The government is proposing that 20% of all homes delivered on residential developments should be starter homes: new homes only available to first-time buyers under the age of 40 and, importantly, which will be sold at a discount of at least 20% of the market price.

Developers will be keen to see the detail and respond to the proposals set out in the recently published Department for Communities and Local Government consultation paper which will directly feed into regulations intended to implement the statutory framework for starter homes.

Why are starter homes in the news?

The government has expressed a serious commitment to "increasing home ownership and improving opportunities for first time buyers" and has made public its ambitious plans to deliver 200,000 starter homes during this Parliament.

Good news for buyers but what about developers?

The proposals will inevitably have an impact on how developers plan and develop new sites. Questions such as:

  • "Would a site size of 10 units or more (or 0.5 ha) be an appropriate minimum threshold for the starter home requirement?"; and
  • "Do you agree that 20% [of homes delivered] represents a reasonable requirement for most areas?"

are likely to resonate.

Additionally, where developers are constructing private rented sector housing (for institutional investment) and specialist older people's housing it is proposed that the requirement will be met through off-site contributions.

A one-time only opportunity

One of the criticisms of the proposals is the speed with which the first-time buyers whom the scheme favours can shift the property at its full market value. In recognition of this, the proposals offer a tapered approach by which the starter home may be sold at an increasing proportion of its market value over time, ultimately achieving 100% after a maximum number of years - current proposals are five.

Uncertainty over how the scheme will work is already causing problems for developers and research carried out for the Local Government Association, as reported in The Guardian, has found that many people in need of affordable housing will simply not be able to afford the newly allocated starter homes, despite the discount.

Whether or not this scheme will result in a windfall for a few lucky buyers but achieve little else, as predicted by its detractors will, no doubt, become clear. In the meantime, for the opportunity to have your say before the closing date of 18 May 2016 the DCLG consultation paper is available here.

Postscript - 25 April 2016

Hot on the heels of publication of the starter homes consultation paper referred to in our update, above, the House of Lords has delivered a blow to the relevant provisions in the Housing and Planning Bill - the vehicle which will transport the proposals into reality. Of the two key amendments proposed:

  • One will force those who buy under the scheme to repay (on a resale) the discount they receive less 5% for every year they own the property over a 20 year period (significantly greater than the five years under current plans); and
  • The other will allow councils to choose how many starter homes are built in their area to make sure affordable housing for those on low incomes remains a priority.

These amendments would go a long way to address criticisms of the scheme, highlighted above. Although the Government has appeared bullish in its response, the reality is that it is now under significant pressure to either agree the proposed amendments or persuade peers to support a revised version.