Welcome to the Twilight Zone. Weird happenings are afoot. Affordable Homes will soon cost up to nearly half a million quid. And Brooklyn Beckham is about to become eligible for one. But couples on the Living Wage will have support withdrawn on the grounds that they are ‘higher earners’.
No idea what I’m on about? This is the world of ‘Affordable Housing’ recast in the government consultation on national planning policy that closes next week. The proposals to change the official definition of Affordable Housing so that it encompasses new Starter Homes too. In doing so, it will mean that building Starter Homes counts towards Affordable Housing targets on new developments, so that developers can build Starter Homes instead of social rented homes or shared ownership, for example.
There are, of course, a couple of big problems with this.
The first one is simply that in much of the country Starter Homes are going to be expensive. Our modelling suggests that by 2020, you’d need an income of £50,000 a year to afford a mortgage on a Starter Home, and a deposit of £40,000. In London, your income would need to be £77,000 and deposit nearly £100k.
So there is a real danger that councils and ministers are going to find themselves claiming that they have built tens of thousands of ‘Affordable Homes’ that don’t meet any common sense definition of affordable.
Affordable Housing that is unaffordable for most people, doesn’t sound that affordable to most people.
Some commentators would justifiably claim that this already happens. They could point to changes brought in under Affordable Rent and increasingly expensive shared ownership homes to back up their point.
It’s a reasonable point, and we talk to people they are increasingly sceptical and mistrustful of terms like affordable. But this change is going to make the conceptual stretching worse. The loss of faith in the types of affordable housing that are built on new developments is just going to accelerate.
The second problem is that, so far as we know, eligibility for buying a Starter Homes won’t be limited by an applicant’s income. People earning mega-bucks will be able to buy them. So far, the only eligibility criteria that have been announced for them are:
- Being under the age of 40 and
- Being a first-time buyer
As an extreme example, I reckon David and Victoria Beckham’s firstborn, Brooklyn, will probably meet these criteria in a couple of years when he hits 18, although admittedly he might already have been given some property in trust. In any case, given that Starter Homes are on average going to cost the public purse £38,000 each,[1] and that after five years the occupier will be able to sell up and pocket that money, you would want to prioritise it for those who couldn’t afford to buy anyway.
The danger of not having an income limit on eligibility criteria is that high income households who could buy without this discount buy a Starter Home anyway, because – you know – it’s free money. There’s already been at least one example of a mortgage broker advising people who can afford to buy putting off their purchase in order to be able get the discount.
Which brings us on to the final point: how strongly this contrasts with another area of policy which is moving so steadfastly in the other direction.
Last week we pointed out that the Pay-to-Stay policy will mean that a couple living on the Living Wage in social housing will soon have their rent increased and warned about a number of serious consequences. That policy was justified on the grounds that it’s “not fair that other hard-working people are subsidising the lifestyles of higher-earners”. It’s not an unreasonable principle so long as it actually applies to genuinely high earners (which in the case of Pay-to-Stay it arguably doesn’t). It already applies to shared ownership and many renting allocation policies. So why not apply the principle to Starter Homes?
We will be submitting a response to the consultation that makes many of these points and there is a still an opportunity for the government to use this review as an opportunity to fix some of the problems with the current definition of ‘Affordable Housing’. The chief point is that if Starter Homes are to be included within that definition unchanged, then how much they cost and the lack of eligibility criteria must be an explicit exception and not become a general rule.
[1] This figure is taken from the £2.3 billion set aside for 60,000 Starter Homes in the Comprehensive Spending Review
