Disagreements surface over UK’s starter homes

London: Local councils in England and Wales have joined a chorus of calls for changes to the government’s starter homes programme ahead of its launch later this year.

The Local Government Association, which represents councils, is calling for discounts on homes sold under the scheme to apply to resales so that they “benefit future generations”, rather than handing one group of people a windfall gain through a one-off price cut.

Under plans, newly built starter homes will be available at 20 per cent discounts to first-time buyers under 40, who will then be able to sell them on at full market rates after five years.

Councils are also worried that the homes, which will be capped at discounted prices of 450,000 pounds in London and 250,000 pounds elsewhere, will eat into the supply of cheap rented properties for those still unable to buy.

“The national starter homes scheme could help some people on to the housing ladder but crucial details are yet to be confirmed,” the LGA said.

“[We are] concerned it will help the fewest number of people in areas where the housing affordability crisis is most acute.”

Starter homes are central to the government’s policy of increasing home ownership, which has reached its lowest levels in 30 years as house price inflation outstrips wage growth. Ministers are to spend 2.1 billion pounds subsidising a planned 200,000 starter homes by 2020. They are expected to launch a consultation shortly on the details of the scheme.

But starter homes will be out of reach for people classified as needing affordable housing — those who would have to spend more than 30 per cent of their income to rent or buy a home — in 67 per cent of local council areas, according to research carried out by Savills for the LGA.

Of particular concern is the fact that starter homes will count as “affordable housing” under so-called section 106 agreements, which require developments to include cheaper housing, despite the fact that a 450,000 pounds home costs 17 times the average British salary.

This means starter homes will in effect prevent the construction of between 56,000 and 71,000 social and affordable — under current definitions — homes that would otherwise have been built, the LGA said.

The LGA is urging the House of Lords to back amendments to the forthcoming housing and planning bill “allowing councils to have a mix of affordable homes based on local needs”, given that millions of people remain on waiting lists for social housing.

The Lyons Commission, a group of housing sector experts, also urged discounts on starter homes to be applied in perpetuity, while calling for ministers to ensure a broad housing mix.

Savills also found that someone with a 5 per cent deposit would be able to buy an average priced house with a 20 per cent discount in only 45 per cent of English council areas. The Department for Communities and Local Government said this was “misleading”, however, as “starter homes will be lower than the average house price for an area”.

“Latest figures show that the number of new homes [is] up by 25 per cent and the housing bill will kick-start a national crusade to get 1 million homes built by 2020, including 8 billion pounds to deliver over 400,000 affordable homes,” the DCLG said.

Financial Times