Starter Homes: Update 16 June 2016

Chapter 1 of the act introduces new duties for councils to pursue the government's flagship Starter Homes initiative, under which new-build houses will be available to first-time buyers under 40 at a 20 per cent discount on full market value.

In return, developers will be exempt from planning obligations. The act introduces a general duty to promote Starter Homes through councils’ planning functions. More specifically, councils must ensure that Starter Homes are delivered on "all reasonably sized sites", subject to a "general exemption" where this requirement would make schemes unviable.

Secondary legislation will set out the percentage of Starter Homes that will be required on different sizes of site and in different areas. If a council is failing to comply with its Starter Homes duties and a policy in its local development document is incompatible with these duties, the secretary of state may prevent application of that policy when certain planning decisions are taken.

A Department for Communities and Local Government (DCLG) technical consultation launched on 24 March signalled a blanket requirement in forthcoming regulations for 20 per cent Starter Homes on schemes of ten or more units or a site size of 0.5 hectares. It said the government would resist any restriction on resale at full market value beyond a "taper" period of, "at most", eight years from initial occupancy. The government has also said that the Starter Homes requirement will not apply to rural exceptions sites.

The definition of Starter Homes will be restricted to properties worth up to £450,000 in Greater London and £250,000 elsewhere.  A late government amendment to the act added requirements for sellers to reimburse a proportion of sale proceeds or to sell on to another qualifying buyer within a period to be specified. Section 3(1) allows regulations to be issued requiring Starter Home owners who sell the dwelling within a specified period to "make a payment to a specified person" or prohibiting them from selling the dwelling within a specified period except to another qualifying first-time buyer at a discount.

Starter Homes were the most keenly contested element of the bill during its Parliamentary passage, with peers seeking to ensure that individual councils retain discretion to set the proportion of Starter Homes in new development and prevent resale at full market value within a period of as little as five years. Communities minister Baroness Williams told the Lords: "It is important that delivery of Starter Homes is as simple as possible, with a clear national requirement."

Commencement: The Starter Homes provisions will come into force on a date to be prescribed by regulations.

Comment: While supporting the objective to deliver more Starter Homes, experts voiced concerns over both the practical implications and its consequences for other affordable housing delivery. The immediate implication could be that councils' local plan teams find they have to update their evidence on housing need. "Will this mean that councils have to do a new strategic housing market assessment? And if Starter Homes become part of the definition of affordable housing, will they need to look again at how they meet already identified need for affordable housing?" asked Alice Lester of the Planning Advisory Service. Simon Ricketts, planning partner at law firm King & Wood Mallesons, said the 20 per cent requirement would "definitely squeeze out" most traditional affordable housing obligations. "Starter Homes will just be a substitute for existing affordable housing," said Planning Officers Society (POS) past president David Evans, adding that even the maximum taper period would do little to address concerns that they will fuel speculation and raise house prices. The Royal Town Planning Institute expressed concerns about the knock-on effect of Starter Homes on councils' ability to deliver affordable housing for rent: "Up to now, local authorities could ask for a proportion of homes to be affordable in schemes across a whole district, but the actual reality was always open to negotiation. Now, not only are social rent and shared ownership potentially driven out and replaced by Starter Homes, but this appears to be obligatory and not open to local negotiation. This lack of discretion may affect delivery." Loss of infrastructure funding from Starter Homes schemes due to their exemption from the Community Infrastructure Levy is a further concern. "Starter Homes will generate the demand for infrastructure without any funding for it," the POS warned.

The Starter Homes technical consultation is here:

More on this topic:
Policy Summary: Government proposes 20 per cent Starter Homes requirement for eligible sites

Peers critical of plan to lift Starter Home discount after five years

Proposed 20% Starter Home requirement suffers defeat in the Lords

Housebuilder backs Lords' Starter Homes amendments

Battle over bill set to continue as MPs overturn Lords changes

Peers vote to defy government over bill amendments

Lords' planning bill amendments thrown out by MPs

Government fends off key Housing and Planning Bill amendments

How the Starter Homes target will affect councils and developers