What is Affordable Housing in the Planning Context?
In previous chapters, we have discussed different approaches to defining affordable housing, particularly in the context of undertaking an assessment of local or regional housing need. Affordable housing has a slightly different meaning than the wider term ‘housing affordability’, which simply describes the relationship between housing costs—rents or mortgage repayments and incomes. The definition of affordable housing is often tied to specific programmes or planning initiatives for delivering new affordable housing opportunities.
Traditional rule of thumb norms commonly used to denote affordability generally refer to the ratio between housing costs and incomes, with 25-30 % being the most common ‘reasonable’ ratio. Exactly what ratio is used may depend on what is counted as part of housing costs and whether income is gross or net of taxes. It also matters where you are in the income distribution; 30 % of very little is very little, and the remaining 70 % is also very little; in other words, your residual income may not be enough to subsist on. Hence, in many instances, eligibility is defined with reference to position in the income spectrum as well as the cost:income ratio. To take one example, according to the ‘30/40 rule’ housing is said to be affordable when rent or mortgage payments account for between 25 and 30 % of household income, across the bottom two-income quintiles. In many cases, the definitions of affordable housing extend to include moderate-income earners—those in the third quintile earning up to 120 % of area median incomes. Thus, affordable housing addresses the needs of households whose incomes are not sufficient to allow them to access appropriate housing in the market without assistance (Milligan et al. 2004). This definition could include traditional forms of public or social housing, which can be supported through specific planning system interventions or exemptions. Many other kinds of affordable housing products may be secured through the planning process, provided that there is a specific planning mechanism or process for encouraging or requiring the affordable housing to be generated, and for monitoring delivery. As noted earlier, these products include housing for a fixed term or secure letting at below market rent, shared home ownership or equity (where an equity partner provides free or subsidised capital to assist a home buyer to access affordable housing); subsidised or discounted home purchase, as well as unsubsidised lower-cost forms of housing delivered through the private market, for example, the so-called Starter Homes in the UK.
Given that planning decisions affect the broad range of housing out- comes—and have a complex relationship to supply and demand factors and to the cyclical and spatial dynamics of housing markets, it is worth considering whether a definition of affordable housing must be linked to a particular model or tenure. Strict legal definitions of affordable housing may be needed in some cases to support specific planning interventions, for instance, to define and enforce developer obligations. However, as the following sections highlight, some fluidity with respect to the types of affordable housing able to be delivered might make planning requirements more palatable to developers and increase the overall yield of affordable homes delivered.