House of Commons Library

Starter Homes for First-Time Buyers (England)

Published Friday, May 18, 2018

This House of Commons Library briefing paper explains the Government's starter homes initiative. The homes will be available at a minimum 20% discount on market value to first-time buyers under the age of 40. The paper outlines legislative provisions in the Housing and Planning Act 2016 to enact the initiative, together with planning policy reforms and a £1.2 billion Starter Homes Land Fund to support starter homes delivery. The starter homes initiative only applies in England.

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Rising house prices and restricted access to mortgages have seen falling levels of home ownership in recent years. Younger households in particular have been disproportionately affected by this decline. Nevertheless, the aspiration to buy and own a home remains strong for the majority of households.

Coalition Government Policy on Starter Homes

In December 2014 the Coalition Government announced a starter homes initiative which was intended to deliver 100,000 discounted starter homes for first-time buyers. The Government subsequently implemented a starter homes exception site policy to encourage the provision of starter homes on under-used or unviable commercial and industrial land. The policy exempted developers from certain planning requirements on these sites, in return for offering starter homes at a discount to younger first-time buyers.

Conservative Government Policy on Starter Homes

Policies intended to increase home ownership and drive up housing supply featured prominently in the Conservative Party Manifesto 2015, including a commitment to expand the starter homes initiative to deliver 200,000 homes by 2020. The Government’s 2015 Productivity Plan set out a range of measures to fulfil this commitment, including “bringing forward proposals to ensure every reasonably sized housing site includes a proportion of starter homes”.

The Housing and Planning Act 2016

The Housing and Planning Act 2016 provides the statutory framework for the delivery of starter homes. The Act defines starter homes as new homes costing up to £250,000 (£450,000 in London), to be available at a minimum 20% discount on market value to eligible first-time buyers. The legislation includes provisions to introduce a general duty on planning authorities in England to promote the supply of starter homes, and a specific duty to require a minimum number or proportion of starter homes on certain residential development sites. The starter homes legislative provisions are not yet in force.

Much of the detail of the statutory starter homes scheme will be set out in regulations. The Government consulted on the content of the Starter Homes Regulations between 23 March and 30 June 2016. Views were sought on a number of issues including: elements of the definition of a starter home; requirements relating to the provision of starter homes (e.g. the number of starter homes and the type of site on which they should be delivered); and restrictions on the resale of starter homes. The Starter Homes Regulations will need to be approved by both Houses of Parliament.

Starter Homes Commentary

The starter homes provisions in the 2016 Act were subject to much debate and challenge as the legislation progressed through Parliament. A broad range of organisations have expressed concerns about starter homes.  Issues that have been raised include: the importance of supplying a mix of housing tenures to provide for people on lower incomes; the need for flexibility to reflect housing needs in different areas; the potential reduction in the delivery of other types of affordable housing; the extent to which starter homes will be genuinely affordable; and the impact of starter homes on local housing markets.

Housing White Paper 2017

The 2015 Conservative Government published its Housing White Paper on 7 February 2017, together with its response to the consultation on the Starter Homes Regulations. The White Paper marked a shift in the Government’s housing policy from a strong focus on starter homes, to delivering a wider range of affordable housing.

The Government has emphasised that it expects starter homes to be delivered alongside shared ownership, rent-to-buy, and other innovative affordable housing products. Reflecting this policy, it expects to help over 200,000 people become homeowners through a range of Government programmes by 2020.

The White Paper announced that the Government:

  • would commence the general duty on local authorities to promote the supply of starter homes.
  • had decided not to implement a statutory starter homes requirement at that point in time. Instead it proposed to amend the National Planning Policy Framework (NPPF) to introduce a policy expectation that housing sites of 10 units or more deliver a minimum of 10% affordable home ownership products.
  • proposed to introduce a household income eligibility cap of £80,000 (£90,000 for London) on starter homes. The cap is intended to ensure that starter homes are available to households that genuinely need support to purchase a new home.
  • would introduce restrictions on the resale and letting of starter homes, to deter people buying them for rental investment or short-term speculation.
  • would require first-time buyers to have a minimum 25% mortgage, to assist first-time buyers who need support to achieve their first home purchase rather than cash buyers.
  • would bring forward regulations to finalise the starter homes definition and monitoring provisions.

Commentators welcomed the Housing White Paper’s new focus on a wider range of housing tenures, and the decision not to implement a minimum statutory starter homes requirement on residential developments.

The Government has published a draft revised NNPF for consultation. The draft text includes: a new definition of affordable housing that includes starter homes; a minimum requirement of 10% affordable housing on certain developments; and proposals to encourage the release of more land for affordable housing. The consultation closed on 10 May 2018, and the Government is analysing feedback.

Delivery of Starter Homes

The Government introduced a Starter Homes Land Fund (SHLF) to provide £1.2 billion to remediate brownfield land for the development of starter homes, alongside other types of affordable home ownership.

Commentators have expressed concern at the slow progress with delivering starter homes. By May 2018, some £250 million of the SHLF had been spent, with media reports that no starter homes have yet been built.

The Government is reviewing the operation of the SHLF, and is expected to make an announcement on the next steps for starter homes following the consultation on the draft revised NPPF.

 

Commons Briefing papers CBP-7643

Authors: Hannah Cromarty; Cassie Barton; Gabrielle Garton Grimwood

Topics: Housing, Housing supply, Owner occupation, Planning

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