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What is ‘affordable housing’? - Frequently asked questions

What is meant by the term ‘affordable housing’?

affordable to many local residents.

This is why the Council prefers to use the alternative term ‘genuinely affordable

housing’ to refer to homes which are affordable to residents on low and

medium incomes, whether for rent or sale.

What is meant by ‘genuinely affordable housing’?

One way of defining genuinely affordable is based on the proportion of a household’s income

spent on housing costs. A common measure is that a household should not spend more

Social housing:

● ‘Social Rent’ is considered the most affordable form of social housing. These

properties make up the largest proportion of rented social housing properties. The

rent paid is based in a formula set by government (more information provided within

the glossary below).

● ‘London Affordable Rent’ are usually genuinely affordable to those on low incomes

(though the benefit cap has begun to affect housing affordability for some larger

incomes if rents are set at or near 80% of local market rents.

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Intermediate housing (for sale or rent):

● Shared Ownership has enabled many people on medium incomes to take a first step

on the housing ladder. The share of the home purchased can be as little as 25%,

with a subsidised rent paid on the remaining share. This is often an affordable option

for those not prioritised for social housing but unable to afford to buy outright, though

ensuring the affordability of shared ownership is becoming more challenging in areas

of the borough with especially high house prices.

● there are a range of other housing products that are intended to make house

purchase cheaper, such as Equity Share, Equity Loans, Starter Homes and First

Homes. However, because of very high house prices, in many cases these would still

not reduce the price enough to be genuinely affordable or would not result in any

eligible households due to the household income required to afford the house prices

of these products exceeding the income caps set out in national planning policy.

● Loosely defined ‘sub-market rents’ can be set at any level between social rent and

market rent though, in practice, they are usually closer to market rent and so are

unlikely to be genuinely affordable.

housing is required including the housing mix (such as the amount of 1 bed, 2 bed, 3 bed

homes) within planning applications, however, the requirements must conform to National

Planning Policy and the London Plan. These polices are informed by background evidence

including studies like the Local Housing Needs Assessment which provides information on

what types of overall housing and affordable housing are needed the most, using information

from sources such as the recent census.

By law, the Council’s planning policies for new housing have to comply with national and

London-wide planning guidance. The definition of affordable housing is incorporated in

national planning guidance, and includes social housing let at up to 80% of local market rent

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Is private housing affordable?

Much private housing, both for rent and sale, is unaffordable to residents on low to medium

incomes. House prices in Richmond borough are amongst the highest in the country, and

private rents are also very high. Another useful measure of the affordability of housing is

assessing the lowest earnings against the lowest house prices within a Council area and

comparing this to what would be accepted for a mortgage. Generally, to be accepted for a

mortgage a household can borrow up to 4.5 times their household income. Within Richmond

the ratio is 18.85, the third highest in England, exceeded only by Westminster (19.59) and

have to rent in the private sector. But the private rented sector is also very expensive. This

means that one of the few housing options available to many residents on low and medium

incomes is to live in shared housing in the private rented sector.

What about those receiving benefits?

The government’s welfare reforms have had a serious impact on the ability of many

households receiving benefits to afford housing costs in the borough. The benefit paid to

private tenants – the Local Housing Allowance (LHA) – has been capped and frozen.

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Affordable Housing: Glossary of terms

Under the Government’s definition, “affordable housing includes social rented, affordable

rented and intermediate housing, provided to specified eligible households whose needs are

not met by the market.”

local workers)”, and,

● “it includes provisions to remain at an affordable price for future eligible households,

or for the subsidy to be recycled for alternative affordable housing provision.

A full definition from the NPPF is provided below the table.

The Mayor of London is committed to delivering genuinely affordable housing. Within the

broad NPPF definition of affordable housing, the Mayor’s preferred affordable housing

tenures are:

● London Shared Ownership.

These are described in more detail in the table below.

Affordable housing should be genuinely affordable to households on low and medium

incomes, i.e. as a general rule, that housing costs should not exceed one third of gross

household income or that, for households in receipt of housing benefit, that housing costs

should not exceed the level of benefit received.

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https://www.gov.uk/government/collections/affordable-housing-supply

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https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_da

ta/file/725825/Rent_Standard_2015.pdf

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