The idea of starter homes seems to have been around for a while, though it has only now been given life by the recently enacted Housing and Planning Act 2016. Given some prominence, in Chapter 1 of Part 1 of the Act, the starter homes initiative is set out across eight sections.
The relevant provisions of the Act are much less descriptive than they might have been. What is encouraging to see however is that the Act lays the foundations for further regulations to be made to give the initiative direction and it looks as if starter homes will be more prominent and more flexible than first envisioned.
The criteria for what constitutes a starter home is largely as before – a building (or part of a building) that: is a new dwelling; is available for purchase by qualifying first-time buyers only; is to be sold at a discount of at least 20% of the market value; is to be sold for less than the price cap; and is subject to any restrictions on sale or letting specified in regulations made by the Secretary of State.
A complicated tapering provision was drafted at the Bill stage, describing a tapering in the value of the 20% starter homes discount that would have to be repaid if a starter home was subsequently resold, reducing by 1/20th for every year following a purchase. The final details of such a tapering scheme, like much else in relation to starter homes, will come in subsequent regulations.
Digging a little deeper into some of this starter home terminology, a qualifying first-time buyer is someone who: is a first-time buyer; is at least 23 years old but is not yet 40; and (and this is the interesting bit) “meets any other criteria specified in regulations made by the Secretary of State (for example, relating to nationality)” (my emphasis added).
Starter homes will therefore (at least initially) be out of the reach of 18-23 year olds, who may have been hoping to benefit from them, and everyone over the age 40, who will have already known that it was not intended that they would benefit. Curiously, the Act later sets out that the Secretary of State may by regulations disapply the age requirement in relation to specified categories of people and specify circumstances in which a dwelling may still be a starter home even if it is available for purchase by joint purchasers not all of whom meet the age requirement. Fairly stringent criteria then, on the face of it, which may yet prove to be quite flexible.
The same can be said of the much discussed ‘price cap’. Two figures have been central to starter homes discussions since their conception: £450,000 for starter homes in Greater London; and £250,000 outside of Greater London. As anticipated, starter homes will be subject to these price caps, which has provoked much criticism. With house prices continuing to soar, particularly in the South East, £450,000 looks like an increasingly modest sum when contemplating the purchase of property in London and £250,000 is not likely to get you more than a one-bedroom apartment in cities like Brighton, Cambridge, Oxford and towns in and around the home-counties commuter belt.
Further regulations to the rescue? The Secretary of State may by regulations amend the price cap (presumably with continuing inflation in mind) and the regulations may provide for different price caps to apply for starter homes in different areas in Greater London and different areas outside Greater London. In other words, the price cap on starter homes may be set on a regional/area by area basis, which could bring a little fairness and proportionality to the scheme. It will be interesting to see whether the price cap ends up being lowered in certain areas, particularly in the North, where house prices are much lower.
The rest of the Chapter sets out the framework for further regulations to put starter homes firmly within the context of the planning system. We are likely to see regulations coming in to provide that a planning authority may only grant planning permission for a residential development if certain starter homes requirements are met (whatever they may be) and the Act states, by way of example, that such regulations may provide that an authority may grant planning permission only if a person has entered into a planning obligation to provide a certain number of starter homes or to pay a sum to be used by the authority for providing starter homes.
It is at this point that many will be thinking that this is starting to sound a little bit like the affordable housing obligations we have been seeing in s106 agreements for many years. It is. A proposed change to the definition of affordable housing in the NPPF to include starter homes is currently subject to consultation and the Act inserts a new affordable housing definition into the TCPA 1990 in relation to the enforceability of planning obligations (a separate blog to follow on this point), being “housing for people whose needs are not adequately served by the commercial housing market, including starter homes”.
The Act does not guide us in relation to whether the delivery of specified levels of starter homes will have priority over the delivery of other forms of traditional affordable housing, but this may be clearer after the regulations that follow. What is clear however is that the government’s intention is for a fundamental rethink in this area, which could have profound effects on the way in which development is brought forward in future. Expect further discussion, debate and disagreement to come. A technical consultation on starter homes is nearing conclusion, the deadline for submissions for which has been pushed back more than once and is now expected for tomorrow.