Eighteen months after the plan for starter homes was announced at the Conservative Party conference, the details surrounding them are still being hammered out.
Estates Gazette, with the help of Savills and a recent British Property Federation and Herbert Smith Freehills round table, has identified the key unanswered questions.
The basic principles of the starter homes plan are in the Housing and Planning Bill, which just passed through the House of Lords. Next, the secretary of state will set out the rules and regulations.
A second consultation on how it will work closes on 18 May. Assuming a month to process responses, along with Westminster’s summer hiatus, there is likely to be no clarity until the autumn, leaving just three and a half years to meet the government’s target of 200,000 homes by 2020.
Starter homes must be:
- sold at 80% of market value
- capped at £450,000 in London and £250,000 elsewhere
- held for a minimum of five years
- sold only to first-time buyers aged under 40
The government wants a fifth of new homes to be offered as starter homes to first-time buyers not eligible for affordable housing.
Key questions
Who will regulate the starter homes?
No clarity has yet emerged on this question. Will a separate body be required for allocation and monitoring, or will councils need to do it themselves? Likewise, who will ensure buyers are not selling within five years? The assumption has been that local authorities will be left with the responsibility, but other ideas include using funding from early resales to beef up regulation.
How much of a discount will some later buyers really get?
Many of the numbers behind starter homes are still up in the air, and the second consultation should clarify this. You cannot sell a starter home until five years after purchase, though the government looks likely to extend that to eight years. The House of Lords has backed an amendment to extend it to 20. The timing of the 20% discount offer could make a big difference – from the day the first house on an estate is built to the day the last is ready to sell, prices could easily rise by 20%, meaning the last buyer’s identical home could be back to full price. The percentage of starter homes on each site is also being questioned.
Are these starter homes extra to the affordable housing already promised?
Will starter homes cannibalise existing affordable housing promises, or will they be extra? Exception sites on which there are high infrastructure costs, low demand, or estate regeneration have already been defined – but the requirements for regular sites have not been. Much will depend on the choices that local councils make, based on their own housing needs. But if they want affordable housing, not starter homes, they could easily dig their heels in and demand both, wrecking viability.
Will the cheaper starter homes drive down values?
If first-time buyers are unable to buy the cheaper starter homes, they are unlikely to want to pay more for later stages of housing schemes. This could drive down sales values, and reduce other affordable commitments. “The 20% discount means that starter homes are likely to be the more attractive option for buyers,” said Chris Buckle, associate director at Savills Residential Research. “This detracts from the sales rate of full market sale homes, impacting cash flow and having a downward effect on blended land values.”
Are we really a nation of home owners?
It seems rental and retirement housing will have exemptions, but has the government, in its obsession with home ownership, ignored the demand for those types of housing? Ghislaine Halpenny, director of communications at the British Property Federation, said: “In order to deliver in areas where we most need new housing, such as London, there needs to be a variety of tenures in order to ensure there is housing for those who will find starter homes unobtainable.”
Who are starter homes helping?
In London, finding the money for 80% of market value is still impossible for many, while buyers in the regions do not really need a discount: the average price of a home in Manchester is only £110,000. Buyers in the South East, where house prices are high, could benefit from a £250,000 cap but, as it stands, the policy looks unlikely to help anyone, while potentially reducing supply at the expense of other kinds of housing.
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