Conservative party conference: radical change to ‘affordable housing’ rule

In his speech to the Conservative Party Conference last week, the Prime Minister outlined a change to planning regulations to include ‘Starter Homes’ for first-time buyers in the affordable housing definition.

In Mr Cameron’s own words, this ‘dramatic shift in housing policy’ will effectively remove the requirement for developers to provide low-cost rented homes as part of new housing schemes.  Instead, for the first time, developers will be able to provide low-cost homes for sale as part of the ‘Starter Homes’ scheme.

What is the Starter Homes Scheme?

The Conservatives believe this scheme will provide 200,000 new homes by 2020, helping to turn ‘Generation Rent to Generation Buy’.  But what is the ‘Starter Homes’ scheme?  The scheme requires properties to be offered for sale at a discount of 20% below market rates. Purchasers must be first time buyers aged under 40 and – here’s the catch – may not sell or rent out the property for the following five years.   The discount will apply to homes worth up to £450,000 in London, and £250,000 outside the capital.

With Starter Homes potentially costing close to an eye-watering half a million pounds, the announcement has inevitability been criticised as not actually being ‘affordable’ at all to the majority of aspiring first time buyers. The scheme will, however, enable those buyers with a large enough deposit to get onto the property ladder with the benefit of a generous subsidy.

What does the announcement mean for developers?

The Government hopes that the announcement will not only appeal to first-time buyers, but will also be a means of increasing the overall supply of housing by making certain sites more attractive and viable for developers.

Allowing developers to build affordable homes, which they can sell rather than rent, certainly adds a new level of flexibility to s106 negotiations and will no doubt be an appealing option in many cases – particularly as it will remove the need to design a scheme around the specific mix of housing requested by a housing association.  It may not, however, be as straightforward as the Conservatives think.  For example, the new Starter Homes may take longer for developers to sell than existing forms of affordable housing. Having heavily subsidised homes for sale on the same site as market priced housing may also have an impact on the attractiveness of the latter.

The proposals are likely to be included in the housing bill, expected next month and we will keep you up to date on this.  In the meantime,please feel free to contact any of the Firstplan team if you would like to discuss the potential impact of this policy change on an existing or potential development.