Starter homes: the problems


As admirable as attempts by policymakers to open up the housing market to those on lower incomes are, confusion and muddle are often the hallmarks of policies in this area. So how likely are the latest proposals to fare better?
The big idea is starter homes. These new homes must be sold at 80 percent of market value capped at £450,000 in London and £250,000 elsewhere, sold only to buyers aged under 40 who are not eligible for affordable housing and they cannot be sold for five years after purchase. Furthermore, a fifth of all new homes should fit this category.
Next week – 18 May – sees the closure of a second round of consultation on how these starter home measures, contained in the Housing and Planning Bill will work. Having passed through the House of Lords, the next phase sees the secretary of state lay down the rules and regulations. The government’s aim is that 200,000 will be built by 2020 – leaving around three and a half years to complete the job after the relevant legislation is passed – an ambitious target given the UK’s recent housebuilding and planning history.
Much of the practical detail is yet to be worked out and it can only be hoped that this second phase of consultation will see answers begin to emerge. Some of the issues to be worked out are obvious.
The relevant regulatory body for a start – will it be left to local authorities or will there be a bespoke regulator? Would the regulatory body be responsible for checking homeowners do not sell within five years? Will that threshold even remain at five years – the government may extend that to eight years but the House of Lords asked for it to be raised to 20. Housing does not spring up overnight with the wave of a George Osborne wand. Prices could easily rise by 20 per cent between the first and last house on an estate being completed, so when would the 20 percent discount be applied? Will these starter homes be in addition to the existing affordable housing or will we see battles emerging between developers wanting to make projects viable and local authorities wanting as much low-cost housing as possible? If starter homes are so much cheaper, will there still be a market for other the parts of housing developments? This could have a real adverse impact on housebuilders’ cash flow and the value of land.
And last but certainly not least, who is going to benefit from the imposition of starter homes? Even with the 20 percent discount, most people in London, for instance, will still find buying their home a distant pipedream. This may be less true of other parts of the country where housing is significantly cheaper which may mean that the starter home initiative is needed less – although of course this is offset by lower wages.
Will this latest attempt to help people buy their first home have the desired effect? It may partly depend on the contributions to this current phase of consultation. At the risk of sounding like a government information campaign, you could do worse than tell them what you think will work.

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