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What’s really meant by the term ‘affordable housing’?

The main problem with the term ‘affordable housing’ is that one person’s idea of affordability can be very different to another’s, so what does the term actually mean?

Put simply, it can be defined as property that a person on an area’s average wage can afford, but another definition of the level of affordability is given by the housing charity Shelter. They say that affordability is up to 35% of the household income after tax. If rent or mortgage payments are more that 35% of the income, then households may struggle to live and will need to cut back on spending on essentials such as food. If they don’t, they may go into debt.

History of affordable housing

People that cannot afford to buy a house usually rent. Council housing and housing associations traditionally offered properties at low rents to enable people on low wages. The Thatcher government introduced Right to Buy, which meant that people living in council houses could buy them at a discount rate. This made them affordable to many people, but reduced the number of council houses available to rent.

There are still schemes that provide affordable rented accommodation, though supply is limited.

Shared ownership and starter homes

For people wanting to own their own home who cannot afford market prices, there are ways in which they can get on the property ladder.

The Starter Home scheme is a government plan to provide new homes at 20% below the market price for people aged 40 or under.

Shared ownership, meanwhile, means that the household takes out a loan for between 25% and 75% of the value of the house, and rent is paid on the remaining house equity. If the household income rises, a larger share in the house can be purchased.

Shared ownership deals are available on newly built property, or an existing housing association home.

Looking nationwide

Obviously, an affordable house is one that someone can afford to buy, but the actual value of the house will depend on both the household income and the area.

According to the property website Hometrack, in October 2016, the average house price in London was £483,000, which means that residents need to earn 14.1 times the average London wage to obtain a mortgage on a London home. There are some areas in London where houses cost considerably more. In Chelsea, the average house price is £1.97m, and in Belgravia this rises to a staggering £3,400,000.

Meanwhile, in Glasgow, the average house price is £117,100, making it one of the cheapest cities for housing in Britain. You can get a mortgage on the average Glasgow house for 3.7 times the average earnings. In Manchester, the average house price is £148,100, and in Liverpool it stands at £112,700.

There are some areas of the country where housing is even cheaper. In parts of Lancashire like Burnley, you can buy a house for £39,500, while Middlesbrough homes can cost around £39,000.

One solution to affording a house is to move to an area with cheaper housing, but that would mean also finding a new job.

Many people dream of owning their own home but find it a struggle, so it’s not surprising that politicians and property experts say that the country needs many more affordable homes to make their property-owning dream a reality.

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