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What is "affordable"?

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Published: 10/07/2018   Last Updated: 10/07/2018  
Tags: Blog

What is an affordable rent?

The answer to the question is needed more than ever given most commentators are now saying we are in an affordability crisis.  Deteriorating affordability is a major cause of our growing housing crisis, with an inadequate housing supply coupled with rising demand.  This crisis is further exacerbated by long-term economic and policy changes in our society such as stagnant real term household incomes, 
Universal Credit, and the growth of low paid, part-time and insecure employment leading to a rise in self-employment and people working on zero hours contracts.

The scale of the problem can be evidenced by the lack of any common agreement as to what is an affordable rent: the Government definition is for it be no more than 80% of average local area market rent.  Affordable rents in England were introduced to help fund the building of new homes, by allowing social housing providers to charge higher rents than social rents to enable them to raise the funds to build homes. But, the argument against this is that this definition makes no reference to income. 
Shelter define affordable housing as costing no more than 35% of your household income after tax and benefits, while Manchester Council defines affordable as costing no more in rent or mortgage than 30% of average gross household income.

Also, how should we recognise how people are able to pay their rent?  Ie. the hidden costs. It is well documented that for a lot of people the ability to pay their rent is achieved only through using high cost credit for other expenses or food banks. Does this really mean the rent is affordable?

If we are to include the level of income in any definition, how do we define what the average income is? Is it by local authority area, region or customer base? There are large differences across Greater Manchester in terms of what the percentage is an average household spends of its gross income on rent.  Should we be considering the type of household in any definition of affordability? For example, a 3 bedroom property is the same
LHA rent regardless of whether you are a two parent household both in employment with two children compared to a one unemployed parent with two children.

Given Greater Manchester requires at least 10,000 new homes a year to cope with demand, how will the new build of these homes be funded, if the Government formula for affordable is changed to reflect a greater focus on household income resulting in a potential fall in income to social housing providers.

Everyone agrees we need to re-frame what affordability means including a better understanding of what people in the lowest quartile spend their incomes on e.g. food, fuel and transport which have seen above inflation increases.  It must also recognise the decline of full-time and secure employment being replaced by part-time and zero hours employment.  We have not yet adequately defined what affordability means and it is only by doing this will we be able to start developing an adequate housing strategy for this country.