The re-animation of Starter Homes

Published: by Toby Lloyd

The first big housing news of 2017 is that one of 2016’s most controversial policies is back. The first Starter Homes will now be built in 30 local areas around England.

At first glance, Starter Homes may sound like a good idea: new homes, built on brownfield land, for struggling first time buyers, and sold at a 20% discount to the market price. What’s not to like?

When it was first proposed, we rather liked the idea of finding land that would not otherwise get planning permission, and using ‘exception site’ policies to bring it into development. This mechanism already allows genuinely affordable housing to be built in rural areas: why not extend the principle to urban sites?

But ever since the idea was first floated back in 2014, it’s been bedevilled by a seemingly endless series of awkward questions. Questions like, what does ‘20% off’ actually mean? How much would the market pay for a home that will be worth 100% of market value in five years’ time? Will developers not just raise their prices before offering the ‘discount’? Is it really a good use of public funds to allow the buyers to sell the homes at full price, pocketing the subsidy? Where are all these brownfield sites that no-one has spotted before? Will these homes be additional at all?

In fact, as soon as you start picking at the details, the entire policy begins to unravel. It quickly became the billy-no-mates of housing policy. Councils hate the government riding roughshod over any idea of localism by forcing them to provide Starter Homes instead of other types of more affordable housing. The mortgage lenders don’t like it, because they don’t know the true value of the assets they’re being asked to lend on. Even the developers have started to get cold feet as the uncertainty has dragged on. There’s a good summary on Inside Housing here – or read any of our many blogs on the slow crumbling of the policy.

I can’t think of a better example of a podium policy: one that plays well at party conference, but falls apart on first contact with reality. As it stands, it won’t help many of the ‘just about managing’ renting households it’s aimed at.

It’s a new year, so let’s be optimistic: there might just be a happy conclusion to the Starter Homes saga. The announcement this morning was in fact just the list of councils who have been granted funding from the £1.2bn Starter Home Land Fund – which was opened for bidding in March 2016. On its own this could be some useful additional funding to get brownfield sites ready for development. We don’t yet know any of the details about how the homes will be sold – or at what prices.

So there’s still a chance that some of those awkward questions will be satisfactorily answered in the forthcoming White Paper. This could be done by agreeing to the banks’ suggestion of making the discount last a lot longer than five years or widening the definition of Starter Homes to include more genuinely affordable tenures.

The biggest question of all though, is this: why should a new, untested and possibly unworkable new policy be allowed to suck up the scant resources available for affordable homes? The Starter Homes Requirement was legislated for in 2016’s Housing and Planning Act, but the regulations needed to bring into force haven’t appeared. We still don’t know if the imposition of Starter Homes on all local authorities will be pushed through or not: until we do, the entire development system is effectively in limbo.