After many people – including West Hampstead Life – made a fuss about the lack of affordable housing provision in the Liddell Road scheme, Camden promised that the 156 West End Lane scheme would meet the 50% affordable housing quota by floorspace.

The development, which was given the go-ahead by the planning committee on Thursday, ended up with 79 affordable flats, or 49.8% of floorspace. Except, you could argue it’s not even that.

Take a deep breath as we dive into the murky waters of what is and isn’t affordable housing – and quite how much money you need to get some for yourself.

First, the good news.

Of those 79 affordable flats, 44 are “affordable rented” (and equate to 30% of total floorspace). According to the planning officer’s report, the rents have been set at Camden’s target social rented rate. In 2014/15, the average cost of Camden council’s housing rent was £475 per month. To give you an idea of how that relates to the local private rental market, one-bed flats in the area on Rightmove start from about £1,250 per month.

You can therefore argue that these rented properties are indeed affordable.

Now the bad news.

The remaining 35 units (20% of total floorspace) are ‘shared ownership’ properties. This still nominally falls under so-called “intermediate” affordable housing. Intermediate includes both affordable rented and shared-ownership but excludes social housing (aka “council houses”), which is a separate category. There is no social housing planned for 156 West End Lane.

How affordable is shared ownership? We looked at the nearby Central development on Iverson Road where a one-bed shared-ownership flat is being marketed.

If you’re not familiar with the concept of shared ownership – as at least a couple of councillors on Thursday night were clearly not – then here’s the primer:

Shared ownership means you take a stake (often 25%) in the property and any mortgage you need is based on that value. You then pay rent on the remaining share (say, 75%) to the housing association that manages the property. There are also service charges. Over time, most people try to increase their stake. The scheme is supposed to be a way to get ownership with much lower financial requirements. Typically a deposit of only 5% is required.

Let’s go back to this Iverson Road property to see what it would cost.

The full market price of the flat is £550,000. A 25% share is £137,500. There’s a required 5% deposit of £6,875.

An “affordable” shared ownership flat on Iverson Road.

Critically, the details specify a minimum household income of £65,000. Shared ownership schemes in London are available to anyone with a household income below £90,000. For this one, you must also be a Camden resident and almost certainly a first-time buyer (the rules here are not black & white).

The median gross income in Camden is £39,610 (higher than the London average of £33,203) [Source].

Therefore, a Camden couple who both earned the average income would have a combined gross income of £79,220, and would be eligible to buy this property. Note that the average London-wide income would only just make them eligible.

They have got their deposit together and need to borrow £130,625. Shared ownership mortgages are a specific product. We have used the Leeds Building Society shared ownership mortgages to calculate the costs.

At current rates, a 3-yr fixed over a 25-year period, reverting to the standard-variable rate after 3 years and with no fees, works out at an overall rate of 5.3%. According to the Moneysavingexpert site, this leads to an average monthly payment of £787.

But remember, that’s just on the 25% you own. Our average Camden couple have then got to pay rent on the remaining 75% and Origin tells us that this is £688/month, plus a £150 monthly service charge.

Total monthly payment: £1,625.

That’s a high monthly payment for a quarter of a flat. There are standard 25-year mortgages available at the moment with representative APRs of 1.5% (they require 20% deposits). Take one of those and you could borrow £400,000 and end up with the same monthly payment of ~£1,600. The cheapest 1-bed flat (not studio) in the area is on for £279,950, but if you wanted that nice Iverson Road flat at market value you’d still need to find a £150,000 deposit on top of your £400k mortgage. The system works therefore at one level – it makes property affordable for people who otherwise couldn’t possibly afford it.

Nevertheless, to get that “affordable” flat in Iverson Road under the shared-ownership scheme, you still need to have a household income equal to two median Camden incomes, and pay out £1,625 a month. For 25% of it. And if you’re wondering, a joint income of £65,000 (assuming you both earned £32,500 each and had no dependents) would place your household in the top 11% of household incomes in the country according to the IFS. Our average Camden couple would be in the top 7%.

The red bar on the right shows a gross household income of £65,000 (net £50,000) relative to national household incomes (based on two adults each earning £32,500).

Is there a solution?
Camden seems to already recognise that affordable renting is far more affordable than shared ownership. According to the 156 report, in April 2016, the council’s cabinet stated that it would “seek to secure affordable intermediate housing… by encouraging all developers and housing associations to provide intermediate rent rather than shared ownership units as the intermediate housing element of their affordable housing contribution to developments’ [our emphasis].

This development was a test of this new strategy but clearly it’s not working.

Indeed, the report for 156 West End Lane suggests that our calculations above could wildly underestimate what a shared ownership flat might cost: “[The] increase in property values has meant that it is no longer possible to deliver shared ownership at a price that is affordable to the council’s target income groups earning £30,000 to £40,000 per year.”

Back to 156 West End Lane. On the basis of what is called “affordable housing”, yes, Camden has delivered 50%. In terms of what a reasonable person might consider to be affordable – perhaps not.

We welcome comments from council officers, or housing associations to correct any assumptions we’ve made here.