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The Chartered Institute of Housing is the independent voice for housing and the home of professional standards

Starter homes: CIH's view

20/05/2016


Got questions about the 'starter homes' scheme? CIH policy and practice officer David Pipe blogs about what we know, what we're worried about and what our response to the government's consultation is.

Image of modern houseThe Housing and Planning Act 2016 has now completed its passage through parliament and received royal assent. Among other things, it provides the necessary legislation to require house builders in England to begin developing ‘starter homes’. However, despite the Act passing into law there are still a number of unanswered questions about the scheme, with much of the detail still to be determined.

What we know

We know that the government is committed to providing 200,000 starter homes by 2020 and that they will be made available exclusively for first time buyers aged between 23 and 40, at 20 per cent below normal prices. But the government is still consulting on the technical details, which will be set out at a later date via regulations.

Of particular importance are plans to require house builders to include starter homes on all sites as a condition of planning permission (subject to some limited exceptions, including developments in rural exception sites). It now looks increasingly likely that this will take the form of a single, national requirement that a certain percentage of homes on all sites must be starter homes, with the consultation paper suggesting 20 per cent as a possible quota.

Our concerns

While we share the government’s ambition to reverse the decline in home ownership, there are two concerns with this. One is that it undermines the government’s often-stated commitment to localism and to planning decisions being taken at a local level, with the involvement of local communities. Councils in different parts of the country are operating in extremely different housing markets and both the level of demand for starter homes and the impact of providing them on the viability of developments will vary considerably. A single, straight-forward quota applied across the whole of England fails to recognise this and will reduce both councils’ and communities’ ability to have a say in the types of housing that are provided in their area.

The second is that the level at which the government is considering setting this requirement is very high. The consultation paper gives 20 per cent of homes on all sites as government’s preferred option, with 15 or 25 per cent also offered as possible alternatives. However, it also recognises that on most sites a 20 per cent starter homes requirement would leave very little scope for other forms of affordable housing, including housing for rent, to also be included. In many cases, therefore, starter homes would be the only form of affordable housing provided.

Out of reach

We know that even with a 20 per cent discount, starter homes are likely to remain out of reach for many people. Savills and the Local Government Association have estimated that in more than half of all council areas in England an average earner with a five per cent deposit would be unable to afford to buy an average home with a 20 per cent discount. Even with a 20 per cent deposit and a 20 per cent discount, an average starter home would still remain unaffordable in around a quarter of all areas.

Therefore, starter homes will not be affordable for all and must be provided alongside, rather than instead of, other forms of affordable housing. The danger with the government’s proposed approach is that many of their 200,000 starter homes will not be additional homes, over and above those that would have been built anyway. Instead, they will directly replace homes which would otherwise have been built for rent, and while they will certainly benefit some aspiring first time buyers this will be to the detriment of others.

We have therefore used our response to the government’s consultation to encourage them to allow individual local authorities to determine the mix of different forms of affordable housing (including starter homes, shared ownership and affordable rent) which is right for their area.

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