Housing White Paper: could Starter Homes be genuinely affordable?

As the publication date for the government's Housing White Paper approaches, we and groups across the the housing world are hoping for an announcement that will signal a 'whole new mindset', as the Secretary of State has promised.

One item that will be included is confirmation of how the government's long-running Starter Homes policy will work - and the detail will tell us how far it will go towards slowing the affordability crisis for first-time buyers. This is the government's flagship policy that was pitched as "turning Generation Rent into Generation Buy".

First approved around two years ago ahead of the 2015 General Election, Starter Homes was an offer from Cameron’s government to renters who found themselves locked out of home-ownership because of rocketing house prices.

It promised 200,000 homes at 80% of market price, open to first-time buyers up to the age of 40. Since then, the policy has stalled under the weight of a number of unanswered questions, including how market value would be judged, whether these homes would be actually affordable, whether the discount will be passed on to future first-time buyers, and whether they should be a priority for government spending on housing.

Since the Housing and Planning Act was passed in May 2016, we have had little detail from government, and the announcement of thirty sites for Starter Homes earlier this month raised another one: what about affordability of housing in the most expensive region in the country, London and the South East, where no sites are proposed?

We still don’t have the answers – and further legislation is required once we do – but as we argued almost a year ago, there remains an underlying principle within the policy that could be developed to provide truly affordable homes to buy.

The policy recognises that simply continuing to build homes at market value will not provide housing for the millions whose wages have not kept up with rising house prices, and will heap more and more debt upon those who can get mortgages.

Instead, we need to build homes to buy that are cheaper – and make that lower price permanent. One of the great problems of the current policy is that the discount only lasts for five years, at which point buyers can then sell their home on at full market value.

This creates a new opportunity for speculation in housing and, by our estimate, the use of government funds to provide free money of around £141,000 on the average home for each of those 200,000 lucky buyers when they choose to sell their homes.

We believe the discount should last in perpetuity, starting to create a new supply of homes to buy below market level, and following the lead of Community Land Trusts and our own Bubble-Free Housing proposal.

Private renters recognise the unsustainability and patent absurdity of a market of rising house prices with no accompanying policy or action to increase people’s incomes or lower people’s housing costs when saving for the deposit.

The latter can be resolved by investing in much more social housing and in regulating security and affordability in the private rented sector. The government has raked in £1.2bn in a new tax on buy-to-let and second home transactions in its first 9 months, and we have called on ministers to plough that cash straight back into building new council homes.

The White Paper is primarily an opportunity to jumpstart the building of new homes, guide how many of those will help low income households, and determine government support for homes built to let at market rents. The latter, known as “build to rent”, is seen by the government as the way to cater for a larger renter population, and use pension funds and other “institutional investors” to pay for it.

We’re unconvinced that a few thousand professionally managed homes will have an impact on the wider, unreformed rental market, but if the taxpayer is going to be supporting this, the new homes need to help those who are being failed by the existing housing system. Build to rent needs to be affordable to those who can’t buy, and offer longer term tenancies or greater security – particularly for families and older renters. Unless the new sector addresses this, our cash will just be building high-spec flats for tenants who could choose to buy.

The other problem to solve is where the new homes will go. For booming cities like Oxford, Cambridge, Bristol and London, this means removing protections on green belt. Today’s Sun suggests that councils will be encouraged to build on green belt where there’s no available brownfield land – and, of course, a lot of green belt is brownfield land.

All this and more is expected to be revealed on Monday.

Having campaigned on this last year, we’ll have our eyes peeled for the details around Starter Homes. If we’re to have them, let’s make them permanently affordable and give future renters an opportunity to buy them too.


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