Conservatives promise to build 200,000 “Starter Homes” – but will they really help first-time buyers?

David Kingman dissects the Conservative government’s plans to provide 200,000 homes at a discount to first-time buyersmodel of cardboard house with key

Prime Minister David Cameron used the opportunity of his recent speech to the 2015 Conservative Party conference in Manchester to reiterate his “Starter Homes” initiative, which he claims will turn “Generation Rent” into “Generation Buy”. Should frustrated first-time buyers believe him?

“The party of aspiration”

This policy was announced as part of the Prime Minister’s broader narrative about turning the Conservatives into “the party of aspiration”. Pledging to reform the planning system to make it easier to build new homes, he made the emotive argument that “when a generation of hard-working men and women in their 20s and 30s are waking up each morning in their childhood bedrooms – that should be a wake-up call for us.”

Key to this is the “Starter Homes” scheme that, as he reiterated, will be rolled out during the current parliament. At the moment, when housing developers apply for planning permission they are usually required to provide a certain share of the new homes as “affordable housing” in return for it being granted. There are several different types of affordable housing, including social rent, part-rent part-buy and the more recent “Affordable Rent” (which can charge rents of up to 80% of full market levels), but they usually result in either the local authority or a housing association having subsidised homes which it can offer to people on its housing waiting list who are statutorily homeless or cannot afford to rent or buy at market prices.

Under the Starter Homes initiative, this system for providing affordable housing is apparently going to be swept away. Instead, developers will be able to obtain planning permission by promising that a certain share of the homes they create will only be sold to first-time buyers who are under 40, at prices which are capped at levels that are supposed to be affordable: £450,000 in London and £250,000 in the rest of England.

The precise method for assessing a buyer’s eligibility to receive these discounts has not yet been disclosed, although presumably it will need to be stringent to prevent fraud. The homes will carry a covenant which prevents them being resold at market prices for at least five years after their initial purchase.

A real solution?

In his speech, David Cameron based part of his justification for this policy on the fact that most young people want a home they can own, instead of rent (a view which surveys support). No doubt he hopes that “Starter Homes” can become emblematic of the “property-owning democracy” which Conservatives have traditionally supported.

However, the announcement was met with significant scepticism from people in the housing world, most of whom believe its costs will substantially outweigh its benefits. An analysis by Shelter performed when the policy was first announced has shown that people earning average salaries across most of the country will still be unable to afford to buy a house even with the Starter Homes discount. They estimate that in order to take advantage of it, households would need to have an income of £77,000 in London or £50,000 elsewhere, which is hardly the kind of money that most struggling first-time buyers under 40 have at their disposal.

Moreover, the loss of genuinely affordable housing for rent, which councils will no longer be able to negotiate out of developers, will be felt mainly by those on low incomes who would never have a realistic chance of becoming owner-occupiers. Writing in the Guardian, Robert Booth argued that there is a strong class distinction when it comes to whom this policy is really supposed to help:

“Cameron’s policy seems most likely to appeal to the sons and daughters of affluent middle Englanders who already have a deposit, some money from the bank of mum and dad and a large, stable salary. It does little to tackle two far bigger problems in housing: the overall undersupply, which causes prices everywhere to keep on rising fast, and the lack of decent housing for the homeless and the poorest workers, those on zero-hours contracts or on benefits.”

Some young people may be rejoicing at the prospect of all these Starter Homes being built in the near future, but for the many first-time buyers who will still be too poor to take advantage of the scheme, this is likely to be another false dawn.