How affordable is “affordable housing”?

Providing affordable housing is becoming a hot topic in West Hampstead. This article first appeared as part of a longer piece on 156 West End Lane, but we thought it would be helpful to split it out. Exact definitions of affordable housing are more or less impossible – they simply don’t exist, that’s not how affordable housing works for obvious reasons (lots of people working in London could afford property elsewhere, for example). What follows is an attempt to clarify the term in the context of London and Camden and there’s some links to further reading.

What’s “affordable”?

Affordable housing should:

  • meet the needs of households whose needs are not met by the market and who are eligible for affordable housing, and
  • be provided at a cost they can afford, taking into account local household incomes and market housing costs, and
  • be affordable to future households unless arrangements are in place for subsidies to be recycled into alternative affordable housing provision.

Three types of affordable housing

Social rented housing is primarily housing managed by local councils and housing associations. The cost of social rented housing is controlled by a national rent regime. Other affordable housing providers may manage social rented housing under the same rental arrangements. This is what most people think of as “council housing”.

Intermediate affordable housing costs more than social housing but less than equivalent market housing. Camden controls the cost of intermediate affordable housing taking into account market costs and the eligible income groups. The Mayor’s February 2011 review indicated that eligible households were those with incomes of less than £64,000 per year (gross). The draft replacement London Plan indicates that he intends to raise the eligible income to £74,000 per year for intermediate affordable homes with 2-bedrooms or more.

How does income covert into housing costs? At the moment, in London, intermediate affordable housing should cost no more than 3.5x the household income threshold to buy and no more than 40% of net household income including rent and service charges.

Most intermediate affordable housing in Camden has been provided by housing associations. Intermediate affordable housing can include a range of tenures such as: rented housing, shared-ownership housing (where occupiers buy a share and rent the remainder) and low cost homes for sale.

Affordable rented housing means rents up to 80% of market levels, although the individual housing associations that manage this sort of affordable housing set their levels. Clearly, 80% of market levels is still far too high for many people. The Valuation Office’s October 2013 data put the average monthly rent of a 3-bed house in Camden at £2,976, 80% of which would be £2,380 – well beyond the reach of many.

Affordable rent was introduced as the grant available for affordable housing development for 2011-15 was halved from its previous level. It allows social housing providers charge up to 80% of market levels, and use the increased rental income to support additional borrowing to compensate for reduced grant.

Housing associations operating in areas with high land and market rental values such as West Hampstead will often have to manage affordable housing developed as part of private developments rather than developing their own – as is happening at West Hampstead Square, for example.

The associations have to cover their costs, so in expensive areas, they may be forced to charge the maximum 80% level, even though that is still a high absolute amount.

What does it mean on the ground?

Camden has changed its affordable housing quota recently. It used to be 50% of floorspace in any development of more than 10 units had to be “affordable housing”. It’s now moved to a sliding scale so 50% of any development of more than 50 units must be affordable, 40% of developments of more than 40 units, and so on.

In terms of the split between the various types of affordable housing, this has changed to 60% social rented and 40% intermediate housing, down from 70/30. This is, says Camden, because it believes that just over half of Camden residents in need of affordable housing could afford intermediate housing.

Further reading

No-one would pretend this was a simple topic to understand, and with national, city and borough policies to take into account, it’s impossible to say “affordable housing = x thousand pounds”.

If you want to delve into more detail, then I suggest
Camden Housing Strategy 2011-16 , which is the most accessible document and sets out more of the context.
Camden’s Planning Guidance goes into more detail
The 2011 London Plan on housing explains the Mayor’s position
Camden Core Strategy CS6 (Housing) is the official policy document

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  • cranky

    Governments should get out of trying to house people. It’s self-defeating and only creates welfare traps. Stop creating poverty ghettos out of a misplaced utopian visions. Get out of the way and let London gentrify.

    • Selfless

      So where do you expect low paid workers to live exactly? Not everyone earns enough to buy or rent privately, especially with all the “posh ghettos” that now exist in the area.

      Perhaps we wouldn’t have “poverty ghettos” if the right to buy didn’t exist, as most of the lovely old council flats spread across the borough wouldn’t now be in private hands. Building new council housing in wealthy areas would also help but instead we consistently see councils selling off publicly owned land to the highest bidder to build posh private developments with no real affordable housing. Why aren’t councils ensuring that a set number of council homes are built on at least part of the land they sell off, that’s the only way you’re going to stop “poverty ghettos”. The way it stand at the moment, the majority of council flats are now on depressing council estates, hence the “poverty ghettos”, as you call them.

      It’s obvious that the only way to stop ghettos being created is to have a good mix of people living together, which is exactly how West Hampstead used to be!

  • Annoyed

    People complain about 14 storey buildings in their area but they also complain about the lack of affordable housing. You can’t have it both ways… price rise is due to a massive supply side problem. If you want to address it, you need to push aside Grade I / II listings, be willing to bulldoze 100+ yr old blocks, and let the city build more housing. Otherwise, 15 people cramming into a 300 sqft studio will become the norm.

    • I think one of the grumbles is precisely that the proposal is a tall block AND no affordable housing. If having affordable housing meant that we had to have a tower more people (not everyone, clearly) would be less opposed to it. But the housing crisis isn’t going to be solved by building more expensive flats that even average earners can’t hope to purchase. Building more housing is great – but it’s the type of housing being built that’s the big issue.

  • Rik

    We have in place a ridiculously complex system caused by years of adding layers and layers without actually fixing the problem. In addition, the new ‘affordable rents’ that HA’s are forced to use to get grants don’t work because they have found that banks will not increase lending based on higher rents after all. So, now HA’s are being forced to take part in the game of building expensive posh flats in order to generate cash to try to build small numbers of social rented and shared ownership properties. So we are seeing a huge increase in properties designed for a very high end market that is mostly living overseas.

    Due to the complexity it is hard for people to campaign and protest against it because it is difficult to fathom in the first place. Good to see this article that is trying to explain the different definitions of ‘affordable’ as there is a lot of misconception around it.

    Surely it will all come crashing down round our heads at some point.