White Paper signals change in starter homes policy

HBF policy director David O’Leary delves deeper into the Housing White Paper and unearths some important, and possibly overlooked, changes in emphasis on Affordable Housing and Starter Homes – or should that be affordable housing and starter homes?

The eagerly awaited Housing White Paper, eventually published on February 7, seemingly underwhelmed many in the housing world. This was, perhaps, inevitable given the breadth of interests engaged in the debate, including pockets of commentators who wanted to see the White Paper used to bludgeon private developers into either building more quickly or departing the scene altogether to make way for alternative housing providers.

But after many months of debate and deliberation the government, it seems, accepted that the notion that there is no “silver bullet” available to fix the problem is more than just a soundbite. The first Housing White Paper for 14 years, instead, presented a series of tweaks, evolutionary improvements and additions to the systems of land and planning rather than a single idea that would bring about a step change in housing supply. We are all familiar with these “solutions” which have taken many different forms through the years. Some of the more memorable of recent times have included garden cities, eco towns, institutional investment in the private rented sector, modular construction, direct commissioning (aka accelerated construction), affordable housing grant and, I am sure, many others I have forgotten.

The reality is that the best means of increasing net supply of housing from the 190,000 recorded in 2015/16 beyond 200,000 and closer to 250,000 is by building on recent successes and addressing blockages where they arise. Ministers and others understandably have a strong desire to achieve results within their tenures but while that is rarely possible, it may be that the incumbents, should they remain in post until the end of the Parliament, may reap the rewards on this occasion. They benefit from a strong foundation, with rapid growth in the past three years off the back of the positive progress made through the NPPF, a phenomenally popular Help to Buy scheme which is planned to outlive the current Parliament, and a further series of measures in the White Paper that should yield further growth.

Starter homes
In some respect the White Paper was as significant for its signalling of a change in policy as it was for putting forward groundbreaking new policy. One area that had proved controversial with widespread disagreement about the impact – positive or negative – that it would have on the delivery of housing, was the Starter Homes Initiative. More specifically, disagreement centred on the Starter Home requirement which was the basis for the Conservative Party manifesto commitment in 2015 to “build 200,000 new Starter Homes”. The requirement, consulted on in 2015 and legislated for in 2016, was expected to impose an obligation on developers of sites of ten or more homes to earmark 20% of homes for sale exclusively to first-time buyers under the age of 40, at a 20% discount. After considering the options, ministers have opted for a new 10% requirement on sites but made clear that this can be made up of a mix of affordable home ownership products determined through negotiation between developers and local planning authorities. So, while this may include Starter Homes, it can also comprise other intermediate housing products or shared ownership.

The Starter Home product itself will also be made more restrictive, with a maximum income criterion and a requirement for the purchaser to have a mortgage. More significantly, the White Paper also confirmed that Starter Homes will be subject to a 15-year repayment period meaning that owners who sell within that timeframe will have to repay a proportion of the property’s value. Reflecting the shift in approach, some of these changes had been proposed at the time of the passage of the Housing and Planning Act, but were vigorously opposed by the then housing minister, Brandon Lewis.

The two and a half years since the Starter Homes Initiative was first announced have seen many changes to the concept, and stimulated much heated debate about the pros and cons of a policy with a clear political objective but, at times, questionable practicality for the key stakeholders, especially local authorities, developers, mortgage lenders and valuers.

The original announcement in 2014 received cautious support albeit with many doubting the deliverability of the ambition to build 100,000 Starter Homes on brownfield sites without an existing local plan allocation. The supercharging of the initiative as part of the Conservatives’ 2015 manifesto was rather more controversial with the chief concerns for developers being around the displacement of sales and potential for an inflationary impact on the overall quantum of below market value products included on sites.

The approach adopted following the publication of the White Paper seems to be much more pragmatic and flexible and can be moulded to meet the needs of the local area and the realities of the specific development. But amidst the uproar about the broken manifesto pledge on National Insurance Contributions which arose in the hours and days following the Budget on March 8, it is interesting to note how little criticism of the Starter Homes decision there has been, probably reflecting the attitudes of stakeholders towards the original proposals. Indeed, while the chancellor was accused of having lost political capital as a result of the self- employment reforms, the only capital lost for DCLG has been the capital letters that had initially been deployed for “Starter Homes”. While it may seem like a point of pedantry, the shift in the White Paper from talk of “Starter Homes” to “starter homes” is highly significant with government now keen to consider a broad range of starter homes – homes for first-time buyers to start out in – rather than a defined Starter Homes tenure, which is a prescribed form of home ownership. It means that the 200,000 by 2020 has been delicately replaced with a more modest target to support 200,000 households into home ownership.

Even in light of these modifications, when it eventually happens this year, the addition of starter homes to the suite of affordable housing products recognised in the NPPF will be a major milestone in the history of affordable housing in this country.

The categorisation of starter homes, or Starter Homes, as affordable housing is momentous due to its resemblance in many ways to market sale housing. Certainly the significance would have been even greater had the direction of previous ministers been maintained with high earning households theoretically empowered to purchase a property with a large discount subsidised directly by the developer but indirectly by the state. The discounts on offer would have been particularly large in high value areas where the 20% discount would have been inadequate to comply with the maximum sales price criterion set at a net £250,000 outside of London and £450,000 in the capital. But even within the currently favoured framework, this represents a sizeable move in the way we view and classify affordable housing, with lettings and sales restrictions only in place for a certain period, and an established route through which those restrictions fall away and the full value of the property can be accrued by the owner. That is, at the end of the 15-year repayment period, with no further payment or action required, these affordable homes shift to being pure market housing.

This opens the door to sales supported by Help to Buy (or, more likely, a successor scheme) perhaps being classed as affordable housing, especially if a future government seeks to introduce some eligibility criteria (see last month’s HBF Viewpoint). After all, the Welsh government has already taken the decision to count Help to Buy completions towards its affordable housing target.

The affordable housing landscape is changing rapidly. Coupled with the consultation published alongside the White Paper, exploring a new “Affordable Private Rent” tenure, these moves illustrate the stark position we have reached in terms of overall housing affordability, and the need for fresh thinking and flexibility all around to maximise housing supply, producing more “Affordable Homes” (for specific households according to eligibility) and more “affordable homes” (homes that are affordable regardless of tenure).

Start-stop starter homes: a timeline

September 2014
Starter Homes scheme announced by prime minister David Cameron at Conservative Party Conference with ambition to deliver 100,000 discounted homes for first-time buyers on brownfield sites that would otherwise come forward. Minimum 20% discount and subject to a five year restriction on sales and lettings

December 2014
“Stepping onto the Ladder” consultation published exploring the rules around Starter Homes eligibility and maximum sales prices. Government also asks HBF to launch and maintain a website for prospective purchasers to express an interest

December 2014
Starter Homes Initiative launched by PM alongside announcement of a new Design Advisory Panel to influence the aesthetic of the new homes

March 2015
Housing minister Brandon Lewis makes Written Ministerial Statement confirming change to NPPG to incorporate Starter Homes Exception Sites

March 2015
Government publishes “Starter Homes design exemplars”

April 2015
PM announces that a Conservative government would double the Starter Homes ambition

May 2015
Conservatives secure a majority at the General Election

October 2015
PM announces that new 200,000 target will be met by classifying Starter Homes as affordable housing and requiring all reasonably sized sites to accommodate a percentage

October 2015
Housing and Planning Bill introduced to parliament to create a statutory framework for Starter Homes. This will create an obligation for local authorities to promote Starter Homes and puts in legislation some of the eligibility for buyers and the homes they are buying

December 2015
Consultation on changes to National Planning Policy Framework to promote Starter Homes in rural areas, on brownfield sites within the green belt and on underused commercial land

March 2016
Publication of technical consultation on Starter Homes regulations. It proposes a 20% requirement on all reasonably sized sites

March 2016
Prospectus launched inviting expressions of interest in £1.2 billion Starter Homes Land Fund administered by HCA

May 2016
Housing and Planning Bill receives Royal Assent after concessions are made to extend the repayment period to eight years. More detail to be determined through government’s response to the recent consultation

July 2016
Theresa May becomes Prime Minister, Greg Clark and Brandon Lewis replaced at DCLG by Sajid Javid and Gavin Barwell

January 2017
30 local authorities announced as Starter Homes Land Fund Partners to help drive delivery of Starter Homes on public land

February 2017
White Paper incorporates starter homes into broader affordable home ownership ambitions. No formal target for starter home delivery through the requirement; 15 year repayment; HCA’s starter home target for public land reduced to 12,500

February 2017
In response to the December 2015 consultation, government confirms decision to proceed with proposals on brownfield sites in green belt areas only where contribution is made to starter home delivery

Expected spring /summer 2017
Formal changes to the NPPF to classify starter homes as affordable housing. Starter home regulations detailing how the product will operate, how the repayments system will work and eligibility process etc

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