Giving with one hand, taking with the other

I’m genuinely torn on the government’s new house building policy: 100,000 Starter Homes for first time buyers, each sold with a 20% discount.

On the one hand, I think it’s great that the policy uses a zoning power to make land available more cheaply to build much needed homes. We’ve been advocating something similar as part of a much broader house building programme. It’s also great that the policy helps priced-out first time buyers with a very substantial 20% discount (and recognises that the discount should stay locked in for at least the next buyer too).

However there are some pretty major kickers.

Most obviously, the government says that the discount to first time buyers can only be afforded if there is no affordable rented housing or shared ownership homes included. I think this is highly dubious. We’ve calculated that the 100,000 homes will create something in the order of £3.5 billion of additional value on the brownfield sites. This is because by zoning land previously not given planning permission you increase its value enormously and by using zoning this extra value that can be “captured” for the local community’s benefit.

When you consider that the policy also wipes out the risk of not getting planning permission for developers by granting automatic permission, there should definitely be scope to squeeze down their margins below their usual 20%, saving more cash for affordable housing.

We argue that there should not be any restriction on developers submitting plans which include affordable housing and that these should be given priority. Any developer who says that it is not “viable” (i.e. enormously profitable) to build any affordable housing should be required to open up their books to the local council and show why it’s not viable: given they face no planning risk and can get the land cheaply.

There’s also an issue with restricting these new homes to unused brownfield land only. Clearly we should always build on brownfield first, but as NLP and others have shown there’s simply not enough brownfield land to meet our housing shortage. If the policy could be extended to some agricultural sites then the model would work even better (as agricultural land values are far below industrial). On scrubby fields with low amenity value near train stations, this sort of zoning could generate enormous amounts of cash to build genuinely affordable housing and local infrastructure.

While I’m sure that the government calculates that there’s a political benefit to restricting the policy to brownfield sites, this may backfire when proposals come forward if they are built on sites which are completely unsuitable for homes, far from employment or services. Equally, having “brownfield” status is no guarantee of avoiding a local planning dispute, indeed many “brownfield” sites are more environmentally valuable than single-crop fields. The evidence we’ve gathered suggests that the most important thing for local communities is knowing that their kids will be able to afford homes, that the homes will be good quality and that there will be new local services (especially schools and health services) which benefit the whole community.

Finally, the way that the 20% discount is calculated is hugely important to prevent developers from gaming the system. I would argue that independent surveyors should give a full market value before a 20% discount is taken off. If the discount is set according to average prices by bedroom numbers in the local area, then there’s a real risk that developers which just build smaller or worse quality homes – wiping out the discount.

On balance though, I do think that this policy usefully moves the debate forward, even if only by small steps. It’s much better than demand side interventions like Help to Buy or cutting Stamp Duty – both of which translate into higher house prices. However if we’re going to provide the long-term solution to the housing shortage that we need it will take a much bigger, bolder and comprehensive programme than this.