Starter homes: a £27bn raffle

Feb 29, 2016 6:00 AM

The government wants to eliminate Generation Rent. I think they're talking about the demographic group, rather than our organisation. They want to replace us with Generation Buy. How cute.

Sadly, their plans so far will do nothing to reverse the growth of renting and will exacerbate the rising level of inequality between people who own their homes and those who don't.

The government's flagship policy is Starter Homes. The scheme will help 200,000 private renter households into home ownership with a 20% discount on the market price of a new home. The trouble is, if you're not in one of the lucky 200,000 - that's 4 million - you won't get a discount. You also won't get to share £26.8bn of profits when you sell your starter home - read our analysis here


There's a lot wrong with Starter Homes. For a start they threaten to crowd out building of other affordable housing, like social rented homes. They're also unavailable to private renters over the age of 40, who arguably have it worse than under-40s because they're more likely to be renting for life.

But the scheme could be a whole lot better if the discount was permanent. In 2014 Generation Rent called on the government to build new homes that would be sold at below the market price - we called this a Bubble-Free Housing Market. They clearly liked our idea because they duly announced Starter Homes. 

But they missed the point, and their policy has one disastrous flaw.

We're all in favour of homes that people can afford to buy, but the whole point of our proposal was that the lower price would stay low. 

The same is true for Starter Homes, but only for the first five years. After five years are up the lucky owner can sell the home for the full market price. That means free, subsidised money for 200,000 people - we've estimated £141,000 for the average home in England. This leaves absolutely nothing for the rest of us, and one technically "affordable" home lost into the overpriced open market.

The government's policy could actually be a decent one if the discount was permanent. A renter dutifully saving up could reach 2021 and find that all Starter Homes have been sold and there are no more discounts. With our proposal, discounted homes would still be available as original buyers started selling up.

This is already being done in the free market by Pocket Homes, and the government's absurd giveaway is even being questioned by mortgage lenders and house builders.

The Housing Bill is going through the Lords which offers a great opportunity to fix this mess. Please write to the main parties and ask them to amend the Bill.