Anthony Hilton: George Osborne's affordable homes ploy

What exactly is affordable housing? Is it what I would find affordable, what my son could or somewhere suitable for my unemployed niece?

I ask because it is a phrase used by politicians and local leaders with increased frequency, but without anyone ever defining what they mean. Yesterday was a case in point. The creation of 400,000 affordable homes by the end of this Parliament was the centrepiece of George Osborne’s Autumn Statement.

As a general rule, when politicians don’t explain clearly what they are talking about, it means they hope you won’t ask. This is particularly the case in the 400,000-home promise because, by any conventional definition of the words “build,” “affordable” and “home”, it is a promise that does not stack up.

Let us explore for a minute what affordable might mean for someone on the average full-time salary of £25,000 — and ignoring the probability that a typical twentysomething is likely to be earning less.

How much could that person borrow to buy a house? Well, there used to be an unofficial limit whereby a mortgage could not be more than three times income.

That has been stretched in this era of low interest rates to a maximum of five times income. On that basis, someone earning £25,000 could get a mortgage of £125,000.

Factor in an allowance for the buyer’s own savings — perhaps another £25,000, which is roughly a 20% deposit — and a property priced at up to £150,000 comes within reach, ignoring the costs of purchase and furnishing.

So what will that £150,000 get you in London? A browse of last night’s Evening Standard Homes & Property section uncovered a range of one-bedroom flats from £283,000 in Walthamstow to £342,000 near Stratford and £454,000 in Southfields.

So for two people both earning and buying together, the cheapest is just within reach, the others way out of the price league.

Now let us look again at the Chancellor’s promise of 400,000 affordable homes by the end of this Parliament — of which 200,000 will be starter homes.

Currently, we build about 130,000 houses a year of all types, and of these 30,000 are produced by housing associations.

Most social housing either for rent or buy is supplied by these associations, topped up by a few thousand properties that developers can be required to build in return for getting lucrative planning permission for expensive properties.

Second, the building industry has very little spare capacity. There are shortages of craftsmen — bricklayers, joiners, plasterers — and this prompts most builders to say that while output could perhaps be grown to 150,000 a year, it is impossible in current conditions to go much beyond that.

So if the industry works flat out, it could start an absolute maximum of 600,000 homes in the four years left of this Parliament.

These, of course, will be homes of all types — from flats and starter homes in brownfield sites in inner cities right through to three-, four- and five-bedroomed detached properties in leafy suburbs.

They might even be skewed towards the top end because that is the segment most profitable for housebuilders.

The next curiosity is the Chancellor’s treatment of housing associations. As noted above, these are currently the major builders of cheaper housing.

You would expect therefore that Osborne would put his weight behind the sector to give it the financial resources to build more.

But he seems to be doing the opposite. The Office for Budget Responsibility predicts that the money flowing into housing associations will fall from £8.3 billion in the current year to £4.5 billion in 2019-20. Will they build more if their income halves?

It follows from this that the 400,000 homes the Chancellor is talking about cannot contain much additional building. This is even more obviously the case because the small print of the Budget says his plan does not kick in for two years.

There will be some additional construction, of course, on the public-sector land that is being released for building. However, a significant proportion of the 400,000 must be homes that were going to be built anyway but which the Chancellor has decided to claim credit for and has branded as “affordable”.

There is one way to make sense of the Chancellor’s words. It may be that this affordable homes programme is not actually about building any more homes — or not materially more — so it is not actually there to do anything serious about the shortage.