The face of the affordable housing sector is changing. David Cameron has big plans: "banks lending, government releasing land, and yes - planning being reformed". Discounted market "starter homes" are to feature as "affordable homes".
Growing numbers of people are frustrated by the difficulties of getting onto and climbing the housing ladder. This is an issue throughout the UK but is particularly acute in London where housing prices outstrip the national average.
MEASURES TO PROMOTE HOME OWNERSHIP
The Government previously introduced the "Help to Buy" scheme with the intention of enabling people who want to get onto the housing ladder (or move up it) buy a new build or existing home priced at up to £600,000 with (at least) a 5% deposit. The Government now intends to introduce further measures to boost home ownership.
David Cameron announced at this years' Conservative Party Conference that the Government will introduce Starter Homes. The first draft of the Housing and Planning Bill (released on 13 October 2015) provides that these homes are to be provided in England only, for first time buyers (under 40 years of age), at a discount of 20% to open market value and subject to a maximum price cap of £250,000 outside London and £450,000 in London. Further requirements may be provided in regulations by the Secretary of State which may include standards.
The new starter homes website states that owners will not be allowed to resell or let their homes at open market value for a period of 5 years after the initial purchase. Planning practice guidance states that “to deliver the minimum 20% discount, local planning authorities should not seek section 106 affordable housing contributions, including any tariff-based contributions to general infrastructure pots, from developments of Starter Homes. Local planning authorities will still be able to seek other section 106 contributions to mitigate the impact of development to make it acceptable in planning terms, including addressing any necessary infrastructure”. Presumably, much of the detail (including the 5 year 20% discount) will be controlled via section 106 agreements.
This concept is, in the words of David Cameron, intended to “transform generation rent into generation buy”. However, detractors argue that the Government’s maximum price cap of £250,000 outside London and £450,000 in London will leave many first time buyers still unable to afford the necessary deposit regardless of their ability to satisfy mortgage payments.
Other initiatives to enable people to enter the housing market include the extension of the right to buy scheme (which previously just enabled some council tenants to buy their home at a significant discount) to assured tenants of housing associations. An agreement was reached with the National Housing Federation to implement the extension on a voluntary basis, albeit funding and monitoring are briefly dealt with in the Housing and Planning Bill.
WHAT DOES THIS MEAN FOR THE TRADITIONAL MODEL OF AFFORDABLE HOUSING?
The Government consider the new starter homes to be affordable housing. However, arguably, each starter home may simply help one family onto the housing ladder the property leaves the truly affordable market after 5 years.
The Prime Minister's announcement of 12 October states that a duty will be placed on councils to guarantee the delivery of starter homes “on all reasonably sized new development sites”. The intention appears to be that starter homes will replace some, if not all of the affordable provision currently being sought on market residential sites, including traditional social and affordable rented units. How that will work in practice remains to be seen. However, there is a risk that the plans will diminish the number of available homes for rent.
Overall, the affordable housing sector is currently in flux but the Government’s priorities are clear. More people owning their own home. The true cost and effect of this policy on housing associations, local authorities and developers is yet to be identified.