Affordable housing: everything you need to know
by Housesimple on 9th September 2017
Affordable housing is a headline issue in the UK right now. The Mayor of London has promised to fast track developments that offer cost-effective homes, while the debate over building on green belts is being rehashed. But what exactly is affordable housing? And who is it for?
Defining what's affordable
There’s no real agreement over what counts. Shelter claims that these homes should cost owners or tenants less than 35% of their monthly income. In 2007, the government argued that 25% of gross income is fair. The latest government definition, outlined in the National Planning Policy Framework, doesn’t commit to concrete figures.
Local authorities provide affordable rentals at 80% of their market price, but when it comes to property for sale, the government isn’t offering anything specific. Instead it’s planning an update to several schemes, outlined in the February 2017 White Paper. These propose banning letting fees, creating a lifetime ISA to help first-time buyers save, and building starter homes with a price cap of £250,000 – excluding London.
Checking your options
UK residents over the age of 16 with a valid National Insurance number are eligible for the Help to Buy ISA for their first home. It offers a 25% savings bonus of up to £3,000.
All buyers with one or no property can apply for a government equity loan of up to 20% of the purchase price of any new build worth up to £600,000.
First-time buyers in England with a household income under £80,000 (£90,000 in London) will soon be able to buy selected new builds at 80% of their market value. They can already apply to buy between 25% and 75% of a property and pay rent on the rest.
If you’re a council tenant, you might have the right to buy your home at a reduced rate – sometimes as much as 70% below market value. Eligibility varies by area, so check the Right to Buy site for details.
Many first-time buyers are deciding to live with their parents up until they can apply for a mortgage, or relying on the bank of gran and grandad to fund their property purchase. As much as these might help, they're not particularly sustainable for many families today. It's a good idea to do plenty of research into new developments and regeneration projects nearby if you're looking to get on the property ladder. Most local authorities require developments to include affordable housing, which could be just the ticket you need to buying your first home.