Year zero for starter homes

Originally posted on November 5 on my blog for Inside Housing.

The sad fate of (non) starter homes offers a lesson for politicians in the folly of making unworkable promises but it is one they seem unlikely ever to learn.

A report published on Tuesday by the National Audit Office (NAO) investigates what happened to one of the flagship promises made by the Conservatives in their 2015 election manifesto: ‘200,000 Starter Homes, which will be sold at a 20% discount and will be built exclusively for first-time buyers under the age of 40’.

Four and a half years later, the total number of completions is precisely zero and the Ministry of Housing Communities and Local Government (MHCLG) has not even laid the regulations in parliament that would enable any starter homes to be built.

So what has happened since the heady days of 2015, when the spending review allocated £2.3 billion to build the first 60,000 starter homes?

The NAO finds that the money was gradually diverted into other schemes to buy and remediate land: a total of around £450m was spent on sites but they ended up being developed for a mix of market sale and affordable homes.

What its report does not reveal is why. This, after all, was one of the key promises made by David Cameron’s Conservatives in 2015.

Forensic dissection of the detail as the legislation went through the Commons and the Lords revealed a series of flaws.

Just for starters, how could homes worth up to £450,000 ever be classed as ‘affordable’ and what was to stop builders simply increasing their prices by 20% first or cutting the size or quality of what they built?

Mortgage lenders also urged caution about setting ‘over-ambitious targets’ before the proposition had been tested on the market.

And starter homes was just one of the unworkable promises made at the time: remember the pledge to extend the right to buy to housing association tenants and to fund it by forcing councils to sell off their most valuable homes.

All three pledges became key parts of the Housing and Planning Act 2016 but none of them were delivered. A fourth policy – to make high-earning council tenants pay increased rents to stay in their homes – was withdrawn before the Act passed.

One key reason was that the policies were unworkable because they were based on plans written on the back of a fag packet.

Starter homes did at least start life making some sort of sense as a way to deliver homes on sites that would not otherwise get planning permission for them – the discount would effectively come from the land value uplift.

The problems started when the promises were scaled up and the government refused to listen to those who argued that the discounts should remain in perpetuity rather than being pocketed by the first buyers.

That idea is at the heart of Labour’s proposed FirstBuy scheme for 100,000 homes for sale at discounts of up to 40% with priority for people living locally and key workers – but with the discount preserved when the house is re-sold.

A second possible explanation is that the policies were never meant to actually happen – they were promises that were designed to be traded away after the likeliest result of the 2015 election.

However, rather than another coalition with the Lib Dems, David Cameron won an unexpected majority, with messy results first for housing and then for the country.

Then add a third reason that the rapid turnover of secretaries of state and housing ministers meant that by the time it came to implementation time the incumbents had nothing to do with the original policy.

That meant that when real obstacles to implementation arose, such as the reluctance of mortgage lenders to engage with the policy, they had no direct stake in overcoming them.

The net result is that no starter homes were ever built and no regulations were ever laid to allow them to be, although that will not stop housebuilders marketing their own ‘starter homes’ at supposed discounts.

The once flagship policy survives only in the glossary of the National Planning Policy Framework as part of the definition of ‘affordable housing’.

But will any of this stop Conservative politicians coming up with similarly unworkable policies in future? Almost certainly not.

Robert Jenrick’s right to shared ownership plan bears all the hallmarks of those gleaming promises made in 2015.

Scheme that undermines the finances for the rest of social housing? Check.

Plan with an obvious flaw at the heart of it (why would anyone pay more for their home and take on full responsibility for repairs in return for a 10% stake?). Check.

Tight election on the way? Check.

Speaking at the Conservative conference last month, Jenrick signalled a return to the home ownership-first policies of David Cameron after the more pragmatic premiership of Theresa May.

And interviewed by the BBC’s Nick Robinson for his Political Thinking Podcast, the housing secretary pledges not just to stop the decline in home ownership, but to reverse it and take us back to the days when half of the under 35s owned their own home.

As a millennial who owns three homes himself, Jenrick is already doing his best to reverse the trend.

But he talks of finding more routes into homes ownership, nominating shared ownership and homes for local people to buy at a discount as favourite ideas.

He also set out that ambition in an article for The Times in August shortly after becoming housing secretary as he argued that:

‘What a difference it might make to the planning system if existing residents knew that a good proportion of new homes would be sold at discounted prices to people from that area trying to get on a foot on the ladder.’

The paper reported the same day that ministers were considering a plan to give first-time buyers a 20% discount to buy a home in the area where they grew up with the cost to be ‘borne by developers’.

Starter homes are dead. Long live starter homes?