Expert View: What is affordable housing?

Alastair Woodgate, Rumball Sedgwick

Alastair Woodgate, Rumball Sedgwick - Credit: Archant

Alastair Woodgate, of leading local chartered surveyors, Rumball Sedgwick, looks at what ‘affordable housing’ really means and considers the difference between ‘affordable’ and ‘social’ housing.

In addition to a housing supply crisis, there is a crisis of affordability in our district. The average house price in our area is some 18 times higher than average earnings. Home ownership has become increasingly difficult to access, particularly for first-time buyers.

The housing charity Shelter suggests that the term ‘affordable’ should classify as no more than 35 per cent of one’s net household income. Affordable housing schemes aim to make homes available for people who can’t afford to buy or rent at market rates. But there is much ambiguity and confusion in the way the term “affordable” is used.

“Affordable” is the umbrella term. The government defines “affordable housing” as “social rented, affordable rented and intermediate housing, provided to specified eligible households whose needs are not met by the market.” It should include provisions to remain at an affordable price for future eligible households or for the subsidy to be recycled for alternative affordable housing provision.

Affordable Rented Housing merely means a rent that is no more than 80 per cent of the local market rent (including service charges, where applicable). But 80 per cent of a market rent in our district remains unaffordable for many.

Social Rented Housing is owned and managed by either local authorities or registered providers, usually Housing Associations. They charge a rent set by government guidelines through the national rent regime.

Social rented housing is cheaper to rent than affordable rented housing and usually provides a longer-term tenancy, with certain rights of succession. ‘Right to Buy’ schemes give some tenants who have lived in a council or housing association home for a number of years the right to buy their home at a discount.

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Intermediate Housing describes a range of homes for sale and rent provided at a cost above social rent, but below market levels, subject to the affordable housing definition. This can include intermediate rent (but not affordable rent), shared ownership and shared equity.

With Shared Ownership you will typically buy and mortgage a share of the property from a housing association. The association keeps the remaining share and you pay rent on this, as you would to any other landlord. The share for sale starts at around 25 per cent of the property’s market value, with the ability to purchase additional shares over time, known as ‘staircasing’. To qualify for shared ownership, the total household income must be under £60,000 a year.

With Shared Equity, generally provided by house builders, you purchase and legally own all of the property. However, the deposit comprises a generally sizable equity loan making up the difference between the mortgage and purchase price.

If you’ve seen references to ‘low cost market housing’ this doesn’t meet the government’s definition and is not considered as affordable housing for planning purposes.

For all your property related questions, contact Alastair and his team at