By James Carson
A report from homelessness charity Shelter has suggested that one of the UK government’s key affordable homes initiatives will be out of reach for many people on average incomes.
The ‘Starter Homes’ initiative was launched in December 2014, offering first time buyers under the age of 40 in England a discount of up to 20% off the normal price of new homes built on brownfield land. During the general election campaign, David Cameron promised that by 2020 200,000 Starter Homes would be built by private builders and sold for no more than £450,000 in London and £250,000 in the rest of England.
The government has claimed that first-time buyers paying an average of £218,000 for a home would save £43,000 under the Starter Homes scheme.
However, analysis of the programme by Shelter suggests that it will not help the majority of people on the new National Living Wage or average wages into home-ownership in England by 2020.
Cheaper homes but not cheap enough
Shelter looked at three typical household formations in each local authority in England earning a range of different salaries to assess whether they were likely to be able to afford to buy a Starter Home. The study found that:
- Starter Homes for families earning average wages will be unaffordable in over half of local authorities across England in 2020.
- Families on the National Living Wage will only be able to afford a Starter Home in 2% of local authorities.
- Single people on low or average wages will struggle to afford a Starter Home in 2020 in the majority of local authorities.
- London, the South East and the East have the lowest number of areas where affordable Starter Homes under the schemes threshold could be built, despite high demand in these areas.
The scheme is being funded by changes to the planning system, exempting developers from their obligations to include affordable housing in building schemes. The government says that these ‘Section 106’ obligations typically add £15,000 to the cost of each new home being built.
However, even before its latest analysis, Shelter was expressing concerns that the removal of these requirements would lead to Starter Homes ‘cannibalising’ genuinely affordable housing. There are also questions about whether the homes will come with the necessary infrastructure in place.
Government pressing ahead
Nevertheless, the government is pressing ahead with the programme and extending its scope. In August, chancellor George Osborne announced that the Starter Homes scheme would be extended to some villages as part of the government’s rural productivity plan. At the same time, some of England’s major house builders have pledged their support for the scheme, including Barratt, Cala and Taylor Wimpey.
Even if it meets the target of 200,000 new homes by 2020, the Starter Homes scheme on its own will not solve the national housing shortage. Around 250,000 homes need to be built each year to keep up with demand, but in 2014 fewer than 119,000 homes were built in England. As the Shelter report concludes, the Starter Homes programme is no silver bullet for the housing crisis:
“Starter Homes would primarily help those on very high salaries or couples without children, but they are not a good replacement for other forms of affordable housing and will not help the majority of people on average wages struggling to get an affordable, decent home. The government needs to look very closely at this policy before going down the wrong track.”
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