Published: 14 Sept 2016 by Toby Lloyd

Two months on and Theresa May’s new government has not revealed much about its plans for housing – but encouraging signals are now beginning to emerge. Last week the delayed Neighbourhood Planning Bill was published, proposing some welcome reforms, and then yesterday the new Housing Minister suggested that the Starter Homes policy could be tweaked to make it more effective.

Gavin Barwell MP told a property industry conference that supporting homeownership shouldn’t be at the exclusion of support for other tenures – and recognised that policies designed to help people buy could create ‘a little bit of tension’ with overall supply objectives.

To be clear, there is nothing wrong with supporting homeownership. Most people want to own, and for good reasons: owning a home gives you the security and stability that evidence consistently shows people prioritise. The fact that mortgaged homeownership has been falling for 23 years is not a cause of celebration. It’s a sign that that our housing system has gone badly wrong.

The problem comes when government policy tries to boost homeownership with short term fixes that actually make matters worse. Pumping more money into an already overheated housing market without increasing the supply of homes dramatically is a sure fire way to push house prices up further. And of course it was sky-high prices that drove the decline in homeownership in the first place, as millions of people found themselves priced out.

In this context, diverting scarce public funds from providing affordable homes to making existing homes less affordable is at best unwise. A decent supply of homes at affordable rents reduces the market pressure on house prices, and gives ordinary families the opportunity to save up for a deposit. It’s not a coincidence that the era of rising homeownership was also the era of a strong social housing sector – or that the two have declined in tandem. As Renewal argued recently, providing more low cost rented homes would be an effective way for government to increase opportunities for homeownership.

The Starter Homes policy that was enacted earlier this year went further, and threatened to cannibalise planning subsidies as well as grant support. Developers would be forced to build Starter Homes instead of social housing or shared ownership – despite few people being able to afford such homes, and the lenders refusing to provide mortgages them.

Not only did this threaten to be yet another nail in the coffin of low cost, rented housing. So great are the uncertainties around how Starter Homes will be defined and how the policy would work in practice, they are undermining developer confidence and so threatening supply of all tenures.

None of these questions were resolved in the rows over the Housing and Planning Act’s passage through Parliament. Regulations are due to clarify the policy, but there is as yet no sign of these.  The obvious way out of this bind is for the government to accept that secure, low cost rented homes are in fact one of the best ways to support people into homeownership, as well as providing decent homes for those that cannot afford or don’t want to own. Redefining the target to build 200,000 Starter Homes to include other forms of tenure would, at a stroke, solve many of the problems of this ill-fated policy.

It may be too soon to say with confidence, but the new Minster’s words suggest that some very welcome improvements could be in the offing. The big tests will be in the detail of the Starter Homes regulations, and in the Autumn Statement’s ‘reset’ of the government’s spending plans.