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If you're hoping to buy your first home, you might have come across the term 'affordable housing'. In theory, 'affordable housing' refers to properties that are offered for sale or rent for below their market value - usually as part of a scheme backed by the government or local council.
These initiatives are usually aimed at specific groups of people, such as local residents or those who earn below the national average wage.
But with so many different schemes and eligibility rules, there is some confusion over how the schemes work and who can qualify.
Here, we'll try to demystify the concept of affordable housing and explain how you can get on the property ladder.
Find the right mortgage using the fee-free service provided by L&C Mortgages
Compare mortgagesBroadly speaking, affordable housing schemes aim to make cheaper homes available for people who can't afford to buy or rent at market rates, but the lack of a standard definition of 'affordable' has led to a range of different approaches.
The government says affordable housing should be 'social rented, affordable rented and intermediate housing, provided to specified eligible households whose needs are not met by the market'.
The most recent official data shows that a total of 57,644 affordable homes were provided in 2019-20, with their tenure as follows:
Around 92% of affordable homes provided in 2019-20 were new-builds, and this trend is likely to continue.
In 2021, the government launched its First Homes scheme, offering discounts on new-build properties to first-time buyers in England.
This is part of its Affordable Homes Programme, which will run until 2026. The programme aims to deliver up to 180,000 affordable homes, with two-thirds of funding to be spent on homes outside London.
Affordable housing schemes come in all shapes and sizes, but here is a basic guide to some of the larger offerings.
If you can access an affordable housing scheme, it could help you get on to the property ladder or access more affordable rents.
Home ownership schemes such as First Homes reduce the burden of buying a home by lowering the overall cost, while the likes of shared ownership provide opportunities for buyers with smaller deposits.
On the other hand, the confusion around what is and isn't 'affordable' has provoked criticism, with some campaigners claiming the definitions are not always effective in helping low-income or first-time buyers.
Critics suggest using a housing cost-to-income ratio would be a more effective way of ensuring affordable housing is truly affordable from area to area. As a rough guide, the housing charity Shelter proposes that 'affordable' should classify as no more than 35% of your net household income.
If you do have some money set aside for a deposit, you could consider buying a home using a 95% mortgage, guarantor mortgage or the government's Help to Buy scheme.
Help to Buy equity loans allow buyers to purchase a new-build home with a 5% deposit.
The government provides an equity loan of up to 20% (or 40% inside London), allowing buyers to take out a smaller mortgage.
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