Changes to starter homes represents significant shift
The change to the government's policy on starter homes outlined in the housing white paper is a positive move, says policy and practice officer David Pipe.
Much has been said about the extent to which the housing white paper signals a shift away from government focusing almost exclusively on promoting home ownership. Certainly the language coming out of government seems to have changed, with ministers acknowledging the importance of building a mix of new homes for both rent and for sale.
In terms of tangible policy changes though, perhaps the most significant example of this is the section of the white paper on starter homes.
Back before the 2015 general election David Cameron made a high profile commitment to build 200,000 starter homes (new build properties intended to be sold exclusively to first time buyers aged 23 to 40, at 20 per cent below normal market prices) by 2020. To put that in to some context, the government’s overall aim is to build a million new homes of all types over that same time period, so this would have required starter homes to make up as many as one fifth of all new homes built during this parliament.
This clearly suggested that many of these would not be additional new homes, over and above those already being built for other tenures. To achieve these kinds of numbers government would need to redirect a lot of existing development towards starter homes.
A consultation published in March 2016 confirmed this. It suggested that 20 per cent of homes on all sites (subject to some specific exceptions) should be sold as starter homes. On most sites this would leave very little scope for other forms of affordable housing (including much needed homes for rent) to also be included, without development becoming unviable. In many cases therefore starter homes would have become the only form of affordable housing provided, directly replacing homes which would otherwise have been built for rent.
Along with many other organisations we expressed real concerns about this, arguing that starter homes would only be affordable to those on above average incomes, that it was vital that they were built alongside (not as replacements for) other forms of affordable housing and that local authorities should be allowed to decide on the exact tenure mix that is needed in their areas. The changes set out in the white paper are therefore really important.
The 200,000 homes target has been abandoned, meaning that starter homes should now form a smaller part of a much more balanced approach to building for a range of different tenures. And the proposed quota of 20 per cent of homes on all sites has also been replaced with a lesser requirement that 10 per cent of homes be built for affordable home ownership. These could be starter homes but could also be homes for shared ownership, rent to buy, or a combination of all three, and we would anticipate that on most sites it will also be possible for developers to include some affordable homes to rent alongside these.
In addition, the white paper also made clear that those with an annual income in excess of £80,000 (£90,000 in London) and cash buyers will not now be eligible to buy a starter home, and that buyers will not be able to sell their home on at full value for a period of 15 years. This has been increased from the previously proposed eight, a sensible change as many mortgage lenders had expressed concern that allowing buyers to cash in on the 20 per cent discount too quickly would make these homes difficult to value and perhaps distort the housing market.
There is still much more that government still needs to do if it is to solve the housing crisis, including restarting investment in new homes for social rent. However in listening to the sector’s concerns about starter homes it has made an important change.