K is for Key Workers

K is for Key Workers - first time buyers with low-paid public sector jobs. Many are eligible for loans for a deposit on a home, or can be encouraged to buy a proportion of a property under a "shared ownership" scheme.

Key workers are defined by local councils according to local needs but normally include low-paid NHS staff, teachers, police officers and firefighters. Some councils also include social workers and public transport staff.

Under the Starter Home Initiative (SHI) they can receive a loan up to £35,000 for a deposit on a first home in high-cost areas defined by the Government. They include all of London, expensive urban areas in the Home Counties, and now cities such as Cambridge and Norwich in East Anglia and Exeter in the south-west.

Applicants need £3,500 up front to pay for legal fees, a valuation and survey, and the property must cost less than £160,000, be within 90 minutes' travel time of work and eligible for a conventional mortgage. The loan is repaid when they sell the property.

Local SHI schemes have different names (one of London's biggest is called Key Homebuy) and are advertised by housing associations in workplaces and public buildings such as libraries. Some councils and housing associations operate an alternative 'part own/part rent' scheme for key workers called shared ownership.

The individual does not get a loan, but is allowed to buy a share (normally at least 25 per cent) of a house or flat, with a housing association buying the rest. Their monthly outgoings are therefore part mortgage and part rent. As the key worker's financial circumstances improve, he or she can buy further shares of the home in 10 per cent chunks and can benefit from appreciation over time.

Properties earmarked for shared ownership are usually on new private estates and come about by councils forcing developers to provide key worker homes in return for planning permission for building a larger number of 'private market' homes. Sometimes the key worker housing is grouped together on the estate (usually in a less favourable position than the private market houses). But sometimes developers agree to 'pepperpot' key worker flats or houses, dotting them throughout the development in such a way that they cannot be identified.

Some housing associations have commissioned the building of prefabricated flats for key workers; some developers have even created 'micro flats', apartments with just 300 square feet of space that cost less than conventional flats and could allow a first step on the property ladder for lower-paid buyers.

Top tips

Key workers who become homeowners can benefit from rising prices as much as better-off property owners. Research carried out by the Royal Institution of Chartered Surveyors shows that all properties on 'pepperpotted' estates enjoy bigger price rises than on developments where homes for key worker are clearly identified. If you have the choice, go for the former.