The Starter Homes Initiative: A solution to home ownership targets?

The government’s Starter Homes Initiative has been in place for some time, but provision for its extension in the Housing and Planning Bill has reinvigorated debate around it. The scheme has two aims: to increase housing supply and to make an element of that supply more affordable.

But while overall affordability is one of the major barriers to house purchase, there are others. Research indicates that inability to put together a deposit and difficulties in obtaining a mortgage are also very significant hurdles. Studies also suggest that only a small fraction of current home ownership has been made possible through the separate Help to Buy initiative.

Taking these and other factors together, it seems unlikely that the Starter Homes Initiative will provide as significant a solution to the housing crisis as the government might hope.

The legislative framework

Through the starter homes regime, first time buyers under the age of 40 can purchase a home at a discount of at least 20% of market value, subject to a price-cap (after application of the discount) of £450,000 for homes within the Greater London Area and £250,000 for those elsewhere. Originally only applying to certain brownfield sites, the draft Bill proposes the following extensions to it:

• The imposition of two new duties on local authorities in England:
  • a general duty to promote the supply of starter homes in exercising their planning functions – i.e. in preparing local plans and determining applications; and
  • a specific duty to require a certain number/percentage of starter homes to be provided on developments of a specified type.
• The introduction of a ‘starter homes requirement’, which the Bill’s explanatory notes indicate could be imposed on all applications for residential development above a certain size – this is where the real potential lies for there to be a significant increase in the number of schemes delivering starter homes.

Key detail awaited

At this stage, many fundamental questions remain unanswered in respect of the delivery of starter homes. Critically, for starter homes other than those under the starter homes exception site policy (i.e. on brownfield land), it remains unclear:

• how the discount will be funded;
• what restrictions will be placed on the subsequent letting or disposal of these units; and
• how any starter home requirement will interact with the requirement to provide affordable housing.

So, where does this leave us?

Some label the Starter Homes Initiative as the death of ‘genuinely’ affordable housing. Others welcome it as a means for many to take their first step onto the property ladder. What is clear is that further legislation and guidance is needed before the potential implications can be truly assessed.