ROOF Affordability Index 2006

By: Steve Wilcox  Published: March 2006


This briefing presents the latest housing affordability index data, sets out the causes and effects of the crisis in market affordability, and outlines Shelter's policy proposals.

Summary

The ROOF affordability index provides a valuable measure of how easy or difficult households find it to become home-owners. Unlike traditional measures of housing affordability, which compare house prices with earnings, the index uses average mortgage costs and hence takes account of variations in interest rates. Another key feature of the index is the use of specially commissioned income data of all working families rather than just those households that succeed to access the market in a particular year.

Despite the slowdown in the housing market over the last year, the latest affordability index data shows:

* affordability has continued to worsen in every region during 2005, and is almost as bad as it was before the last housing 'crash' in the early 1990s

* average mortgage payments now take up 21 per cent of first-time buyers' income in England compared to a 14 per cent average over the last 20 years

* the greatest decreases in affordability in England, during 2005, were in the North East, followed by the North West, and Yorkshire and the Humber

* affordability problems are most acute in the South West2 and London and these are also the English regions where affordability has declined the most since 1994

* Northern Ireland is the part of the UK where affordability has worsened the most during 2005, and also the most since 1994.

A full breakdown of the affordability data and details on calculation is provided as an appendix to this briefing. There is also an analysis of the affordability position in each English region.

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