Key Worker housing in the UK

Matilda Battersby investigates the current situation for our Key Workers and asks: what more can be done to ensure a safe and affordable approach for all those living in the private sector?

Secure housing for cleaners, teachers, nurses, police officers, firefighters and other Key Workers in the areas where we need them should be a concern for everyone in the UK.

The combined influences of an unregulated private rental sector, wages failing to keep up with inflation, soaring energy and food costs and high interest rates, mean we’re all feeling the impact of the cost-of-living crisis.

With Key Workers paid £24,809 per year on average (22% lower than the national average), affordability of housing is a huge challenge, putting them at risk of being priced out of the communities they serve.

The story so far: Where are we now?

Earlier this year, trade union Unison surveyed its members (half a million of whom work for the NHS, and in other Key Worker roles) about the cost, conditions and suitability of their housing. The results of its ‘Through the Roof’ survey revealed that housing costs have increased for almost two-thirds (63%) of public service workers, with almost 60% spending 40% or more of their entire household income on housing costs.

The Organisation for Economic Co-operation and Development defines “affordable housing” as costing no more than 30% of gross income, stating that those spending more than 40% of income on housing are “overburdened.”

Unison’s survey found that almost a third (32%) of those in private rented accommodation spend 60% or more of their income on housing, as did 25% of housing association tenants, 24% of council tenants and 19% who pay into a mortgage. It should come as no surprise then that the majority of survey respondents said they were “struggling to manage financially”.

Housing crisis

The UK housing market has remained strong even as the rest of the economy fails to grow, with a lack of supply of housing stock keeping existing prices high, and the value of property far outstripping wage growth.

The simple fact is, as a nation, we are not building enough houses to make prices more competitive. In December 2022, Michael Gove dropped the government’s pledge to build 300,000 homes a year.

This has added additional uncertainty to a housebuilding market that is already frustrated by planning delays, ambiguity over the funding and delivery of affordable homes (the current system dictating how councils calculate their affordable housing spend (Section 106) is due to be replaced with a new Community Infrastructure Levy, but there has been a lengthy consultation process). As a result, the number of new-builds completed in England in the coming years is predicted to fall below 120,000 homes a year, according to the Home Builders’ Federation.

Social housing is an area of particular pressure in England and Wales.

The Right to Buy scheme has allowed eligible social housing tenants to buy their homes at a reduced price since Margaret Thatcher introduced it in 1980. Great as this is for individual tenants, local authorities are unable to replace social housing as quickly as it is sold off.

According to homelessness charity Shelter, more than a million households are waiting for social homes. In 2022, 29,000 social homes were sold or demolished, and fewer than 7,000 were built. In England, there are now 1.4m fewer households in social housing than there were in 1980, while the private rental sector has doubled in volume.

In this climate of unregulated private rents and the fear of no-fault evictions, housing can feel incredibly uncertain. So, what’s the government doing to make sure Key Workers are able to live where they work?

Sadly, nothing specific. There is currently no dedicated government housing support scheme for essential workers in any of the four nations of the UK. In Scotland, it was announced earlier this year that £25m has been made available from the Affordable Housing Supply Programme to make underused rural homes available for Key Workers and others in need until 2028. But the other housing schemes currently on offer are open to all first-time buyers with an income under a certain threshold.

Key Worker living programme

Up until quite recently and for the past two decades specific government schemes for Key Workers did exist.

The first programme of this kind in England was launched by the Labour government in 2002. The Starter Home Initiative offered 200,000 first-time buyer Key Workers £10,000 equity loans to enable them to buy new builds.

The policy was criticised for limiting access to just a small number of essential professions, however, and for not keeping pace with rising house prices. It delivered just 9,000 homes for Key Workers before being replaced in 2004 with the Key Worker Living programme.

This later scheme involved £690m of government investment and expanded eligibility to include a wider range of Key Workers, including probation officers and firefighters.

It was similar to the better known Help to Buy equity loan, in that the government’s stake in the property had to be repaid in proportion to the market value of the home, but it was scrapped by the Conservative government in 2019.

Since 2010, the Conservative-Liberal Democrat coalition and successive Tory governments have offered various initiatives for lower paid workers to buy via Help to Buy (an equity loan for a deposit for a new-build) or shared ownership (where buyers borrow enough to own a portion of a home, and rent the rest) schemes. The Forces Help To Buy Scheme, for example, was launched in 2014 to enable service personnel to borrow up to half their annual salary (up to a maximum of £25,000) as a home deposit, but it closed in 2022.

First homes

With the emphasis on the importance of Key Workers post-pandemic, Westminster launched a First Homes scheme in 2021 which offers homes for 30% to 50% less than market value in England to anyone who meets the criteria.

The discount is paid for by the housing developers as part of their affordable housing contributions under Section 106.

While any first-time buyer with household income of under £80,000 (£90,000 in London) who is able to get a mortgage for at least half the price of the home can apply to buy a First Home, the local authority where it is can set other eligibility conditions, and many of them use this to help house Key Workers. The government does not set a national standard definition of a Key Worker for First Homes but councils can choose their own criteria.

Westminster law now dictates that a minimum of 25% of all affordable homes delivered by developers in England should be under the First Home scheme. They cannot cost more than £420,000 in London, or £250,000 anywhere else in England. Crucially, First Homes can only be sold to another buyer who qualifies under the scheme, which means they won’t subsequently enter the open market.