Communities in United Kingdom
Affordable housing
GOOD PRACTICE TITLE: Affordable housing
KIND OF PRACTICE: Housing
DOCUMENT AUTHOR (ORGANIZATION AND AUTHOR NAME): Mary Seacole Housing Association
Lennox Adams
PLACE: Luton
CONTEXT, FIELD OF INTERVENTION:
According to the National Centre for Social Research there is widespread concern about a ‘crisis’ in the affordability of housing in the UK, and particular concern about rising rents in the private rented sector, which now accounts for 19% of households in England. There is currently little consensus about what is actually meant by ‘affordability’ in relation to housing. One problem with the discussion concerning affordability is the lack of a clear, agreed definition of what ‘affordable’ means in an applied sense and how “affordability” should be applied.
The National Centre for Social Research proposed a new residual income approach in an effort to define and measure housing affordability, based on the Minimum Income Standard. Using this minimum income, it is easier to identify the extent of the crisis in affordability in the UK. The approach can also be used to assess the merits of the proposed solution of a ‘Living Rent’, which has been argued for by, amongst others, the Mayor of London. In Luton a local variant is used but since any measure is a variable, the values of “affordability” will vary over time and location. As a result, the “good practice” described here will change as circumstances and costs change.
PERIOD:
2013 to present
POPULATION, PARTICIPANTS:
The population of Luton eligible for affordable rents. These include all the clients at MSHA
COORDINATORS:
Luton Borough Council
METHODOLOGY (HOW THE PRACTICE WORKS):
Luton Borough Council prepared 3 models in which the average cost of a hectare of land in Luton is compared against housing mixtures at:
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35 dwellings per hectare
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50 dwellings per hectare
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60 dwellings per hectare
PARTICIPATORY PROCESS:
MSHA clients were included in the tests of affordability because they completed MSHA’s 3-stage transition programme and had a job. They found accommodation with private landlords and so provided a further comparison with Luton Borough Council tenants.
TIME TO BE SUCCESFUL (HOW MANY TIME THE PRACTICE TAKE TO ACHIEVE THEIR OBJECTIVES):
Not Applicable
VALIDITY (IF THE PARTICIPANTS THINK THAT THE PRACTICE RESOLVED THE PROBLEMATIC):
The validity of each model was tested in terms of what Luton Borough Council could earn from sales of large houses in order to support those who cannot afford the full rents of community housing.
The result, using the model that gave the gest returns, is shown in the table following:
IMPACT:
These figure were considered appropriate for the period 2013-15 but the values in table were far below the commercial rents for those properties. The definition of affordable rent being 60% of commercial rent was realized
INNOVATION:
The innovation that underlies the methodology is the comparison between the land cost (per hectare) and the amount of rent that can be raised from different mixtures of housing types with a given affordability target. The national target for the percentage of affordable homes is 15% for new housing developments. In the graph above this target is just about valid if a different model is used than those tested by Luton Borough Council
RESOURCES OR CONDITIONS NEEDED FOR THE PRACTICE:
The main resource is land that is in Council ownership or joint ventures with private land owners.
LIMITATIONS:
Affordable housing is limited by the strength of market forces. Luton’s proximity to London is resulting in increasing land and housing costs faster than affordable rents can adjust. This means that if the Council sets affordable rents at 60% of commercial rents, then the Council will make a loss on its housing provision. This means the Council will not be able to build new community housing. In 2016, affordable rents was revalued at 80% of commercial rents. This means that affordable rents are becoming too high for poor people to afford.
LEARNED LESSONS: :
The concept of affordable rent as a percentage does not mean the same as the actual amounts of money. Since 2015 Luton Borough Council considers affordability at 60% of commercial rent but the actual monetary vaue for each dwelling is increasing faster than many can afford. This is because of proximity to London. In response to these increases many people on low incomes have been leaving Luton for cheaper locations in Britain.
It is worth noting that all the research and modelling of affordable rents make no mention of homelessness because homeless people cannot afford “affordable rents”
SUSTAINABILITY:
The model described above is only sustainable if land prices and commercial rents remain the same as in 2013. Although the meaning of affordability may remain at 60% of commercial rents, the monetary value will rise as other values rise. Thus, even at 60%, rents may not be affordable.
REPLICABILITY:
The model is replicable but local factors will require considerable adjustments.
CONCLUSION:
Luton Borough Council selected 35 dwelling per hectare as its model for future housing in Luton, of which 15% will be community housing and “affordable” at 60% of commercial rents. This conclusion is true for 2016 but rapidly increasing land and property values, due to proximity to London, are changing the definitions of affordability in Luton.