'Affordable' shared ownership flat in Hackney on the market for £1m

A shared ownership flat valued at more than £1m has gone on sale in east London, in another sign of London’s growing affordability problem for would-be homebuyers.

Shared ownership, offered through housing associations, is designed to help people on low incomes get on the housing ladder by offering them the chance to buy a stake in a property which they can increase over time. The buyer also has to pay rent on the remainder of the property that is not mortgaged.

However, rising house prices in the capital mean even this kind of “affordable” housing is getting more expensive. The three-bedroom flat in a new award-winning development near fashionable Old Street in Hackney is valued at £1,025,000, with buyers offered a minimum stake of 25%.

The advert for the sixth-floor flat, which is being sold by Islington and Shoreditch Housing Association (Isha), says priority will be given to local authority and housing association tenants, ministry of defence workers and people who live and work locally to Hackney.

But the housing association estimates that to afford a 70% mortgage on the £256,250 share, and have enough money to pay a rent on the remaining 75% of the property as well as the monthly service charge, would-be buyers would need a household income big enough to afford more than £2,400 a month in housing costs. A mortgage calculator on the Share to Buy website where the property is listed suggests it is unrealistic that a large enough loan would be granted to anyone with a household income of less than £77,000. The median salary in the borough is £31,000.

Isha said just three of its shared ownership properties had been valued above £900,000, all of which were on the edge of the City of London where homes regularly have seven-figure price tags. It added that all three were three-bedroom homes, which meant several purchasers could club together to buy. Another three-bedroom flat in the development with a similar price tag is under offer.

Clare Thomson, chief executive of Isha, said: “We recognise that the home highlighted by the Guardian is out of reach to many of the households we prioritise to assist.

“It does still, however, meet our objective of assisting people who would otherwise not be able to purchase in that area. The proceeds from shared ownership are invested in providing low-cost rent homes in the same area.”

Developers are obliged to provide affordable housing as part of new building projects over a certain size by working with housing associations to create properties at below-market rents and for shared ownership. Under the rules, only households earning up to £85,000 in London are allowed to buy three-bedroom homes through the scheme.

Kate Webb, deputy head of policy at housing charity Shelter, said: “It is clear that when an ‘affordable’ flat costs over a million pounds, our housing crisis has plummeted to new depths.

“Shared ownership schemes are there to help people on ordinary incomes get on to the housing ladder, but as house prices soar even a small share of these supposedly affordable homes will be pushed well out of their reach.”

The Green Party spokesperson for housing, Tom Chance, said: “I don’t think anyone can call a small share of a luxury flat for almost £3,000 per month affordable. If local prices continue to rise, and the owners buy up a bigger share of their home, it will be resold at an even more obscene price.

“It’s a broken model in a broken housing market. We need to stop throwing money at the same old ideas and try something fundamentally different like community land trusts, which fix the price to local incomes.”

House prices in Hackney have soared in recent years, with the average cost of a home breaking through the £500,000 early in 2014 and rising to £627,213 now.

The flat is in a new development called The Cube, which is described as “a contemporary development of stylish apartments, in a location that offers the opportunity to live London life to the full”. The cross-shaped building has won several awards for its innovative design and look. A two-bedroom property in the same development being offered through a normal sale is on the market at £1.3m, but the housing association is offering three three-bedroom properties at rents of less than £200 a week.

Thomson added: “Isha is committed to developing within our core areas of Hackney, Islington and Waltham Forest. We were established in the 1930s to provide affordable housing in Shoreditch, which at that time was a high value area because of the commercial furniture-making interests. Our challenge is to provide solutions that maintain low-cost housing options, both rent and homeownership”.