan-preparation or decision-making. Where secondary legislation has the effect of limiting a household’s eligibility to purchase a starter home to those with a particular maximum level of household income, those restrictions should be used.
Discounted market sales housing: is that sold at a discount of at least 20% below local market value. Eligibility is determined with regard to local incomes and local house prices. Provisions should be in place to ensure housing remains at a discount for future eligible households.
Other affordable routes to home ownership: is housing provided for sale that provides a route to ownership for those who could not achieve home ownership through the market. It includes shared ownership, relevant equity loans, other low cost homes for sale (at a price equivalent to at least 20% below local market value) and
rent to buy (which includes a period of intermediate rent). Where public grant funding is provided, there should be provisions for the homes to remain at an affordable price for future eligible households, or for any receipts to be recycled for alternative affordable housing provision, or refunded to Government or the relevant authority specified in the funding agreement.
In a nutshell the term “Affordable Homes” covers everything from social housing built specifically to rent at charges that people on lower lower incomes can afford to standard housing estate properties sold for 20% less than the average property sale price in the local area. Zoopla says the average house price in Hackleton is £373,839 at the time of writing so that could mean that houses costing over £250,000 could be described as affordable. Such properties are generally aimed at first time buyers able to afford a substantial mortgage and not what many people wanting local Affordable Housing mean.
These discounted houses tend to be the type that developers wish to incorporate in their schemes in order to maximise the return on their investment. And in order to provide a few of these cheaper houses they will wish to build many more ‘full price’ houses to ‘subsidise’ them.