A good start?

A good start?

The top flag of the Government’s flagship Housing and Planning Bill is the provision for starter homes. This is part of a package of measures intended to stimulate housebuilding, and in particular, to deliver on the deep-seated Tory objective of increasing home ownership – at a time when ownership is falling and private sector renting is the only option for an increasing number of new households and young people.

Will the measure work in increasing access to housing and under what circumstances? Will there be unspoken other consequences, unforeseen or intended, and good or bad? The answers lie in large part in the Regulations, still to appear, which will provide the details, hiding the devil or releasing a housing angel.

The Bill provides for a statutory duty for a private housing scheme to include starter homes, to be sold to people under 40 at a 20% discount on the market price, subject to a £250,000 cap (£450,000 in London). By replacing the current arrangement whereby affordable housing is provided as a proportion of a market housing scheme according to policies set in local plans, the requirement changes the group in housing need catered for, and changes how their need is addressed through the planning system.

The scheme is certainly simpler for housebuilders and this alone may help move things along in housing delivery. Against this is the point that affordable housing delivered by a housing association provides good cash flow to a scheme developer and often in the very early stages of the scheme, which may be particularly useful when there are heavy up-front infrastructure costs and hefty debt charges.

A starter home sold at 80% of its market value is a better deal for housebuilders than an affordable home transferred to a housing association at say 45-65% of open market value. The critical issue becomes the comparison of the number of starter homes with what a scheme might have provided as affordable homes. Affordable homes are currently provided according to locally set policies, rooted in viability assessments if properly evidenced (and hence likely to be effective) and balanced with the use of CIL and s106 taken from the development value to deliver the infrastructure needed to make places work.

But for individual schemes at the time of an application, viability evidence can be used to reduce the level of affordable housing from the policy requirement (and anything else secured by s106, though affordable housing is the usual target). The CIL charge cannot be reduced through these negotiations because CIL is a fixed charge for a given use in a given place.

The provision of starter homes is to be a statutory requirement and the level won’t be known until the Regulations appear. The press release for the Bill talks of ‘getting 1 million homes built by 2020’ and the ‘legal duty on councils to guarantee the provision of 200,000 starter homes’, and so rather suggests a level of 20%.

Making something statutory which affects viability – and which can only be implemented if a scheme is viable – is a significant step with possibly a different impact on the delivery of the overall number of homes and their distribution in some low value areas than is intended. The Bill does include the clauses that ‘the regulations may confer discretions on an English planning authority’, and that ‘the regulations may make different provision for different areas’. Whether this latter point might allow for different levels of starter homes in different parts of the same local authority area is an interesting question – rather like CIL charging zones and the spatial variation of affordable housing policies as some well-informed local planning authorities already pursue.

At the levels of starter home provision implied, a housing scheme in a viable location would be likely to be more profitable to the developer, which ought to mean more sites being viable with a decent contribution to addressing the needs of those closed out of access by market conditions (subject to being able to raise a deposit of course) and to more houses being built.

Local planning authorities that are on the case though may look to tap the headroom released by setting higher CIL charges and requiring some of the other houses in the scheme to be available for affordable rent, with the Framework still expecting local planning policies to reflect the particular make-up of the housing need in their area.

We await developments, in every sense.

John Baker

John Baker

Partner – Planning

  • Bristol
  • 07976 936060