Published: 20 Oct 2015 by Kate Webb

Recently I took part in a local radio phone-in to debate the government’s plans to redefine “affordable housing” and divert funding into its new Starter Homes programme. Would these homes work for families on ordinary incomes?

The government hopes people will think so, having announced plans to redefine “affordable housing” to include Starter Homes. Exactly what counts as “affordable” is a hotly debated question, but surely the maximum price of £450,000 in London is stretching the definition too far. We’ve crunched the numbers and calculated that Starter Homes are likely to be unaffordable for households on average incomes across 58% of the country.

But despite these uncomfortable figures there are clearly some people who think Starter Homes sound like a great idea. The woman on the radio debate just before me declared the policy “fantastic”. She and her partner were desperate to buy, and hoped the promise of an “affordable starter home” would do what it said on the tin.

This might sound like a win for the government, but her reasons for welcoming it made my heart sink for her – and underscored to me why the policy is unravelling so quickly.

The caller explained why she was so excited by the offer: she had previously had to give up on shared ownership because it was unaffordable locally and she couldn’t raise the minimum deposit required for a share. Social rented housing was not an option for her due to tight allocation criteria and long waiting lists.

She was on the minimum wage, she explained, and money was tight.

If Starter Homes are a stretch for families on average wages they’re nigh on impossible for families on the minimum wage. The caller will presumably gain from the Chancellor’s new National Living Wage but even on that income, Starter Homes will be unaffordable in 98% of the country.

The stark truth for this woman and her family is that it is highly unlikely she will be able to afford a Starter Home – and yet she’d been ecstatic at the thought that politicians were going to help her. An understandable hope when the prime minister stands up and promises to deliver affordable housing for hard working families. But it’s a hope that doesn’t withstand even a cursory affordability check.

Is it such a problem if she’s not one of the lucky beneficiaries? Someone will be able to afford a Starter Home. Our analysis shows that in England people will need a deposit of £40,000 and an annual income of £50,000; it’s a lot, but enough people do earn that much for the 200,000 Starter Homes the government has promised to find a market. The IFS calculates that a couple on £50,000 are in the top 24% of earners.

The problem with Starter Homes is not that no one will be able to afford them, but that they will be built instead of cheaper homes people on ordinary incomes could actually afford. Currently, Section 106 agreements require developers to build social rented and shared ownership housing alongside market sale homes. The government now wants these agreements to support Starter Homes instead.

So a home that could have been affordable to the caller above will now never be built, and will be replaced instead with a flagship offer that works for a lucky few. It’s not just Shelter warning of this: residential property consultants JLL have said that Starter Homes risk displacing genuinely affordable homes on a huge scale.

The government has fixated on one number – that 86% of Britons want to own their own home – and ignored the far more meaningful numbers on incomes and housing costs that show why a declining number can actually afford to. A government genuinely committed to ensuring that hardworking families can better house themselves would not put all its eggs in the Starter Home basket.