Interested in becoming a social landlord? Or maybe you’re a DSS tenant searching for a more affordable abode? Whatever your reason for being interested in the way social housing rent is calculated, we have all the information and advice to answer your questions. However, before we take a look at how social housing rent is determined, we describe what social housing is and why it’s a more affordable housing option.
What is social housing?
Social housing is a more affordable alternative to private renting and can be provided to eligible households by any landlord (known as a social landlord) that’s registered with the social housing regulator. Often, a social landlord will be your local council or Housing Association which is why social housing is sometimes referred to as council housing.
There are also different types of social housing tenancies that can help to provide a sense of social, as well as financial, stability. An assured tenancy, for example, allows tenants to live in their home for the rest of their life, providing peace of mind that they have a secure and affordable home – something that private renting can’t guarantee. Other types of social housing tenancy include starter and fixed-term tenancies.
Not to mention, social housing is also more accommodating to those with mental or physical disabilities like elderly persons that require accessible living space. This type of housing is therefore often adapted to meet their specific mental or physical requirements, but at what price? Below, we explore how much you can expect to pay for social housing and how social housing rent is calculated.
How to calculate social housing rent
Unlike private rented housing where the prices are generally fixed by landlords, social housing is more affordable because landlords don’t set the prices. The Government does. According to the official consultation paper ‘Rents for social housing from 2020-21’, “‘social housing’ comprises low-cost rental accommodation (e.g. homes let at social rent or affordable rent) and low-cost home ownership accommodation (e.g. shared ownership homes)”.
Ultimately, this provides social housing tenants with the opportunity to either rent or buy their own property in a financially viable way, but how low is the ‘low cost’ of social housing? Typically, social housing rent is anywhere between 50 and 60 per cent of the private market rent, making it a more affordable avenue of rental housing to explore.
To accurately calculate the rent for social housing (also referred to as social rent), the Government uses a set formula that can be applied to any given property. It takes into consideration the size, location and relative value of the property, as well as local income levels, to produce a ‘formula rent’. This formula also applies a weighting based on the number of bedrooms so that properties with a smaller number of bedrooms can enjoy lower rents.
Once formula rents have been calculated, landlords have flexibility to increase rents by up to five per cent. This is intended to grant them discretion when dealing with local factors. For supported housing, the flexibility is up to 10 per cent above formula rent.
However, to prevent social landlords from raising these prices too high, social housing rent is restricted by rent caps that apply a limit on social rents.
For example, a three-bed property on the private rental market may achieve a monthly rental income of £1000.
A similar property available for social housing, however, would therefore cost in the region of £500-£600 per month – providing the tenant(s) with a considerable saving. Even with the additional flexibility landlords can apply to raise this amount, the tenant would still stand to save anywhere between 30 and 45 per cent on their rent based on the above figures.
If you’re interested in applying for social housing or want to find out whether you’re eligible, you should check out your local council’s allocation scheme rules and regulations. Alternatively, you can always get in touch with a DSS-friendly estate agent like Pick My Pad to find out more information. Offering unmissable opportunities for landlords and tenants alike, we’re just a phone call or an email away!
Get in touch today!
If you’re searching for a DSS-friendly home or a property investment opportunity in the Walkden, Salford or Greater Manchester area, we can help. The knowledgeable team at Pick My Pad has decades of valuable experience and plenty of local expertise to ensure both DSS and no-income tenants have access to accurate, free and no-obligation advice.
To help our clients find the perfect home within their budget and in an ideal location in the North West, we have dedicated teams for selling, buying and letting properties. Regardless of whether you’re looking for a property close to the best schools or one conveniently located on the doorstep of public transport routes, our bespoke service aims to match your housing requirements to your ideal abode.
For more information regarding our DSS-friendly properties, feel free to get in touch. You can either give us a call on 01617903999 or fill in our online contact form to discuss your housing preferences with one of our friendly and professional team members.
However you decide to reach out, we’ll be in touch shortly to help find the right property for your family.
Eager to put down roots and buy your own home, but unsure whether you have the funds to support your dreams? If you’re still wondering what property you could afford to purchase in the UK, you’ve come to the right place.
Here, we’ll explore how far your house-buying budget can stretch based on your annual income and savings.
As reported by the BBC, Nationwide has confirmed that UK house prices are at a 17-year high! Coupled with soaring inflation, ever-rising energy prices and increasing interest rates, it’s no wonder many potential homeowners are wondering whether they can afford to buy a home right now.
Can I afford to buy a home?
When it comes to buying a home, many UK citizens won’t have the full funds to meet the average (as of January 2022) £274,000 house asking price in their bank account: this is where mortgage lenders come in.
Instead of saving up hundreds of thousands of pounds and living off beans on toast for five years, a mortgage lender will often lend up to five times a borrower’s income to help them purchase a home.
As long as you can meet the mortgage lender’s affordability criteria, which takes into consideration your committed expenditure and bills as well as your income, you will only need a deposit to secure your new home. Depending on the amount you are allowed to borrow, house deposits are typically 10% of the property purchase price.
For example, if you had your heart set on a property with a purchase price of £150,000, you would be required to provide a deposit of at least £15,000. Your mortgage lender would therefore need to provide you with (at least) the remaining £135,000 that you would then typically pay back in monthly instalments over a 25 to 35-year period.
What house can I afford on 30k+ a year?
Lenders will often allow you to borrow up to four times your income. So, if you earn £30,000 a year, you may be offered up to £120,000. However, this will depend on whether you meet other requirements of their affordability criteria to assess your ability to make the required monthly repayments. Paired with a 10% deposit of £12,000, individuals earning an annual income of £30,000 should be able to afford properties with an asking price of up to £132,000.
What house can I afford on 20k+ a year?
Following the same principle, those with an annual income of £20,000 can expect to be offered around £80,000 to buy their home. However, with average UK house prices continuing to rise, you might be wondering ‘how much house can I afford?’ with just £80,000 and unfortunately, the answer is that your options are limited.
What house can I afford on less than 20k a year?
Similar to those earning £20,000 a year, those earning less than this figure may find it even more difficult to purchase a property. For example, those with an annual income of £18,000 will only be able to borrow up to £72,000. With the lowest average house prices being £150,787 in the North East, buying a suitable property as individual on 20k or less a year isn’t easy.
However, you can apply for a joint mortgage with a partner or family member to boost your application’s chances of success. If they earn a similar annual salary, you could potentially double the amount of money that a mortgage lender is willing to offer you, allowing you to purchase more expensive or suitable properties.
How do you buy a house with a low income?
If a joint mortgage isn’t an option, but you still need affordable housing, there are several affordable home ownership schemes offered by the Government that you can explore: this includes loans for new-build homes if you’re a first-time buyer and shared ownership.
If you’re eligible to receive an equity loan for a new-build home, you’ll be required to pay at least a 5% deposit of the property purchase price and arrange a repayment mortgage of at least 25%. This equity loan can cover anywhere from just 5% up to a more substantial 20% of the property purchase price. For London properties, this percentage is increased up to 40%.
Shared ownership, on the other hand, is ideal if you can’t afford the deposit or mortgage repayments for a suitable home. Instead of purchasing the full property, you’ll be able to purchase a certain percentage share of the property (often 25%, 50% or 75%) while paying rent to the landlord on the rest.
Begin the search for your new home
Now you have an idea of what house you can afford based on your income and the current help-to-buy schemes offered by the Government, you’re ready to begin your property search – exciting!
Luckily, we’ve made shopping around online for your new home effortless thanks to our handy search filters. Alongside filtering our available properties for purchase by location, you can also set the minimum price and maximum price to ensure you’re only shown properties within your budget.
Offering everything from trendy apartments to sprawling family homes, Pick My Pad have something to suit every potential homeowner. Explore our impressive selection of properties for sale today.
Searching for a new home, but struggling to see past the mammoth price tag of the monthly rent?
Perhaps your family has quickly outgrown your current abode, you’re being driven out by poor living conditions or you simply can’t afford to rent privately anymore. Whatever your situation, social housing could be the solution you’re looking for.
If you’re put off by complicated Government terminology and housing jargon, then don’t worry. We use easily understandable terms to clear up any confusion you might have around social housing, helping you to make sense of this potentially complex topic.
In this ultimate guide to social housing, we explore the definition of social housing, how it was created, why it’s important and, perhaps most importantly, who is eligible for it. Plus, we also unpick the difference between social housing, council housing and affordable housing to help you decide which option is right for your family.
With all of this vital information at your disposal, we hope that you’ll be able to make a more informed housing decision. Join us to discover how social housing can offer eligible households both financial and social security today.
What does social housing mean in the UK?
Social housing can differ from country to country, so it’s important to uncover what it means for UK citizens. So, what is social housing in the UK and how could it help you? Let’s find out!
Defined as lower-cost rented housing, social housing can be provided by any landlord that is registered with the social housing regulator. Known as social landlords, typically the landlord of social housing will be your local council or housing association.
As well as being far more affordable than private rented housing, social housing also gives tenants a sense of security by offering both greater financial and social stability. Some tenants may even secure an assured tenancy which allows them to live in their home for the rest of their life.
Not to mention, social housing is particularly useful for those who require more accessible accommodation. For example, people with a mental or physical disability or elderly persons, because council housing is often well-adapted to meet their specific needs.
Why does social housing exist?
While social housing has been around since the late 19th century, the first real plan to actually build social housing was embarked upon in 1919. It came as part and parcel with the Government-led Housing and Town Planning Act which aimed to provide government subsidies to finance the creation of half a million homes in just three years.
Despite these efforts, the UK economy suffered in the early 1920s which led to substantial funding cuts. As a result, less than half of the promised number of homes were constructed in this three-year period.
However, the incredible surge in demand for social housing couldn’t be ignored after the Second World War.
During this period, the Government struggled to prevent the poor conditions of private rented accommodation and was faced with a rising demand for housing from returning soldiers.
As a result, a push for better social housing occurred in 1930 and was spear-headed by Ramsay MacDonald’s Labour government to clear out private slums and provide good-quality homes for those in need.
Wildly-successful, social housing provided a certain standard of living and dignity that private renting could not for millions of ordinary people.
Nowadays, Government-mandated social housing provides an alternative to the often unaffordable private market for both prospective tenants and buyers alike. Social housing therefore helps the Government to deliver on their aim to provide access for these households to a good-quality and affordable home where the private market cannot.
Why is social housing important?
With several other schemes from the Government’s Affordable Homes Programme also offering more affordable routes to both buying and selling property, social housing may not seem vital. However, according to the Regulator of Social Housing, this sector already provides 4.4 million homes across England as of March 31 2021.
Even though social housing makes up a significant proportion of properties in the UK, there’s still a substantial demand for safe, good-quality and affordable homes, but why? With soaring private rental prices and record UK home prices, finding an affordable home privately has become near impossible for low-income households in particular.
This is clearly demonstrated by the considerable social housing waiting lists and mounting research conducted by the homelessness charity, Shelter. It found that a massive 17.5 million people currently live in unstable, unaffordable or even dangerous housing. Subsequently, it has described this ‘the housing emergency’ and is on a mission to highlight the ever-increasing need for safe, affordable and stable housing.
Stable (or even increased) funding for social housing is therefore vital in helping to tackle this housing emergency.
What is the difference between social housing and council housing?
Social housing and council housing are similar – more so than affordable housing and social housing.
While it would seem logical that council housing is provided by councils and social housing is offered by housing associations, this is not always the case because the latter can also be offered by councils.
The key difference will be the type of tenancy agreement you choose to sign and the resulting rights you have to the property. As council housing is designated to those in most need, it is typically prioritised for those with dependent children, people with physical or mental disabilities, those who have been an institution, the armed forces or care, as well as families with a pregnant individual.
While this is not an exhaustive list of those who qualify for council housing, they are generally classified as those with the ‘highest housing need’. For those who do not qualify for council housing but still require a degree of support, social housing is the next best thing.
Who qualifies for social housing UK?
Unfortunately, no one has the right to social housing, and as the demand often outweighs the number of homes that councils and housing associations have to offer, there are some restrictions on who can apply.
Legally, applications can be taken from any British citizen who is living and settled in the UK aged 18 or above as well as citizens from other countries that have the right to stay in the UK for an unlimited period. However, a low income, limited savings and a local connection are all factors that can increase your chance of successfully securing social housing in the UK.
There are also three criteria in particular that will dramatically increase your chances of being accepted for social housing. This includes;
Being homeless
Living in cramped accommodation
Suffering from a medical condition as a result of your current dwelling
Even if the above criteria do not apply to yourself or any member of your household, but you still have a low income and require more affordable, secure housing, it’s well worth applying. This is because local councils will have their own set of rules on who can apply and who should be given priority – this is called an ‘allocation scheme’.
To find your local allocation scheme rules and regulations, you can either contact your local council directly or look online. Not to mention, if you are rejected but still believe your application for social housing should have been accepted, then you can ask for a review to be put on their waiting list or be given higher priority.
How to apply for social housing
In order to apply for social housing in the UK, you should contact your local council or housing association. At this point, you’ll be added to a waiting list. Unfortunately, there’s no telling how long you may have to wait for a suitable property to become available, especially if you have specific requirements that need to be met. For example, if you have several children, you may require a larger house with more bedrooms.
It’s well worth noting that you can apply for social housing from several different housing associations at the same time to potentially help reduce your waiting time. However, it’s important to understand that no applicant is guaranteed to get a property and if you are accepted and you refuse a suitable home, the social landlord could refuse to find you another.
What are the different types of social housing tenancy?
There are three different types of social housing tenancy in the UK. If your application is accepted, you’re likely to be offered a starter tenancy to begin with. Think of this tenancy like a probation or trial period that typically lasts for 12 months.
After a year, your type of tenancy will either change to an assured tenancy or a fixed-term tenancy unless your housing association or local council has chosen to extend your start tenancy or evict you.
An assured tenancy generally means you’re allowed to live in the property for the rest of your life whereas a fixed-term tenancy (as suggested by the name) lasts a certain period – often five years. Your social landlord will determine whether your tenancy is renewed at the end of this period.
Is affordable housing the same as social housing UK?
No, affordable housing and social housing are totally separate. While both types of housing are cheaper than market level, this is where the similarities end.
To be exact, affordable housing is defined as “housing for sale or rent, for those whose needs are not met by the market (including housing that provides a subsidised route to home ownership and/or is for essential local workers)” as laid out in Annex 2 of the National Planning Policy Framework.
While social housing also provides housing for those whose needs are not met by the market, this type of housing is prioritised for those who are in most need. As outlined in the previous section, this commonly includes those with disabilities, children or no home. Plus, social housing is considerably cheaper than affordable housing.
In simplistic terms, affordable housing with regards to rent is set at 80% of the average local market rent. Social housing, on the other hand, is set at around 50% of the average local market rent, making this type of housing much more affordable for households with a lower income.
If you’re in need of expert advice when it comes to finding affordable housing at no extra cost, Pick My Pad has you covered. A valuable part of the Mistoria Group, we are able to provide specialist guidance and help in practically any property-related service you may require.
Contact us at Pick My Pad
Looking to put down roots in the Greater Manchester area? Pick My Pad is on hand to help. With decades of combined experience, our team specialise in providing free, no-obligation advice for both DSS and no-income tenants.
Boasting dedicated teams for letting, selling and buying properties, we’re experts when it comes to finding affordable properties for our clients. Having built a considerable base of local knowledge including detailed information about the best schools and crucial transport links, we offer a bespoke service to ensure we provide the best service for every client.
To discuss your housing requirements, please give us call on 01617903999 where you’ll be directed to one of our friendly and experienced team members. Alternatively, you can also contact us online where we’ll be in touch shortly. You’re just a call away from discovering your perfect home.
With the terrible trio of sky-rocketing utility bills, stagnant wages and the soaring cost of living continuing to tighten their grip around households across the UK, affordable housing couldn’t be more relevant right now.
While affordable housing may seem like a fairly self-explanatory phrase, it actually covers an extensive range of property schemes and isn’t as cut and dried as it may first appear. So, what is affordable housing in the UK and could you stand to benefit?
Below, we take a deep dive into the subject of affordable housing to help demystify what is a potentially overwhelming topic. From the exact definition of affordable housing to who can qualify for Government-led affordable housing schemes, we leave no stone unturned.
What does ‘affordable housing’ mean?
According to Annex 2 of the National Planning Policy Framework, affordable housing is regarded as “housing for sale or rent, for those whose needs are not met by the market (including housing that provides a subsidised route to home ownership and/or is for essential local workers).”
This detailed definition is subject to complying with one of the four following definitions of either; affordable housing for rent, starter homes, discounted market sales housing, or other affordable routes to home ownership.
Put simply, affordable housing in the UK refers to housing that has been deemed ‘affordable’ by the Government according to the above definition that was most recently updated in November 2021.
While ‘affordable’ is a relative term, the Government has used the below definitions to clarify the meaning of affordable housing for renting, as well as for shared ownership and full ownership.
As reported by the BBC, in order for a rented property to be considered affordable it must cost no more than 80% of the average local market rent. This provides prospective tenants with much more affordable options than those that are currently available to them via the private rental market.
What about affordable housing for home ownership? The Government definition of affordable housing for home-owners is housing that is provided where the mortgage payments on the property are greater than council housing rent, but below market levels, creating an affordable middle ground.
How do you qualify for affordable housing?
Typically, you can qualify for affordable housing if your household income is at or below the median as dictated by a recognised housing affordability index. There are a number of various housing affordability indexes, each one measuring the ability of an average person to purchase a particular item; in this case, a house. Naturally, this median value will vary from region to region, providing a good indication of whether a household can afford a home in a certain location.
A good guide for determining whether or not you’re eligible for affordable housing is if you can afford to rent or buy housing privately. If you cannot afford private housing, the likelihood is you’ll be eligible for affordable housing. Most commonly, affordable housing schemes are aimed at certain groups of people, for example, local residents that earn less than the national average wage.
Currently, the Government is running an Affordable Homes Programme that started in 2021 and will continue until 2026. Ultimately, this programme provides grant funding to support the costs of developing affordable properties for both rent and sale.
With the aim of providing 180,000 affordable homes by the end of the scheme, it has created two affordable rental routes and four affordable home ownership schemes. Below, we take a look at some of the most popular.
Renting property: social rent and affordable rent
There are two types of rent that are more affordable than properties on the private market. They are social rent and affordable rent. While affordable rent (also known as intermediate rent) is simply homes let at 80% of the local market rent for an equivalent home, social housing refers to homes that are let by a registered provider or local authority for significantly below market rent.
The only issue with social housing is that not everyone is eligible for this scheme because these homes are prioritised according to need. As such, affordable housing is the next best thing. If your application is successful, households will have the opportunity to save money for a deposit thanks to these decreased monthly rent payments.
Buying property: First Homes and shared ownership schemes
Within the Affordable Homes Programme, the Government also offers a First Homes scheme that provides discounts on new-build properties for eligible first-time buyers. Through this scheme, successful applicants can snap up one of these first homes with a discount of at least 30% against their market value, providing them with full ownership at a decreased price tag.
Exclusively available to first-time buyers with a household income of £80,000 or less (£90,000 or less in Greater London), this scheme acts as a fantastic step onto the property ladder. It’s worth noting the home ownership schemes like First Homes lower the overall cost of the property for sale, while shared ownership schemes are more suitable for buyers with smaller deposits.
Shared ownership allows eligible households to purchase a certain percentage of a home (commonly 25%, 50% or 75%) and pay rent on the remaining share. The minimum share for purchase is just 10%, so there are plenty of opportunities to purchase your own home regardless of your deposit amount.
If you’re looking for more affordable rent with a view to buy, rent to buy schemes are also available which allow working households to pay discounted rent (set at or below 80% of the market value) for at least five years. During this time, the tenants have the opportunity to save and put this sum towards a deposit.
Is affordable housing good?
Pros of affordable housing
As explored above, affordable housing schemes can give eligible households a boost onto the property ladder. Regardless of whether they’re ready to buy or need more affordable rent for a few years to save a deposit in the meantime, affordable housing can be a lifeline for these households.
A massive pro of affordable housing for prospective homeowners is that it can help first time buyers to actually own their first home without spending more in the long run on renting a property. Plus, more affordable rented housing can also support many low-income households by providing them with quality housing for a better price, allowing them to save for the future.
Cons of affordable housing
Sadly, there’s no consensus on the exact definition of ‘affordable housing’. Due to the subjective nature of the word ‘affordable’, many organisations disagree with the Government’s definition of affordable housing. As a result, this had led to criticism of what is actually affordable for both low-income households and first-time buyers alike.
By way of illustrating, the homelessness charity, Shelter, puts forward its own definition of ‘affordable’ housing – 35% of a household’s net income (this is the income after tax and benefits). This definition uses a housing cost-to-income ratio instead of using the market value to deem which properties are affordable on a case-by-case basis.
Shelter adds that the average amount private renters can expect to spend on their rent is 47% of their net income – a substantial 17% extra than their proposed definition of affordable housing. This leads us to the conclusion that although affordable housing certainly gives prospective tenants and buyers support on their hunt for more cost-effective accommodation, there is room for improvement.
By ensuring property prices aren’t just cheaper than market value but actually take into consideration the net income of households, the Government can provide real, affordable housing. Ultimately, this will not only allow eligible households to consistently pay the rent or mortgage without falling into debt or arrears, but it’ll also allow them to achieve a good standard of living.
Why is affordable housing needed?
According to data provided by the popular property portal, Rightmove, average house prices saw a mammoth 10.4% annual price growth in March 2022 – the highest in eight years! This has led to record UK home prices with the average British home now costing a whopping £354,564.
Coupled with private rents ‘rising at the fastest rate in five years’ (as reported by the Guardian), first-time buyers are not only struggling to afford private rent, but are also unable to step foot onto the property ladder as they can’t save a decent deposit.
This is where social rent, affordable rent, and the Government’s home ownership schemes come into play to make renting more feasible for low-income households and buying property a real option for first-time buyers. Affordable housing has also been linked to both reducing stress and combating infectious diseases, improving a household’s overall mental and physical health.
Not to mention, affordable housing provides families with the opportunity to allocate more funds to cover other household essentials such as rising utility bills and their monthly food shop. The rising cost of living paired with a desire to ‘put down some roots’ has led to an ever-increasing demand for affordable housing because it offers both social and financial stability.
Do developers have to provide affordable housing?
Yes, property developers are bound by Government policies and quotas from the local authorities when it comes to the amount of affordable housing they need to provide. However, they can use a viability assessment to prove that their profits could be slashed by 20% if they were to follow these quotas, leading councils to reduce the number of affordable homes they are required to build.
Despite this loophole, according to official statistics as reported by Which?, a grand total of 57,644 affordable homes were provided in 2019-20. The split between affordable homes to buy and affordable homes to let was fairly equal with 24,551 affordable rented homes being created and 23,122 shared ownership properties being provided.
How much is affordable housing per development?
With the highest proportion of affordable housing being made up of new builds, it’s paramount that there are set levels of affordable housing developers must abide by. Typically, councils in the UK insist that at least 25% of new dwellings in developments should be affordable. However, this percentage can rise up to a significant 40% to cater to greater demand for affordable housing according to the area.
With a considerable proportion of new build developments consisting of affordable housing, there is a glimmer of hope for tenants stuck in unaffordable rental properties as well as first-time buyers struggling to pull a deposit together. Luckily, the team at Pick My Pad is just a phone call away if you require more information regarding affordable housing.
Get in touch with Pick My Pad
For reliable, expert advice when it comes to both selling and buying property or renting houses in the North West, look no further than Pick My Pad. We have invaluable experience when it comes to helping our clients find affordable properties. We even offer DSS and no-income tenants free, no-obligation advice and services.
Part of the Mistoria Group, we have a wealth of local area knowledge that includes in-depth information about great schools as well as vital transport links. By offering a bespoke service for each and every one of our clients, we take into account the unique needs of your household to unearth the perfect pad for your family.
You can either call us today on 01617903999 to speak to one of our friendly staff members and discuss your housing requirements or contact us online. However you choose to get in touch, we’re here to help.
