Feeling the squeeze
Technical consultation issued by the Department for Communities and Local Government in December 2015 proposed a change to the definition of Affordable Housing under the National Planning Policy Framework “to encompass a fuller range of products that can support people to access home ownership”. This definition is intended to cover Starter Homes.
Separately, the Housing and Planning Bill is currently passing through the House of Lords. The Bill seeks to introduce a statutory duty on local authorities to promote the delivery of starter homes and a statutory requirement for a proportion of starter homes to be delivered on all suitable reasonable sized housing developments in England.
The Bill contains details of what a starter home is and who will qualify to buy one but it does not contain the detail of a number of key points including:
- the percentage discount at which a starter home must be sold. The Bill refers only to a discount of not less than 20% of market value.
- the percentage of new homes on a development which must be delivered as starter homes. Technical consultation issued by the Department for Communities and Local Government in March 2016 proposed a single national minimum requirement of 20% of all homes delivered as part of a relevant residential development.
- how the statutory requirement for the delivery of starter homes will sit with the existing affordable housing regime which is not enshrined in a statutory duty. As Local Planning Authorities will continue to be required to have policies to address local affordable housing need they could treat starter homes as an additional requirement to their existing shared ownership/rented requirements.
The issues for you
The absence in the Bill of certain key points means it will not be possible to finalise and implement strategies to deal with its effects until the relevant details are known.
There is no fixed timescale within which the Bill will be agreed and become law.
Regulations will need to be made to give effect to key aspects of the Bill (if and when the Bill is made law). The need for regulations further exacerbates the uncertainty.
Transitional arrangements are proposed which would apply to all planning applications submitted after the Bill becomes law. Any planning applications in their final pre-submission stages at that point may have to be redesigned to accommodate the requirement for starter homes.
These individual points will inevitably create and exacerbate uncertainty.
Whilst the precise detail is yet to be finalised we think it likely that the requirement will have implications for scheme design and the market for certain existing products. The response of mortgage providers and the re-sale market for Starter Homes once any restrictions have been lifted will also be keenly watched.
Where do we go from here?
Until the Bill becomes law and all relevant regulations have been made, you will need to consider the potential impact of a statutory requirement to supply starter homes when negotiating terms for land acquisitions, particularly in conditional contracts, options and overage agreements. You will need to ensure that if you were required to provide starter homes the impact of this is provided for in the relevant documentation.