It’s a well reported fact that property prices are now rising faster than wages so it’s little wonder that affordable housing has become such a hot topic. Back in January, the Prime Minister of the time, David Cameron vowed that the government would embark on a programme of building thousands of new affordable homes and that £1.2 billion would be set aside for the next five years to build starter homes that first-time buyers could afford.
So, as we approach 2017, what does affordable housing really look like?
Well, one of the government’s definitions of affordable is that it should cost no more than 80% of the average local market rent and that any mortgage payments should be aligned with this. It is understood that the mortgage payments should be more than a person would pay on council housing rent but it should still remain affordable for future eligible households.
It was agreed earlier this year that the planned starter homes should be sold with a 20% discount on market value with the stipulation that only first-time buyers under the age of 40 would be allowed to buy them.
So, as you can see, definitions of affordable housing can be a bit confusing. Shelter, the housing charity. has a different definition of affordable housing stating that it should cost no more than 35% of your household income after tax and benefits.
According to Nationwide Building Society, in 2016 the average UK mortgage payment was 34.5% of take-home pay and this percentage has remained fairly consistent since 2009 so it’s still some distance from what Shelter would call affordable.
Clearly the topic of affordable housing is very subjective and entirely dependent on the income that you have. What is affordable for one person, will still be a stretch for others so there’s a balancing act that needs to be made in setting this at the right level.