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West Midlands to overhaul affordable housing definition by linking rent to average salaries
The West Midlands Combined Authority (WMCA) has announced plans to overhaul its definition of affordable housing by linking rents and mortgages to salaries rather than to local house prices and rent rates.
The WMCA said today that homeownership could be in the reach of thousands more people under its new plan, which would ensure local people pay no more than 35% of their salary on mortgages and rents for affordable properties.
The new definition, which has now been accepted by the WMCA’s housing and land board, sets affordable housing rents and mortgages at 35% or less than the average gross earnings of the lowest quarter of wage earners in a local area. The guidelines will be reviewed regularly to make sure prices reflect real incomes of the local areas.
When asked by Inside Housing for data illustrating how many more people this could open up housing to, WMCA said it was not able to provide that exact data yet.
The new definition marks a significant move away from the current definitions of affordable housing being used across the country. Affordable rent is often defined as anything up to 80% of local market rent levels.
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Affordable homeownership usually comes in the form of shared ownership, where residents are required to buy a stake between 25% and 90% of the value of a home and pay a mortgage on their part of the house as well as a reduced rent for the remaining part.
The WMCA hopes that the new definition will encourage new types of affordable housing products to come onto the market, which might benefit key workers such as nurses, police and teachers.
Under the new rule, any development receiving investment from the authority will now need to make a minimum of 20% of the homes on a given development affordable under the new terms.
West Midlands mayor Andy Street, who chairs the WMCA, said: “In recent years would-be homeowners have been forced to stand by and watch as house prices outstrip wages.
“The current ‘affordability’ definition is 80% of market value, which for many people in the West Midlands still leaves homes frustratingly out of reach.
“By linking the definition of affordability to local people’s earnings rather than property, and using this alongside our minimum 20% requirement, we can help make the prospect of homeownership a very real one for many more hard-working individuals and families.
“It also sets out a very clear ambition to developers and partners who want to work with us to deliver homes.”
The West Midlands needs to build 215,000 new homes by 2031 to meet future housing and economic demand.
The authority is currently using a ‘brownfield first’ policy, where funding has been more readily given to schemes being built on former industrial land.
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Inside Housing Development Summit 2020
Inside Housing is pleased to join forces with Homes England and the LGA to introduce the Inside Housing Development Summit.
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