The Starter Homes initiative has again been defeated in the House of Lords, but the government is unlikely to concede defeat. Paul Walton explains the implications for developers.
The government’s flagship Starter Homes scheme faces an uphill struggle after being voted down yet again in the House of Lords.
Labour, Liberal Democrat and crossbench peers want to water-down the controversial scheme that would see 20 per cent of homes in new developments being made available at a 20 per cent discount to first-time buyers aged under 40.
Ministers have come under further fire from mortgage lenders who warn that the government’s target of delivering 200,000 discounted first-time buyer homes by 2020 is ‘too ambitious’. According to the Council of Mortgage Lenders (CML), the scheme could even destabilise the property market.
Impact on affordable homes provision
The Starter Homes programme is controversial because it would remove the requirement for developers to provide affordable homes for rent, or having to pay for local infrastructure in return for planning permission.
This might be welcome news for up-and-coming homeowners, but the scheme’s critics are concerned that it will result in fewer homes for less well-off families to rent.
Moreover, local authorities are worried that they will lose billions of pounds of infrastructure funding. Developers typically pay councils about £15,000 per home. If these payments were scrapped, the Local Government Association (LGA) says councils would lose £3bn.
What’s the next move?
Despite widespread criticism, the government is determined to press ahead with the scheme through a twin track approach that is expected to result in major changes this year, with inevitable disruption to planning procedures.
This is because the government can modify the National Planning Policy Framework (NPPF) to make Starter Homes a qualifying affordable housing type. By doing so, ministers could potentially deliver the scheme regardless of what happens in the House of Lords.
The winners and losers of the Starter Homes initiative
The scheme will certainly create winners because it is anticipated that the new price caps will facilitate better returns in transactions involving a straight swap for shared ownership.
In addition local councils will aim for an increase in overall affordable provision and the new system could eventually strengthen the argument for a fixed percentage of affordable housing in some locations. For instance, at Lower Graylingwell in London, the 30 per cent affordable provision has risen to 50 per cent of Starter Homes.
Just as crucially, developers are being advised to plan for the end of so-called ‘golden brick’ payments by Registered Providers and to evaluate the implications for cashflow of a further 20 per cent of product as sale tenure.
There will also be losers. The new scheme will circumvent traditional housing need, leaving local authorities with large numbers of disadvantaged people on the housing register. The upshot may be that people who cannot afford a £250,000 home will cite the Town and Country Planning Act 1990 as a basis for their local representatives to safeguard what they regard as sound planning policy.