The trouble with starter homes

Originally posted on January 3 on my blog for Inside Housing. 

The new year ‘green light’ for Starter Homes raises yet more questions about the flagship Conservative policy.

The announcement covers 30 local authority partnerships that will get help from the £1.2bn Starter Home Land Fund to develop schemes with “thousands of new homes” on brownfield sites. These will then be sold at a discount of “at least 20% below market value” to first-time buyers aged between 23 and 40.

So far, so faithful then to the policy as it evolved under David Cameron and George Osborne. But note that vague reference to “thousands” and compare it with the very specific pledge to build 200,000 Starter Homes in the 2015 Conservative manifesto. The Starter Homes Land Fund was launched in the Spring Budget to deliver “at least 30,000 homes”. Note too that only five or six of the 30 areas are in the politically sensitive South East and that the announcement does not cover London.

What this looks like is the more acceptable end of the policy: a plan to get homes built on sites that might not otherwise be developed. True, the £1.2bn could be better spent in other ways but this is not yet the subsidy-hungry, Section 106-hogging ‘cuckoo in the nest’ of affordable housing specified in the Housing and Planning Act.

Instead it looks more like the original proposal for 100,000 Starter Homes from 2014. As I blogged at the time, there were still problems to be resolved (sites that would not normally get permission for homes may be needed for industrial or commercial use and be miles away from schools and other facilities) but the basic idea of urban exceptions sites did have potential.

That was before the target was suddenly doubled to 200,000 just two months before the last election and then included in the Conservative Party’s manifesto. From there the trail led inexorably to the spending review and the Housing and Planning Act and their provisions to suck grant and planning subsidy away from affordable housing.

And the fundamental problems with the idea have not gone away: up to £450,000 in London (£250,000 outside) is not affordable by any stretch of the imagination; those who can afford it probably don’t need the 20% discount; there is no guarantee that the discount will not simply melt away into the back pocket of builders who carefully jack their prices up first; and above all the only way that the discounts could be funded was by raiding the affordable homes budget and diverting section 106 money to Starter Homes rather than affordable ones.

There were some changes and concessions as the act went through the House of Lords, with some restrictions on resale and lettings to prevent short-term speculation. The act still gives planning authorities a general duty to promote them and the definition of ‘affordable housing’ for planning purposes now includes them.

Many key details of the scheme has still not been published so it’s still possible that the 2017 version of the policy will be better than the 2016 vintage. In particular, the emphasis in Monday’s announcement was on brownfield sites, which recalls the original idea of building them on sites that would not normally get planning permission for housing.

Gavin Barwell certainly hinted as much last September in the wake of his first major speech as housing minister. Asked whether the 200,000 target only means homes sold at a 20% discount, he said:

“It’s obviously a manifesto commitment that we have, what I’ve got to look at is can we have a wider range of products in terms of affordable housing, and not just say that the only thing that qualifies is this one?”

The Department for Communities and Local Government quickly put out a statement saying there was “no change” in the policy but the following month Barwell confirmed that the definition would be broadened “away from the statutory definition”. That could well mean that other schemes such as Rent to Buy or buy-as-you-go will count as Starter Homes.

Given the chances of building 200,000 Starter Homes at a 20% discount by 2020 look somewhere between slim and zero, that would make sense. As with the New Year’s honours list, the blame for a bad policy could be pinned on David Cameron.

More details are expected in the Housing White Paper later this month. Whatever finally emerges though, the fundamental questions remain. Will the homes really be additional? Will the money really go to sites that would not otherwise be viable? Will the discounts go to people who could not otherwise afford to buy? And how many other affordable homes will not be built as a result?