More “affordable” homes but the rents prove unaffordable for many

High Rise-2More affordable housing was delivered in London in the last financial year than for any period dating back to 1991. 17,913 homes were built or acquired and made available in the affordable rental sector, according to data from the Department for Communities and Local Government, and the GLA.

This will be welcome news to many Londoners who struggle to find a suitable place to live against a backdrop of rising private rents and ever climbing property prices. But the increase in delivery is being driven by a particular part of the affordable housing sector and for many it is not really affordable at all.

Affordable rents were previously available through what was termed social housing. This is rented property provided by a council or a housing association with long, secure tenancies and rents at around 50% of the market rates.

Housing associations also provided Intermediate rental. This gives a tenant a subsidised rent, usually around 60% of the market rate, while they save for a deposit to buy the property.

In 2010 the government introduced a new category, which it confusingly called Affordable Rent. This aimed to give social landlords a route to maintaining or increasing the amount of lower cost rental while relying less on public funding. It allows them to charge more and have less restrictive tenancies. Affordable Rent properties can charge up to 80% of the market rate.

As the chart below shows, it is this sector that has taken off in the past year, increasing the amount of affordable housing, but the amount of Social Rent housing has declined sharply since AR was introduced. And this is not due to the building of new stock alone. Some Social Rent property is re-classified as Affordable Rent when it becomes vacant.

Affordable rent

The last time the delivery of affordable housing was at this level was in 2011-12. In that year a comparable number of Intermediate Rent properties was made available. But in 2011-12 there were 11,374 Social Rent homes. Last year there were 3,053.

To examine the impact on monthly rents Urbs looked at the data on market rates for various property types, previously reported here, and applied the Affordable Rent and Social Rent rules. We have used the median London price for each size of property determined by the Valuation Office Agency, which advises the government on property pricing.

Market Rate Affordable Rent (80%) Social Rent (50%)
1 Bedroom £1,155 £924 £577.50
2 Bedroom £1,400 £1,120 £700
3 Bedroom £1,695 £1,356 £847.50
4 Bedroom + £2,500 £2,000 £1,250

A family needing a 3 or 4 bedroom house would require a substantial income to afford an Affordable Rent and in many areas of central London the cost will be much higher.

Some families may be able to claim Housing Benefit to bridge the gap but the Benefit Cap introduced in 2013 means that the total claim for all benefits for a family is £500 a week – the amount needed just for rent of a 4 bedroom house in these calculations.

In its own impact assessment of the policy in 2011 the government acknowledged that the difference between the Social Rent and Affordable Rent would be hard for some to meet and reduce their housing security, or as it put it:

“Although some households are not likely to realise the same degree of benefits as would have been the case had they been allocated a social rented property (e.g. in terms of the introduction of time-limited tenure and potential for higher rents) the policy will also bring substantial advantages to the same type of households by increasing supply”

It says that without the policy there would be far less affordable housing and these people would have to wait for the limited amount of social housing while remaining in private rental properties at higher prices.

It can be argued that the introduction of the Affordable Rent category has addressed a decline in social housing. But the increase in affordable housing may be of little comfort to the least well off for whom an affordable rent of up to 80% of market rate in London is, well, just unaffordable.

Source data

See also

Families face the biggest premiums for renting homes in the capital

Under 40s locked out of housing market destined to be “generation rent”

Renting in London: 2 bedroom homes