The Government’s Starter Homes proposals have been around for a while – consultation in 2014 led to new policies in March 2015, backing the commitment to deliver 200,000 by 2020, freeing Starter Homes ‘exceptions sites’ from affordable housing requirements and encouraging authorities to search for sites. The Housing and Planning Bill 2015-16 measures intended to realise that commitment will go well beyond the existing policy, if they survive the House of Lords Report stage.

Big picture

Starter Homes will be new homes [1] for purchase only (and only by first time buyers under 40) to be sold at the lesser of 80% of market value or £450,000 in London (and £250,000 elsewhere).

  • Authorities will be under a statutory ‘general duty’ to promote Starter Homes when considering planning applications
  • A power for the Government to specify the proportion of Starter Homes on specific types of sites, nationally
  • A power for the Secretary of State to issue ‘compliance directions’ requiring Local Plan policies to be disregarded. This is a hitherto unknown command power by central Government and is possible casualty of the House of Lords’ scrutiny.

The Government has already made clear that tenure changes should be accepted without changes to the overall amounts of provision in S106 renegotiations. The HCA is already putting this into practice, tenure swapping a policy compliant affordable split to Starter Homes on its Lower Graylingwell scheme in West Sussex.

All is (nearly) revealed

The NPPF Review has not been clear about the extent to which Starter Homes will actually be treated as affordable housing (albeit that they will be exempt from providing it). We understand that the significance of the Starter Homes Technical Consultation on the Regulations which will shape the regime is that:

  • There will be a fixed 20% requirement for most schemes of 10 units or above. Viability testing will be permitted, but the threshold for exceptions is likely to be a higher bar than hitherto accepted in viability appeals.
  • Starter Homes will be affordable housing in policy terms. In re-opening the NPPF consultation on changes to the definition of affordable housing, the Government is signalling its intention to modify the NPPF to allow Starter Homes to qualify. We understand that they are meant to be a ‘top slice’ of viability, which is intended to ensure that Starter Homes always float to the top of the affordable tenure pile in appraisals.
  • The 8 year ‘restricted period’ during which first time buyers will have restricted selling rights will allow the percentage of market value to taper up (like staircasing Shared Ownership equity). This responds to concerns by lenders about the effect of sudden pulses of de-restricted units hitting the market at the same time. These periods are controversial and likely to be significantly amended following the cross-party rebellion in the House of Lords.
  • Units will not be able to be let. The attractiveness of this, alongside a period where the market for re-sales is narrowed to first time buyers under 40 remains to be seen.
  • PRS is likely to benefit from a blanket exemption but will be expected to yield a commuted sum. The Government is likely to require such sums to be calculated based on the gain in value to the developer (and to require authorities to deliver Starter Homes with it). How it will factor in the costs of assembling land to do so is moot.
  • Standard S106 wording is being prepared.

Rebel Alliance

The defeats suffered by the Government at the Third Reading stage in the House of Lords on 11 April 2016 now cast a shadow over how radical this new tenure is likely to be. Amendments backed by a cross-party alliance of peers would:

  • Extend the protected period to 20 years and force starter homes owners to repay any discount (tapering by 1/20 each year) where selling earlier
  • Return control to local authorities on how many starter homes should be delivered locally, and was backed by a majority of 86 peers.

Both amendments were back by majorities of at least 85 peers and the likelihood of the radical changes envisaged by the flagship policy announcements last year coming into effect in 2016 look limited.