Published: 26 Aug 2015 by Pete Jefferys

The government’s flagship house building policy is 200,000 new “Starter Homes” by 2020. The policy was launched with a fanfare by the Prime Minister during the general election campaign with the words “a home of your own” emblazoned behind him: a sentiment that Shelter would certainly endorse.

However, new analysis we’ve published today shows that these Starter Homes will be a non-starter for families on typical wages across most of the country. In fact, average earning families will be priced out of these new “affordable” homes in 58% of local authorities by 2020, while families earning George Osborne’s new National Living Wage will be priced out in 98% of the country.

Map 1: Where can families on average local wages afford Starter Homes?

The government might be scratching its head at these results: we show that even with a 20% discount on the price and an average deposit already saved up or gifted, typical families can’t afford these homes in most places. How can this be? It’s simply because house prices are now so wildly out of kilter with normal earnings and becoming more so each passing month – even with a discount and a deposit, the mortgage is too big to afford. This isn’t just in London either. Starter Homes will be out of reach to typical earners in the sorts of places politicians like to focus on outside the Westminster bubble (see table 1).

Table 1: Starter Homes – unaffordable for average earners in politically important areas

Last week, we argued that the government’s affordable housing policies should be judged against who they really work for: low and middle earner families striving to make ends meet, or higher earners who need the help much less. Our analysis suggests that Starter Homes will fall very much into the second camp, helping the highest earners and couples with two good wages and no kids.

Families in the middle like Sarah’s in Leicester, will really struggle to access Starter Homes, as they simply don’t have the earnings to get a mortgage, even with a discount from the market price.

But there’s a double whammy from this policy. Not only is it unaffordable to typical earners but Starter Homes will make things even worse for middle and low earners by cannibalising genuinely affordable homes. The government have hinted repeatedly that the big discounts on offer from Starter Homes will be funded by cutting back affordable housing obligations on private developers. This would be robbing Peter to pay Paul, with normal working families having fewer options and staying stuck privately renting as a result.

Even if some middle earning families do benefit from the scheme, they’re likely to be stretching themselves to the limit taking on big mortgage or Help to Buy debts – this could come back to bite everyone when interest rates start rising.

So what should be done?

Rather than arguing that Starter Homes should be scrapped, we’d argue that the scheme should be amended in two ways:

• Starter Homes must be genuinely additional to other types of affordable housing, instead of replacing them. Its fine to help higher earners get on the property ladder, but don’t do it by scrapping homes for middle and low earners.

• Given the high target for 200,000 Starter Homes, the government should look at other models for buying them to make the scheme more affordable to normal earners. For example could there be a Rent to Buy approach, without the need to take on a big mortgage?

Finally, all this needs to be part of bigger, bolder plan that the Chancellor should set out in the Comprehensive Spending Review this autumn, including prioritising spending on house building. While some people talk down the possibility of building enough homes, we know from our own history and from other countries today that building enough homes – and the right sort of homes – is possible through investment and reform. It’s high time we got on with it.

And you can help. Sign our petition to tell George Osborne to build the genuinely affordable homes we so desperately need.