David Cameron and the £720,000 ‘affordable’ home

A comment on my blog a couple of weeks ago alerted me to a contradiction in terms: a £720,000 ‘affordable’ home.

The two-bedroom flat in Pear Tree Street, Islington appears on the Share to Buy website, the official home of the Mayor of London’s FirstSteps scheme that comes complete with the strapline ‘making housing affordable’. It’s available under a shared ownership, part-rent, part-buy scheme. As Tracy Dover commented: ‘I’d love to know who is eligible for shared ownership and can afford this!’

It can be yours for a £9,000 deposit plus monthly payments of £2,444 for rent, service charge and mortgage. By my calculations that represents around half the take-home pay of a household with the maximum eligible income of £80,000.

I’ve mentioned it in tweets and blogs a few times since including a post on Wednesday about Southwark and its ‘£3 million council house‘. At Neo Bankside, an ‘iconic’ new development next to Tate Modern, the council rejected the idea of ‘affordable’ homes on site because they would only have been affordable on a household income of £90,000. It took a £10 million contribution instead to fund 170 council homes elsewhere. The same dilemma about maintaining affordability or maintaining mixed communities exists all over London.

Just as I was posting that, the local MP was raising the £720,000 affordable home at Prime Minister’s Questions:

Emily Thornberry (Islington South and Finsbury) (Lab): A new flat has just been launched in my constituency, which has been built partly as a result of public money under the Government’s affordable housing scheme, known as Share to Buy. It is a two-bedroom flat in Pear Tree court and it costs £720,000. Does the Prime Minister believe that to be affordable and, if so, to whom?

There are many things David Cameron could have said here. ‘No, it doesn’t sound very affordable to me’ was one option, however unlikely. A more promising line might have been a reference to the way that average house prices in her Islington constituency more than trebled under the last Labour government. The definition of ‘affordable’ was being stretched to breaking point well before May 2010. Instead this is what he had to say:

The Prime Minister: We need to build more houses in our country and that is why we are reforming the planning system, which Labour opposed, why we have introduced Help to Buy, which Labour opposed, and why we have put extra money into affordable housing, which Labour opposed. Labour is now the “build absolutely nothing anywhere” party and as a result housing will become less affordable.

Answering the question is of course not the point of PMQs but this non-answer is still a revealing one, I think. It’s true that we need to build more houses. Reform of the planning system does seem to be generating an increase, though it could hardly fail to given that the last three years have seen the lowest housing completions in England in peacetime since the 1920s.

Help to Buy may help some people get a mortgage but the reason it is so controversial is that it will also inflate prices.

As for putting ‘extra money into affordable housing’, I must have missed something since the affordable housing budget was cut by 60 per cent in 2010. Numbers were only maintained then and in the 2013 spending round by demanding that landlords charge higher ‘affordable’ rents that are completely unaffordable in places like Islington.

All three parties (contrary to Cameron’s BANANA taunt) are thankfully now committed to increasing supply. If ( a big if) output increases to the 250,000 additional homes required to meet demand in England that should help to bring house price inflation under control. But will it really be enough to solve the housing crisis symbolised by that £720,000 home?