How Affordable Housing works

Most affordable housing is provided by Registered Social Landlords (RSLs), often referred to as Housing Associations. It can also be provided by private firms and individuals.

Rented

This is often the only type of accommodation that can be afforded by many people living in a rural community. However, private rented accommodation in a rural community is very limited. The rent that is charged by an RSL is kept by legal restriction to an affordable level.

Shared Ownership

The best way to demonstrate this is by example:

A schoolteacher from the village primary school earns £30,000 a year, and can afford a £90,000 mortgage (3 x salary). The open market value of an affordable 2 bedroom house is £180,000. The teacher owns half the house and pays a social rent on the remaining half to the RSL.

Please note that the owned percentage of a property can be as low as 25%.

Staircasing - this may or may not apply to the agreement but what this means is that in the example above the teacher owns half the house. As their financial position improves they are allowed to purchase further 'chunks' of the house up to a limit (in a rural area this is limited up to a maximum of 80%). The occupant is not allowed to own all the property, otherwise the affordability factor would eventually disappear.

Covenant

The cost of a house is capped at a percentage of its market value. For example, the £180,000 house in the above example is offered for sale by the RSL at 60% of its market value - £108,000. The remaining 40% is written off by 'covenant in perpetuity'. "Who owns the 40%?" you ask. The answer is no-one. In other words the house is sold at 60% of its market value and when re-sold at a later date will again be sold at 60% of its new market value, and so on.

Mixed

As house prices rise, very often there is a need to mix shared ownership and covenant. For example, a £200,000 house has its selling price capped at 70% - £140,000 - it is then sold as a shared ownership property to a local worker who would need to raise a £70,000 mortgage.

It is important to note that in all the above circumstances the affordability is built into the selling agreement in perpetuity. Therefore when the teacher moves, they are required to sell the property under the same circumstances in which they bought it.

Eligibility

To be eligible for affordable housing a person would not be able to afford open market housing.

The person has to be local or with a local connection. Usually this means that the person has lived in the parish for 5 years or more, or originates from the parish and wants to return. If the houses cannot be filled by people from the parish, then applicants from the neighbouring parishes are considered.

Another eligibility factor could also be whether the applicant is a key worker and thereby contributes to the community.

The whole thrust of rural affordable housing is to allow local people to stay in their community and continue to contribute to it.