London's new poor

Can £250m persuade key workers to stay in the capital? By Ginetta Vedrickas

The plight of many of London's key workers – largely teachers, nurses and the police – priced out of London's property market is well documented. But last month, following much speculation, the Government finally announced details of how it plans to spend its £250m starter homes initiative, giving hope to many, although some key workers say that delays, coupled with lack of information, mean they will not benefit.

The plight of many of London's key workers – largely teachers, nurses and the police – priced out of London's property market is well documented. But last month, following much speculation, the Government finally announced details of how it plans to spend its £250m starter homes initiative, giving hope to many, although some key workers say that delays, coupled with lack of information, mean they will not benefit.

Lynn Esson, a teacher from south London, and her partner heard about the scheme a year ago. "We thought it sounded fantastic," she says. "That was what prompted us to start looking for somewhere to buy. But when I tried to find out more about how the scheme works, and whether I qualified, my local education authority (LEA) knew nothing about it. That really did annoy me."

Ms Esson eventually discovered she was not eligible, because the couple's combined salaries were just above the Government's cut-off point of £42,000 in total annual household income. But the cool-off in the market has finally enabled her to make an offer on a London flat, which she is buying with her partner, an accountant.

She admits she could not afford to buy aloneand sees similar situations among her colleagues. "All the teachers I know who are buying can only do so with financial help from elsewhere. It's driving such people out of the city."

The starter-home initiative will give successful applicants equity loans worth between 20 and 40 per cent of a property's value, which they must repay when they sell it. Starting this month, a telephone hotline is advising the many key workers desperate to find out if the scheme can help them, though some believe falling property values may be a more realistic solution.

Teacher Gillian Sanderson (not her real name) says: "For the last couple of years I've listened to people bleating on about how much their houses are worth. Now they're all worried that property prices will fall, but there are many of us who wish they would."

For three years Ms Sanderson has been renting near the school where she teaches in north London, but she cannot afford to buy. "It is ridiculously expensive even to rent. I've decided I'm probably better off moving up to the north of England, although I do love London."

A National Housing Federation survey shows home ownership is beyond reach for single earners on a national average income of £21,749 in more than 50 per cent of English counties. In London, an income of more than £40,000 is needed to buy an average-priced property in almost all of its 32 boroughs.

For 35 years the Teachers' Building Society has been giving mortgages to teachers and knows from first-hand the particular problems faced by Londoners. A spokesman, Mike Hislop, hopes the Government's initiative will at long last help to ease the situation. "We've identified a need for support in this area, because we have a good understanding from close liaison with teachers and we all support the proposed way forward."

Recently the society worked with housing associations and county councils who bid for cash from the starter-home initiative, including Notting Hill Home Ownership, who won a joint bid of £119,500 under the Keys to the Capital programme. Their consortium includes Metro-politan Home Ownership in north London, Boleyn Forest Housing Association in east London and Tower Homes in south London.

Under Notting Hill's home ownership scheme, key workers can buy a 25 to 75 per cent share of their house while paying a low rent on the remaining percentage. When they move, the organisation buys back the property to house other key workers.

The scheme is already working at the Isokon building in north London, a landmark Thirties Modernist building designed to house artists, writers and architects in compact studio apartments. It fell derelict but has been earmarked as a solution to the shortage of affordable housing for key workers in the borough of Camden.

The GLA's housing commission believes the starter homes initiative will ease London's particular housing problems and has specified other ways to improve housing in their Homes for a World City report. The Mayor's housing adviser, Neil Coleman, wants to raise affordable housing targets to 50 per cent. "We've been working with developers and we believe it is economically viable."

Some developers are sceptical, particularly as a threatened recession may be about to dent London's property market. Mr Coleman says: "We won't adopt policies that jeopardise development and we will keep talking to developers. You've got to remember that the GLA's housing plan is being developed to last for 20 years."

And Steve Coleman, of Notting Hill Housing Group, welcomes his organisation's role in the starter homes initiative but he is cautious about the proposals to raise percentages of housing allocated to affordable housing. "It's difficult," he says. "The percentage has to make sense for everyone. If we raise it to 50 per cent there could be an impact on quality or, in the worst-case scenario, schemes may not get built, in which case we would get 50 per cent of nothing."

Some developers are already meeting 50 per cent targets, including St George who were targeted in a protest by key workers who recently occupied a show home at Imperial Wharf. Ironically this scheme, opened by Ken Livingstone, is made up of 50 per cent of affordable housing. Spokesperson Charmaine Young adds: "We are one of only two developers in London to receive starter home initiative funding and we are contributing to easing the crisis faced by key workers here."

Starter Home Unit hotline: tel 020-7944 4519; or e-mail starterhome@dtlr.gov.uk