Why building low-cost, attractive homes is a priority for some developers

An extra 84,000 affordable homes must be built in England by the end of 2008, according to an announcement in Gordon Brown's budget.

The Government has also set out three new "Homebuy" schemes to allow lower-paid first-timers to get on to the property ladder.

Affordable homes are no longer seen as the poor relations of mainstream private homes. This is because the Government has specified that housebuilders such as Barratt, Bellway, Persimmon, Taylor Woodrow and George Wimpey will be building them.

"Affordable properties will not look different or be based in ghettos away from private homes on the same developments," explains James Brown, who runs the affordable-housing division of the property consultancy Savills.

"A development with 15 properties or more must now have at least some affordable homes. In practice, many planning authorities insist that any scheme with just 10 or more homes must have an affordable element," he says.

We can expect to see more high-street housebuilders setting up affordable-home divisions in the way that Berkeley Homes has done with Berkeley First, a sister company set up to build low-cost homes for key workers and students.

The first private developer to specialise in affordable homes, Berkeley First works with housing associations and universities to create low-cost communities in London and South-east England. Its largest scheme is Paragon in Brentford, London's largest mixed-use affordable development. It has 221 key-worker flats and 839 student bedrooms (scheduled for completion in September), plus 130,000sq ft of teaching areas for the Thames Valley University and 3,000 sq ft of shops, providing more than 300 jobs.

Berkeley is pioneering "factory-made" rooms that are slotted together on-site, which, it says, cuts building time by half. The Government, however, wants housebuilders to go further. As part of the Budget announcement, it says that, by 2008, new, affordable properties must emit 6 per cent less carbon dioxide than those built under the latest building regulations. Around half of the new affordable homes must also be built using "factory-made" techniques.

But the Government's proposals and schemes such as Paragon may still not be enough to resolve the capital's housing shortage, according to the London Housing Federation.

It says that property prices in London have increased by 44 per cent since 2000, compared with a rise in salaries of 7 per cent. The average property in the capital now costs 8.8 times the average salary. In 2000, the average home cost just 6.6 times the average salary.

A typical London home now costs £276,000, compared to £192,000 in 2000; the typical salary has risen from £29,207 to £31,370 over the same period. In some boroughs, the worsening affordability has been more extreme. An average home in Barking and Dagenham in 2000 cost 3.3 times the average salary, but now costs 8.1 times. In Newham, homes cost 9.3 times the average salary, up from 3.9 times in 2000.

The Government claims that its new target for affordable homes will address this problem. Not only will 28,650 of the homes be in London, but 35 per cent of them will be large enough for families and not solely aimed at solo buyers or couples.

"Common sense is being applied to affordable housing at last ," says Savills' James Brown. "It's not going to be just flats - houses and families will get a look in at long last."

3 ways to buy

Three new schemes announced for public- and private-sector first-time buyers:

* Social Homebuy - for existing council and housing association tenants;

* New Build HomeBuy - to help key workers and other eligible parties buy a share of a new home;

* Open Market HomeBuy - to help key workers and other eligible parties buy a home with their mortgage and an equity loan from a housing association.