In his latest conference speech, Mr Cameron has announced a relaxation of current planning laws with a view to increasing home ownership in Britain and shift from ‘generation rent’ to ‘generation buy’. David Cameron’s affordable homes scheme is bad news for generation rent.
Currently, planning rules state that property developers are required to build affordable homes for rent; Cameron plans to scrap these requirements and make it so that developers will have fulfilled their obligations to the council if they build homes for purchase. For the first time, the definition of ‘affordable housing’ will be reformed to include starter-homes for first-time buyers (under 40), not solely to rent.
Under the scheme, houses must be 20% below the market rent and capped at £450,000 inside London and £250,000 outside.
Cameron believes that this reform is in line with what young adults want – “For years politicians have been talking about building what they call affordable homes but the phrase was deceptive. It basically means ones that were only available for rent. What people want are homes they can actually own.”
Young adults nowadays are exhibiting a ‘we buy any home‘ attitude; they are seemingly desperate to get onto the property ladder whatever it takes.
The affordable home scheme, therefore, is fantastic in theory, but is it actually feasible?
Of course, given the option in ideal circumstances, young adults would wish to invest in a property rather than fritter away their pay checks on rent for months on end, with nothing to show for it. But the truth of the matter is, many of these young adults are unable to afford to buy one of these so called ‘affordable’ homes; it seems they aren’t quite what they say on the tin.
These homes are effectively useless to those who are ‘priced-out’, or don’t have a nest egg to pour into a deposit and monthly mortgage payments; at best, the ‘affordable homes’ provide an alternative for those who might have used the existing ‘help to buy scheme’.
Even with the Bank of England’s relatively low mortgage rates resulting in homes being cheap to own, they’re sure as hell not cheap to buy. Raising a deposit when trying to pay bills and keep up with ever rising rent payments is no mean feat. Especially when these deposits are pretty hefty amounts of money; for a £450,000 property in London (affordable homes maximum price) to take out a 95% mortgage you’re looking at a £22,500 deposit – not forgetting stamp duty and other moving charges. Ouch. Not looking so affordable now, eh Mr Cameron?
According to The Housing Charity Shelter, an average earning family will in fact be unable to afford one of these new ‘affordable’ homes, in 58% of the local boroughs. And those on national living wage (newly brought in by Osborne) can forget it – they will be priced out in 98% of the country.
So although on paper the affordable housing scheme appears to be a good idea, it seems the majority of workers, earning average wages, are set to benefit very little. Renters are always going to exist – there are some people who are never going to be able to afford to buy, and telling developers they no longer need to keep rent down can only be bad news for ‘generation rent’.