Housing Needs Assessment 2006 - Westminster City Council

6. Financial information and affordabilityThe mortgage requirement is based on taking the level of savings and any equity away from theestimated property price and then checking the income level of the household in relation to thelikely amount of mortgage remaining. Income from housing related benefits is not included in theaffordability calculation. A worked example of the mortgage affordability test is shown below:A household containing a couple with one child would require, at minimum, a two bedroom property. Theminimum cost of such a property in the City of Westminster is estimated to be £275,000. If the couplehave £20,000 in savings then they would require a gross household income of £87,931 ((£275,000-£20,000) divided by 2.9) if both adults were in employment, or £72,857 ((£275,000-£20,000) divided by3.5) if one person is in employment.ODPMGuide‘A household is considered likely to be able to afford to buy a home that costs 3.5times the gross household income for a single earner household, or 2.9 times thehousehold income for dual income households.’ [Paragraph 6.17 March 2005Discussion Draft Guidance](ii) Private rental affordabilityThe definition of private rental affordability is shown below:Private rental affordability: A household is unable to afford private rented housing if renting privatelywould take up more than 25% of its gross household income (excluding housing benefits).A worked example of the rental affordability test is shown below:A household containing a couple with no children will require at minimum a one bedroom property. Theminimum weekly rental for this is £205. This means that the household must have a weekly gross incomeof at least £820 (£205 ÷ 0.25) to be able to afford the property.(iii) Combined affordabilityIt is important to assess the numbers who cannot afford either of the above options. This is themeasure of combined affordability, which is defined below:PAGE 63