What is affordable housing?
Affordable housing is for people whose current housing does not meet their needs or who are a newly forming household, both of whom are either;
- unable to afford to buy a home on the open market, or;
- are looking to rent a home but cannot afford to pay market rents
There are both rental options and low cost home ownership products available in Cheshire West. We have our own development programme and we work closely with housing associations and private developers to make affordable homes available.
The Government’s definition of affordable housing is, ’housing for sale or rent, for those whose needs are not met by the market, (including housing that provides a subsidised route to home ownership and/or is for essential local workers)’.
There are several different types of affordable housing available.
Affordable housing for rent
Affordable homes which are rented are frequently known as “Council housing”, social rented housing, or housing association homes. They are let at least 20% below local market rents (including service charges where applicable) and are generally managed by housing associations (registered providers) or Council's. For example, if the full market rent is £500 per month, eligible affordable housing applicants will pay £400 per month. Some affordable rented homes are let at lower rates than 20%; these are called social rents and tend to apply to older properties.
Affordable or social rented housing is available to any household who has a local connection to the borough and cannot afford to access market housing, regardless of whether you are working. This type of housing is allocated according to housing need, with those whose current housing situation is the most unsuitable, prioritised first.
Shared ownership is a low cost home ownership product, sometimes known as part rent, part buy, shared equity or intermediate affordable housing. You buy a share in your home (for example 25%, 50% or 75%) and then pay a small rent to a housing association on the share that you don’t own. For example, if you were to take out a mortgage to own 75% of the property, the housing association would own the remaining 25%, which you would pay rent towards. Additional shares can be purchased when you are able to afford to do so and this is known as ‘staircasing’. On some schemes you can staircase up so you own 100% of the property and it becomes a market home. You are still responsible for repairs and maintenance of the property – this is not included in the rent.
Shared ownership homes are available to any household who cannot afford to access market housing. Owners are encouraged to purchase the largest share their income/savings allow them to, so they pay less rent. They are a useful option for working households on lower incomes, or those who have been homeowners but no longer have an income to support the purchase or maintenance of a market home and may wish to downsize.
Discounted market sale
Discounted market sale homes are also a low cost home ownership product and are known as intermediate affordable housing. They are often referred to as discounted sale properties and are offered for sale to eligible purchasers at a discount of at least 20% below local market value. In higher value areas this discount may be up to 40% to make them more affordable. For example, a £100,000 house with a 25% discount would be offered to eligible applicants for £75,000. Eligibility is determined with regard to local incomes and local house prices, and frequently households with a local connection to the area are given priority. This is not a shared ownership scheme and even though there is a discount on the sale price, the purchaser owns 100% of the property, with no additional rent to pay.
Discounted market sale properties must remain as affordable homes with no option to convert to a market home, and therefore are not suitable as an investment option for private rent in the future. When you want to sell the property, you must do so on the same terms, which means you must sell it with the same level of discount you received and to someone who meets the criteria for affordable housing. This type of low cost home ownership is most suited to working households or households with some equity who cannot afford a market home, as applicants will need to provide a reasonable deposit towards their purchase.
Applications for discounted market sale properties are made to us. More information can be found on our discounted market sale page.
Starter homes are a new type of affordable housing, proposed by the Government in 2016. As yet there are no starter homes in Cheshire West and Chester as further legislation needs to be passed to set the eligibility criteria. Starter homes are proposed to work similarly to discounted market sale but with a fixed discount of 20% below local market value. However; they are only available for first time buyers who meet the national eligibility criteria. Unlike discounted market sale affordable homes, after a set period of time the starter home converts to a market property and owners can sell or rent out the property without restrictions.
Rent to buy
Rent to buy is a low cost home ownership option which allows households to rent their home from a housing association for a set limited period of time at an affordable rent (80% of a market rent) so they can save for a deposit. The household is then offered the opportunity to purchase the property (at a market value), often with some of the rent they have already paid, being used towards the deposit. Once purchased the property is no longer an affordable home and can be sold or rented without restrictions. If the tenant is unable to purchase at the agreed time, they may not be able to remain in the property as it could be sold as a market home at this point.
Help to buy
Help to buy is a Government loan scheme offering two alternative ways of becoming a home owner, rather than a type of affordable housing. It is only available on market properties for sale and not in conjunction with any of the five options above.
A help to buy equity loan allows people to purchase a new build property with help from the Government. The Government provides an equity loan for up to 20% of the cost of your new home. You will only need a 5% cash deposit and a 75% mortgage to make up the rest.
Alternatively, a help to buy mortgage guarantee scheme is available. This works in the same way as any other mortgage except that the Government offers lenders the option to purchase a guarantee on mortgage loans. Because of this support from the Government, lenders are encouraged to offer better access to low-deposit mortgages, which means you only need a deposit of 5% to qualify.