Is affordable housing affordable?

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One person’s affordable is another person’s pipe dream; Janet Sillett takes a look at a less than straightforward question.

Deputy New York City Mayor Alicia Glen had just begun testifying at a City Council “mandatory inclusionary housing” program hearing when a barrage of catcalls erupted. “De Blasio’s plan ain’t affordable to me!” the hecklers shouted…

(from Gothamist a website about New York)

So what do we actually mean by affordable housing? Sounds an easy question but it is a highly contentious one.

John Bibby writing for Shelter’s blog puts it like this:

“Fundamentally, there are two ways to answer the question ‘what is affordability?’: one focuses on the person and what they can afford to pay for their housing and the other focuses on the home and what type (or tenure) of home it is. Both are right. Or at least, both tell part of the truth. But depending on the way they’re used, they can also either be contradictory or aligned”.

Under the legal definition, Affordable Housing doesn’t directly take into account what the person occupying the home can actually afford to pay, given their income and dependants. It focuses on what type or tenure the home is. It basically defines Affordable Housing as any home that is not private market housing, i.e. not a home bought privately or a home that’s rented from a private landlord, and includes lots of schemes, like shared ownership, intermediate rent (80 per cent of market rent) and, of course, social rented housing.

How the government defines affordable housing and what is included in the definition is clearly crucial. This was reflected during the passage of the Housing and Planning Act over what counts as affordable housing. One in five properties in new residential developments should now be starter homes, made available to qualifying first-time buyers under the age of 40 for at least 20 per cent less than market value.

The 2016 Act amends the definition of affordable housing to include starter homes. Seems like a positive way forward? But there has been plenty of criticism of it. Jo McCafferty, for example, director at Levitt Bernstein, said that while the idea of discounted starter homes for first-time buyers was a good one, “if they are swept into the definition of ‘affordable housing’ in the way that the government intends, they will undoubtedly replace affordable rented housing.” John Healey, Shadow Housing Minister, has said the legislation is “extreme and entirely unbalanced”, and that starter homes will lead to a “huge public subsidy” and “choke off other types of housing” and “still be out of reach for most people on ordinary incomes”. The Act doesn’t provide clarity over whether the delivery of 20 per cent starter homes will take precedence over the delivery of other forms of ‘traditional’ or other affordable housing in the application of Local Plan policies to housing proposals – we await the secondary legislation with interest.

Will Housing Grant to build affordable homes (which has been reduced anyway) be increasingly going to subsidise affordable housing that is actually only affordable to a small section of the population. House prices increased by 8.4 per cent between August 2015 and August 2016. The average price is highest in London at roughly £489,000. The lowest prices are found in Northern Ireland and the North East at £123,000 and £127,000. But analysis carried out by Savills found that a couple on average salaries would struggle to buy a home at a 20 per cent discount in almost half of all council areas in England.

Is the UK unique in not being clear about meanings? No, we are not. We share this with, for example, Ireland and the States. Being in New York recently made me think about these issues. How do we categorise affordability? Who should be eligible for affordable housing and how can we ensure new housing provides a quota of genuinely affordable housing to people in our communities who cannot afford market rents or average mortgages?

The hearing quoted above was about Mayor Bill de Blasio’s “mandatory inclusionary housing” program. The plan would rezone several city neighborhoods so developers can build taller buildings, and require them to rent 25 per cent to 30 per cent of the apartments for less than market rate.

This is the first time New York developers would be required to include affordable housing. Yet critics say the plan will yield a grossly inadequate amount of housing for people who make less than $40,000 a year—the people who need it most. The dilemma, according to the administration, is that if the percentage of lower-cost is set too high or rents are set too low, developers simply won’t build, and “30 per cent of zero is zero.”

Two alternative proposals came from the Real Affordability for All coalition, one requiring 50 per cent of housing built to be affordable for people at or below the neighbourhood median income, and the Association for Neighborhood Housing Development, which wanted 15 per cent reserved for people making less than $23,000.

Both sides agree on the need but disagree sharply on the means. The council relies on leveraging the market, even if it means the homes won’t be affordable to many on low incomes. Others want much greater state support. And this is, of course, an issue for the UK and Ireland too and one where there is little consensus.

What should local government in England be calling for to ease what is a housing crisis in some parts of the country? The autumn statement later this month gives the government an opportunity to abandon the cap on the money local authorities can borrow to build social housing. This would increase the numbers of new homes and mean more genuinely affordable housing for rent and sale. What else? Devolution can present opportunities too – the new combined authorities could, for example, be given more powers over housing which could reflect different local circumstances and ensure that subsidy goes where it is needed most.

We do need a mix of housing types and tenures, but the system is clearly skewed currently in favour of owner occupation, and the definition of affordable housing seems pretty stretched. What we mean by the term affordable housing is not just semantics, as the hecklers in the New York hearing clearly illustrated.

Janet Sillett is the LGiU’s head of briefings.

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