Housing is considered ‘affordable’ when it costs no more than 30 per cent of gross household income
By Panayiotis Pachomiou
HOUSING is so much more than simply having a roof over our heads. It gives us a personal sense of place and home and is the foundation of family and community wellbeing. However, with the increased cost of private-sector housing compared with the level of household income and expenditure, a significant number of us lack the resources to purchase a home. Without subsidised housing, many households will not be able to buy a home of decent standards at affordable prices.
Hard-working people who earn minimum wages can barely afford rent, let alone consider buying a home. Recognising this, the government published directives in May this year which encourage the private sector to include affordable housing in their residential developments for sale and rent. But affordable housing is not just about the price. It is about what people can afford relative to their income, specifically focused on those who are at the lowest two income bands.
Housing is considered ‘affordable’ when it costs no more than 30 per cent of gross household income. Everyone should have the opportunity of a decent home that they can afford, with the added benefit of being in a sustainable mixed community.
This Policy is essential to any inclusive and well-functioning community, as well as a productive economy. For this reason, it focuses on the connections shared between people, place and home and delivers greater social and economic outcomes. After all, having a home is not simply having a roof over our heads, but is also about belonging to your community.
Real and enduring affordability for people to have a home is needed and the government has taken the first step in the right direction.
Affordable housing is a generic term used to describe housing that is affordable to lower or middle-income households. It is provided to eligible households whose needs are not met by the market and provides availability at a low cost, which is enough for them to afford, based on their income and local house prices. In addition to widening the opportunity for homeownership, it offers greater quality homes for those in need and provides more flexibility and choice to those who rent.
More importantly, it fills the multiple gaps in our housing market. For example, people on very low incomes may need heavily subsidized solutions like social housing, whilst those on moderate incomes may need assistance to get onto the property ladder. But what about people on the lower end of the low-income band who often earn too much for the heavily rationed social housing system? The delivery of affordable housing will fill these gaps and includes schemes for young people who want to move out of their family home and widens the opportunities for homeownership for our key workers who provide vital services to the community, such as our police officers, nurses and school teachers.
The government’s directive outlines that affordable housing may be delivered in two methods and types; Intermediated Rented Houses and Discounted Equity Homes.
The first reduces the levels of rent below that which is offered in the private rented market, whilst the second has a simple discount for the purchaser on its market price, so the purchaser can buy the whole home at a reduced rate. The discount is the land value which the landowner has gained through the planning incentives. The directive aims to provide planning incentives by increasing the density so that part of the increased density will be sold at a fixed selling price to the eligible individuals and families.
Provided that the land falls within a residential planning zone with a density of 1,100:1 and more and the land area is equal to four plots, that is 2,100m², the landowner may exercise his right to implement the provisions of this directive in the development proposals for a unified development.
The directive provides that an additional 25 per cent density may be granted to the development whilst 10 per cent of the overall density shall be assigned for sale under the affordable housing policies and the remaining will be sold by the landowner to the open market. There are certain conditions and provisions as to how best the directive may be applied and the consultation and agreements that need to be in place prior to the submission of a planning application.
The maximum density may be enhanced by other directives to maximise the density up to 30 per cent, by using, for example, the directive for Energy 1/2014 which benefits the developments by a further 5 per cent of the permitted density.
In order to harmonise the 10 per cent of the affordable area, the directive provides that the area of the affordable dwellings may be reduced by 10 per cent of the permitted as set out in the Development Plan of 2011.
The selling price for the affordable dwellings is set based on the construction index reflected on the minimum specification standards. These are fixed for 2019 at €870/m² for apartments and €1.050/m² for houses. The Land Development Corporation has published invitations to landowners to consider the affordable housing policies.
The added cost to the residential developments is the provisions relating to the parking at basement level in developments exceeding the ten residential units.
Appendix 1 of the directive 1/2019 also provides incentives in providing dwellings for affordable rent whose duration is for two years as from 15th May 2019. Affordable rent is considered to be 20 per cent below the rental market.
The directive provides that in planning zones with at least 1,100:1 density and the plot to be 2,000m² net, the landowner may benefit from the provisions of this directive. The development should be completed within three years from the date a building consent was granted. In order to facilitate the rental market it provides that 70 per cent of the density area shall be designated for rented accommodation for eight years and the remaining 30 per cent of the density may be sold to the open market from the outset to provide a cash flow for the development to the landowner. The minimum dwelling areas may be reduced under this incentive by 20 per cent instead of 10 per cent as the main directive provides.
There are further incentives arising from the directive with a two-year limitation programme from the date of issue, wherein residential plots of land with a net area equal to 3,000m² or more having permitted density ratio of 1,40:1.
The directive provides that the density may be increased by 45 per cent out of which the 20 per cent of the density shall be assigned for the development of affordable housing and the remaining density gained to the open market. The directive provides for certain design parameters and distances from the boundaries of the adjoining properties since the maximum permitted number of storeys will be extended by further two storeys.
Rental is now the second largest form of tenure in Cyprus. As such, it is imperative that in order to tackle the housing shortage, we should increase property investment across all tenures. As a concept, affordable housing is also interesting to long-term investors like pension funds who want a long-term income stream and like the social contribution of high-quality rental.
Panayiotis Pachomiou, Chartered Architect, B.Sc (Hons) Arch., Diploma Arch., RIBA Pachomiou & Kazamias Architects and Property Consultant at Cyprowealth Advisory Services