Discounted starter homes plan 'will fail to help most buyers'

The government’s plan to offer discounted properties will fail to provide affordable housing for most families, according to local councils.

Under the starter homes initiative, the government wants builders to construct 200,000 homes in England for sale only to first-time buyers.

The properties, to be built on brownfield land, will be sold at a discount of at least 20% on the market rate. In London, the maximum cost of a qualifying home will be set at £450,000; outside the capital it will be £250,000.

But the Local Government Association (LGA) said analysis by the estate agent Savills showed that discounted starter home prices are out of reach for all people in need of affordable housing in 220 council areas and for more than 90% of such people in a further 80 council areas.

People in need of affordable housing are defined as those who would have to spend 30% of their household income to rent or buy a home.

For the average earner with a minimal deposit of 5% looking to buy an average priced house, a 20% discount would make it possible to borrow enough to buy a starter home in just 45% of all council areas in England, said the LGA.

This includes all average priced homes in north-east England, 95% of the north-west and 90% of the east Midlands.

“This new analysis shows that starter homes will be out of reach for the majority of people that are in need of an affordable home,” said Peter Box, housing spokesman for the LGA.

“Not everybody is ready to buy, and it is crucial that councils are still able to ensure there is a mix of homes that are affordable for those people that need them.”

Building the homes will cost less than usual because developers will be released from a number of standard requirements.

They will be exempt from section 106 obligations, which require affordable housing to be included in building schemes or a payment in lieu to be made to the local council. The government says section 106 obligations typically add £15,000 to the cost of each new home built.

In its own analysis, the government has suggested that should 100,000 starter homes be built through the planning system, between 56,000 and 71,000 social and affordable rented homes would not be built.

Concerned at the deleterious effects of the scheme on social and affordable rented homes, the LGA is urging the House of Lords to back amendments to the housing and planning bill allowing councils to continue to ensure a mix of affordable homes based on local needs.

“The private sector has a key role to play in solving the housing shortage, but it cannot build the 230,000 needed each year alone,” said Box.

“Councils need to be able to ensure genuine affordable homes continue to be built for rent and sale across the whole country for future generations and the millions of people stuck on waiting lists.”

The Resolution Foundation thinktank last week warned that nine out of 10 Britons on modest incomes under the age of 35 will be frozen out of homeownership within a decade.