Starter Homes

In this blog, Manos Boulmpasakos, an environmental consultant at Groundsure, analyses the ‘Starter Homes’ scheme. If you have any questions or comments about this article, you can contact the commercial consultancy team at commercial@groundsure.com.


200,000 will benefit from the Starter Homes scheme – What about the rest?


When someone visits the government’s webpage for the “Starter Homes” scheme, they will read the message “coming soon”. The “Starter Homes” scheme was officially launched when the Housing and Planning Act 2016 received Royal Assent. The key principles of the scheme are described briefly below [1, 2, 3]:

  • First-time buyers (between 23 and 40 years old) will have access to new-build houses offered with at least a 20% discount from their market price. The aforementioned houses will be priced up to £250,000 outside London and up to £450,000 in the capital
  • The scheme aims for 200,000 starter homes to be delivered by 2020
  • The owners of the new houses will not be able to sell them for a period of five years; this is to ensure that short term speculation will be avoided
  • The “starter homes” will be built on brownfield land.

The Housing and Planning Act, states that Local Planning Authorities have the obligation to promote the new scheme. Planning permission for certain residential redevelopments will be granted once the starter homes requirement has been met, which indicates that 1 in 5 new homes on any qualifying development must be a starter home [1,3].

However, there are strong objections/points that have been raised whether this scheme would actually contribute in combating the housing crisis and helping first-time buyers. One of the key concerns for housing campaigners is that starter homes can be resold at the open-market price after the initial five-year period [4]. If no further conditions apply on the reselling option (for example, houses are not sold on to first time buyer with the 20% discount), then no more than 200,000 first-time buyers can benefit from the scheme.

By undertaking a starter home development project, a developer will be released from Section 106 obligations. These require a certain percentage of affordable houses to be included in the development project and payments to be made to the councils for local infrastructure [5, 6]. With the aforementioned requirements out of the equation, less affordable houses will be available for the families that cannot afford to buy. What is more, the councils will be deprived of funding that could have been spent on vital infrastructure. The Local Government Association (LGA) estimated that councils could lose up to £3bn [6]. In addition “brownfield” sites, where starter homes will be built,require investment in local infrastructure as they tend to have limited access to public transport and services.

The LGA, based on an analysis conducted by Savills, states that starter homes will not be affordable for “all people in need of affordable housing in 67% of council areas” [7]. With all this in mind, should the target of delivering 200,000 starter homes by 2020 be achieved, it would help a certain proportion of potential first-time buyers onto the housing ladder. What about the rest though?

Groundsure produces a variety of reports on brownfield developments, including the recently launched Groundsure Avista and Fire Insurance Plans reports.

 

References

  1. Department for Communities and Local Government and Brandon Lewis MP, 2016. New government plans for 1 new home in 5 to be a starter home [Online]. Available at: https://www.gov.uk/government/news/new-government-plans-for-1-new-home-in-5-to-be-a-starter-home [Accessed 5 November 2016]
  2. Department for Communities and Local Government, 2015. Subject: Stepping on the ladder: High quality Starter Homes for first time buyers, Consultation response. [Online] Available at:<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/408455/150302_-_Gov_response_Starter_Homes.pdf> [Accessed 5 November 2016]
  3. Pinsent Masons LLP, 2016. Housing and Planning Act 2016. [Online] Available at:< http://www.pinsentmasons.com/PDF/2016/Housing-and-Planning-Act-2016.pdf> [Accessed 3 November 2016]
  4. The Guardian, 2016.Starter home buyers could receive £141,000 windfall from taxpayers. [Online] Available at: <https://www.theguardian.com/business/2016/feb/29/starter-home-buyers-could-receive-windfall> [Accessed 2 November 2015]
  5. The Guardian, 2016.Discounted starter homes plan ‘will fail to help most buyers’. [Online] Available at: <https://www.theguardian.com/money/2016/feb/16/government-discounted-starter-home-plan-buyers> [Accessed 2 November 2015]
  6. BBC, 2015.Why ‘starter homes’ are controversial. [Online] Available at: <http://www.bbc.co.uk/news/business-34465513> [Accessed 5 November 2016]
  7. William Eichler, LocalGov, 2016. Starter homes out of reach for majority of families, says LGA. [Online] Available at: < http://www.localgov.co.uk/Starter-homes-out-of-reach-for-majority-of-families-says-LGA/40329> [Accessed 2 November 2015]

 

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