- London Mayor’s affordable home ownership scheme involves huge annual costs for purchasers
- Hackney flat costs nearly £125k upfront and then a further £20k per year under the affordable housing programme
- Costs include both mortgage and rent payments due to “part-buy part-rent” model
- Households have to earn at least £90k a year to be eligible to buy a Fulham flat
- Scheme is advertised via a company founded by a Tory MP
By Chaminda Jayanetti
More than 85 percent of homes offered for sale under an “affordable housing” scheme backed by Boris Johnson would cost more than £10k a year to own, Sentinel News can reveal.
Not only are the costs of owning the affordable housing comparable to London’s runaway rents, but some of the homes on offer are well beyond the reach of most Londoners.
A pre-owned two-bedroom flat in Hackney listed under the First Steps programme – the affordable housing scheme backed by London Mayor Boris Johnson – requires £123,825 as a minimum deposit upfront, followed by payments of £19,176 every year.
This monthly payment comprises the estimated mortgage, service charge, but also rent on top – most of the 280 non-retirement properties for sale under Share to Buy are available on a part-buy part-rent basis.
This involves purchasers putting down a deposit and taking out a mortgage in order to buy a partial stake in a property. They must then pay monthly rent on top in order to actually live there.
So, the buyer of the Hackney flat will have to pay the six-figure minimum deposit, plus the mortgage repayments, just for a 65 percent stake in the home – with rent to pay on top.
In this way, the scheme makes this £635k Hackney flat “affordable” to buyers at a mere £412,750, plus rent.
This combination of rent and mortgage costs explains why, of the 280 non-retirement properties currently available on the Share to Buy website, only 40 cost below £10k a year in addition to the minimum deposit.
The other 240 properties – more than 85 percent – cost over £10k a year, with 60 homes costing more than £20k a year, and seven of these costing more than £30k a year on top of the minimum deposit.
Minimum deposits under the scheme vary hugely. They are generally set at between five and ten percent of the total cost of the stake that is being purchased – and the stake can vary from 25 percent to 60 or 70 percent of the equity in the home.
As a result, the minimum upfront deposit can be under £5k for some properties, but tens of thousands of pounds for others – and the six-figure blockbuster for the two-bedroom flat in Hackney.
Buyers can increase the deposit beyond the minimum if they choose – but even then, that doesn’t bring down the annual rent and mortgage costs that far. By putting down £15k upfront, 72 properties on the list cost under £10k a year to live in – but that still means three quarters of the Share to Buy properties will cost five-figures a year to hold onto.
Among the other “affordable” properties available under the scheme is a one-bedroom flat in Ealing, costing a minimum of £18k upfront and then £28,884 a year in rent, service charges and mortgage costs.
Households earning above £71k are not allowed to purchase the Ealing flat – meaning that the annual cost would be at least 40 percent of the purchaser’s annual pre-tax income.
Also listed under the First Steps programme on the Share to Buy website:
- a two-bedroom flat in Islington costing just over £20k upfront and then more than £30k a year in rent and mortgage costs – all for just a 25 percent stake in the property
- a three-bedroom apartment in Aldgate that is only available to households earning £82,808 a year
- a two-bedroom apartment in Hampstead demanding £57,750 upfront and then more than £20k a year afterwards
- a two-bedroom apartment in Hammersmith & Fulham that costs at least £90k upfront, followed by almost £25k a year after that, and is only available to households earning at least £90k a year
Share to Buy was founded in 2004 as a mortgage broker, but now acts as the main portal for First Steps, Boris Johnson’s affordable housing programme. Share to Buy’s co-founder, joint shareholder, and currently unpaid director is James Cartlidge, who was elected Conservative MP for South Suffolk at last year’s general election, succeeding the deselected Tim Yeo.