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EXPLAINED: Does anyone actually know what an 'affordable' home is?

EXPLAINED: Does anyone actually know what an 'affordable' home is?

Monday 20 March 2023

EXPLAINED: Does anyone actually know what an 'affordable' home is?

Monday 20 March 2023


As the debate around 'affordable housing' continues to fill column inches and provide fuel for vicious Twitter spats between politicians... Does anyone know what is actually meant by 'affordable'?

Possibly the most pressing issue on the political agenda is the need to have more affordable homes in Jersey, with suggestions to help ranging from rent control to mass development projects.

A recent proposal by Reform Jersey leader Deputy Sam Mézec, which has now fallen away, could have forced the public-owned States of Jersey Development Company to provide only 'affordable' homes when building residential units at the Waterfront and South Hill in St. Helier.

Last October, Housing Minister David Warr welcomed the release of 63 first-time-buyer homes at a St. Helier development – for a minimum of £370,000 – describing them as an "affordable" way to get on the property ladder, albeit with the assistance of the "bank of mum and dad".

But amongst all the rhetoric, it's easy to forget that the key question at the heart of the debate is sometimes forgotten about: what do we mean by 'affordable'?

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Pictured: Housing Minister David Warr has faced continuous pressure to present his definition of 'affordable'.

What the policy says...

It would be reasonable to think the simple answer to this question lies should lie in a Government policy document entitled 'Definition of Affordable Housing in Jersey', which was published in July 2021. It says:

"Accommodation for renting or accommodation for purchase, for persons who would otherwise have financial difficulties renting or acquiring residential accommodation in the general market for residential accommodation prevailing in Jersey." 

As such, the Government definition of an 'affordable' home is, in essence: a home for someone who can't afford one.

What does it mean to say someone cannot 'afford' a home?

In some ways, this definition that raises more questions that it answers. Chiefly, what does it mean to say that a person cannot 'afford' a home?

If a person spends 90% of their income on a mortgage, is that affordable? What about 80%? 

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Pictured: Jersey's Planning Law is defined as accommodation for people who might have difficult acquiring accomodation in the general market. 

Last month, prompted by a question from Deputy Rob Ward, the Chief Minister admitted that: "The affordable definition is something we are trying to define." 

The internationally-recognised definition...

Statistics Jersey has opted for a slightly more concrete definition of "affordable".

They argue that a working family is able to purchase a property affordably, if mortgage payments consume no more than 40% of net income or 30% of gross income.

This is an internationally-recognised way of analysing affordability that is backed up by prominent research.

For instance, The UK Affordable Housing Commission wrote in a 2020 report that: "Our analysis suggests that when rents or purchase costs exceed a third of the net household income, housing costs can lead to financial difficulties, arrears, debts and consequent personal problems.

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Pictured: How much of your wage can you 'affordably' spend on your mortgage? 

"The position gets much worse if that percentage of income is a lot higher; we have taken the 40% of income figure as signalling a very serious affordability issue." 

What does that mean for an islander on an 'average' salary?

The mean Jersey salary is £44,720 a year.

A three-bedroom house - once considered an 'average family home' - had a median price of £835,000 as of June 2022. This would only be "affordable" to someone with an annual gross income of at least £169,000 and net income of at least £126,000.

For a person on an average salary, the mortgage payments would account for 57% of the mean gross income and 74% if the mean net income of working households. Prices would need to come down by around £390,000 (47%) for the purchase of such a property to be affordable. 

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Pictured: How property in Jersey has become less affordable over the years.

it would take 3.8 people on an average salary to pay off a mortgage on such a property. 

Indeed, the latest Statistics Jersey report found that, by this measure, any property larger than a one-bedroom flat would be “unaffordable” to an average household.

Competing pressures...

However, even this definition has its flaws.

For instance, the UK's Affordable Housing Commission notes in its report:

"It's tougher to spend over a third of your income on housing costs if you are on a lower income than a higher one: you have less cash to spend on other essentials... A household with six mouths to feed will find it harder to pay their rent [or mortgage] than a single-person household with the same rent and income." 

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Pictured: "It's tougher to spend over a third of your income on housing costs if you are on a lower income than a higher one: you have less cash to spend on other essentials."

UK housing charity Shelter argues that anything over 35% of net household income pent on housing costs is unaffordable.

However, they admit that: "35% for someone on a low income will be a lot more difficult to pay than 35% for someone on a high income. It will be easier to pay for someone without children than parents of three.

"It also gets complicated when someone receives housing benefit, because it’s possible that their rent will be ‘unaffordable’ as a proportion of their income even if all of it is covered by the benefit." 

Clearly, a concrete, catch-all definition of affordability is a very difficult thing to create - but it could also be argued that any more detailed definition is better than none.

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