The Housing and Planning Bill 2015/16 had its first reading in the House of Commons in October 2015 – this article focuses on what housebuilders need to know about the "starter homes" provisions. At the time of writing the Bill is at report stage in the House of Commons and so various matters are still being debated.
The stated intention of the legislation is to provide a greater opportunity for home ownership for first-time buyers in England by building and selling 200,000 starter homes to be spread across all "reasonably sized new development sites". As drafted, the Bill would require a local authority to promote the supply of starter homes in England on any development that contains at least one dwelling.
A starter home is a new dwelling (whether new build or converted to residential use) which may be made available for purchase by qualifying first time buyers only. A qualifying first time buyer is an individual who:
- has not bought residential property before ; and
- is under the age of 40.
Prospective buyers may be required to meet other characteristics specified by the Secretary of State from time to time. These characteristics may include restrictions on nationality and minimum age.
Cost of a Starter Home
A starter home must be sold at a discount of at least 20% of the market value and must be sold for less than the price cap. The price cap contained in the Bill varies depending on whether a property is inside or outside of Greater London with a price cap of £450,000 for those properties in the capital and £250,000 for those properties outside.
Because the price cap takes into account the 20% discount, the on-market value of these properties could be up to £562,500 and £312,500 for properties in and out of London respectively. This amounts to discounts of £112,500 and £62,500 respectively.
A feature of the legislation is the broad remit of the Secretary of State to amend the effect of the provisions by regulation and the definition of starter home, qualifying first time buyer and the price caps may all be varied to different degrees by the Secretary of State by regulation.
Implications for Housebuilders
The Bill is currently light on detail in relation to the specific obligations on the Local Authority to provide a supply of starter homes. The Bill states that an English Planning Authority must "carry out its relevant planning functions with a view to promoting the supply of starter homes in England" and provides that the Secretary of State may, by regulation, require that an English Planning Authority may grant planning permission only if the starter homes requirement is met. The Bill contains the example that a person may be required to accept a planning obligation to provide a certain number of starter homes (or to pay a sum to be used by the Authority for providing starter homes) to obtain planning permission.
It is not clear where this approach fits alongside social or affordable rented properties and shared ownership as usually contained within a Section 106 Agreement. This ambiguity is likely to be uncomfortable for developers and house builders and may complicate negotiations with the planning authority.
It is also not clear what restrictions will be placed on a qualifying first time buyer following acquisition of a starter home so schemes to extract the benefit from the windfall 20% of value may be devised depending on the final form of the legislation. A key challenge for housebuilders would appear to be to ensure that starter homes (whether in addition to or alongside traditional affordable housing) can be provided without diminishing profit.
In line with the general tenor of the Bill, the provisions relating to starter homes fall back on a monitoring, compliance and step-in mechanism allowing the Secretary of State to monitor and intervene in local planning decisions to ensure the provisions relating to starter homes are adhered to.
Other Notable Provisions
- Privatisation of elements of the planning process.
- Amendments to the Self Build and Custom House Building Act 2015 requiring planning authorities to assess demand for self and custom build sites.
- Temporary permitted development allowing conversion of certain office premises to residential use made permanent.
- Powers granted to Secretary of State to pressurize local authorities into producing Local Plans (i.e. SoS can step in and prepare or revise Local Plans unilaterally) and additional powers under existing planning legislation.
- Changes to regulate rented sector aiming to deal with problem landlords including sanctions (including bans/fines) for landlords who fall foul of regulations.
- A duty for local housing authorities to consider selling high value assets when vacant.
- Facilitation of brownfield development.
What to do?
When and if the Bill achieves Royal Assent there will be renewed attention as those in the development industry look to establish what it means for their projects.