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Starter homes will be unaffordable for those in need, says LGA

Housing / iStock_000074406885

Starter homes offered at discounted prices could by unattainable for most families in need of affordable homes across England, according to the Local Government Association (LGA).

The government’s scheme aims to offer first-time buyers aged under 40 a 20 per cent discount on the market value of properties.

But the LGA has said that given the continued lack of detail on the Starter Homes scheme, it is concerned that the scheme will help the “fewest number of people in areas where the housing affordability crisis is most acute” and will thus be out of reach for those most in need in many areas.

The LGA suggests that local authorities need greater flexibilities to decide the quantity and type of starter homes needed in their area, and to provide crucial affordable rented homes to enable people to save money for a deposit.

Analysis conducted by property consultancy Savills on behalf of the LGA defines people in need of affordable housing as those who would have to spend more than 30 per cent of their household income to buy or rent a home. The research reveals that starter homes will be unaffordable for those in need in 220 council areas (67 per cent), and out of reach for the majority in a further 80 (25 per cent).

For the average earner looking to buy an average-priced house with a 5 per cent deposit, the 20 per cent Starter Home discount would only make it possible to borrow enough to purchase a home in 45 per cent of council areas.

Funding for discounts on starter homes would be created by exempting developers from paying Community Infrastructure Levy contributions and Section 106 contributions towards affordable rented housing. According to the LGA, government analysis suggests 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.

Neal Hudson, associate director of residential research at Savills and author of the analysis conducted on behalf of the LGA, told The Planner: “There will undoubtedly be a market for starter homes, but they should not replace affordable housing on a wider scale. We run the very real risk of shifting housing further away from people at the lowest level of need in this country”.

LGA housing spokesman, Councillor Peter Box, said: "In some places, such as the North-East and Midlands, the scheme will give people a better chance to get on the housing ladder”, but a national scheme will not work for every area.

Hudson agreed: “The success of starter homes will absolutely rely on input from local authorities, as the exact benefits of the policy will depend on local levels of income and affordability.”

Phil Williams, RTPI President, commented: “Successful places need a mix of housing but the bill has the potential to 'squeeze out' other forms of affordable housing. The bill is too prescriptive and I urge ministers to reconsider allowing for greater flexibility to fully develop sites, which would be in the interests of councils, developers and communities, as well as ensuring that sites were fully viable.

"The other key consideration around Starter Homes is that developments, whether for first time buyers or not, still place burdens on infrastructure. The RTPI supports place making not just isolated housebuilding”, Williams added.

This announcement from the LGA follows further research released by Savills this month, which suggested the uncertainty surrounding the land value implications of starter homes is affecting the rate of housing development in the UK.