19th April 2016
Just before Easter, the Government published its consultation document on Starter Homes regulations. WYG’s Ben Simpson analyses the details and asks to what extent Starter Homes could improve the availability and affordability of homes.
One size fits all
The Government has committed to building 200,000 Starter Homes for first time buyers under 40, to be sold at a minimum of 20 per cent below market value. The consultation document gives us more detail on how the concept might work. But the overriding problem with the document is that its proposals tend to ‘one-size fits all’ solutions.
Requirements: sites and percentages
The draft policy proposes that the Starter Homes requirement applies to sites which meet at least one of the following criteria: 10 units or more or 0.5 or more hectares. But setting a single threshold for site / scheme size has its problems when applied across different economic contexts, as we have seen with affordable housing policy.
The document proposes that a national minimum Starter Homes requirement of 20 per cent of all homes delivered as part of residential developments is broadly justified. But it provides no evidence for this level. This requirement will either reduce the provision of other tenures to an absolute minimum or, more likely, replace them altogether in many areas of the country. The application of a single percentage requirement will certainly not be appropriate across all local planning authorities. Delivering housing will be made more difficult and expensive than if authorities were setting their own target percentages according to demographic circumstances, as defined through their Strategic Housing Market Assessments.
Developers will mostly find themselves better off under these proposals and in many areas the proposals should increase their appetite for delivery. The requirement may still render some schemes unviable but there is a proposed exemption for such circumstances and, in certain situations, a commuted sum would be permissible in lieu of on-site provision. This is sensible for particular kinds of housing such as private rented stock or homes for the elderly where on-site provision might not be appropriate or may make the scheme unviable.
Interestingly, the 20 per cent requirement suffered defeat in the House of Lords on 11th April. The proposed Lords amendment would provide Councils with the flexibility to bring in a different level. This seems sensible, given that the need for Starter Homes will be considerably less in certain areas than in others.
Restrictions on sales and sub-letting
The document also consults on restrictions on the sale and sub-letting of Starter Homes for five years following initial sale. The proposal would allow owners to sell at a higher proportion of market value as the number of years owners have lived in the home increased. (The Government does not support extending the restricted period beyond the first eight years of occupation).
But selling these homes at open market value means that they will cease being affordable very quickly, only benefitting the original purchaser. The proposals will create a one-off injection of cheaper stock which will soon become part of the pool of market housing.
An alternative approach might be to make the Starter Home discount applicable in perpetuity to create a permanent addition to the affordable stock.
The House of Lords also voted on 11th April to back an amendment requiring repayment of the 20 per cent discount on a sliding scale if the property is sold within the first 20 years of first purchase, allowing recycling of the subsidy back into affordable stock. The practicality and enforceability of this amendment is not clear. But it must be unlikely that it would form part of any concessions that the Government might be willing to make on the legislation.
The Housing and Planning Bill specifies a price cap of £250,000 outside Greater London and £450,000 in Greater London. Both caps are very broad in their coverage. A £250,000 cap outside Greater London is too blunt to be workable across the rest of the country. In many areas, especially in the Home Counties, the price of a Starter Home will be way out of reach of many on Council waiting lists.
It would be more sensible if the price cap had scope to be adjusted according to the relationship between earnings and house prices in specific locations.
Developers and landowners are likely to benefit financially from the proposals and there is no doubt that it will speed up the process of delivery in some areas where costs associated with provision of social rented affordable housing form a stumbling block. But schemes could be delayed in the short-term while the mechanics of the policy’s implementation and relationship with adopted policies on affordable housing are worked through.
Overall, though, there are some significant flaws within the Starter Homes concept. The discount to market value will not put properties in reach of most of those who cannot afford to buy. Instead, Starter Homes will reduce the number of homes for both private and social rent when social rented properties are increasingly vital. Subject to any amendments being made, they will be a one-off windfall for those lucky enough to be in the right place at the right time.
You can contact Ben on 0207 250 7539 or email@example.com