Government plans for Starter Homes have been strongly criticised by Lambeth Council which warns of inflated house prices and a lack of affordable homes in the borough.
The council says if local planning authorities have to support starter homes at the expense of traditional affordable tenures, their ability to meet local housing need and to plan for and create balanced communities will be severely reduced.
In its formal submission to the government’s consultation, the council says: “… there is a complete disconnect between local evidence of affordable housing need, as demonstrated through strategic housing market assessments, and the requirement that 20% of all homes delivered on all sites above a nationally prescribed threshold should be starter homes.”
The council is strongly opposed to the government’s proposal that people could sell or sublet starter homes five years after buying them and argues that a minimum restriction of 15 years should be imposed. The council’s concern is shared by a number of major private lenders who fear that the government’s plans could distort market values and encourage buyers to overpay.
In Lambeth, the cheapest new build properties are more than 20% dearer than the cheapest homes available in the second hand market, generally ex-RTB properties. As the council points out, starter homes will not increase the number of households able to enter home ownership, just provide them with a subsidy for a more expensive home which will be out of the reach of many residents, thus increasing inequality.
A spokesman said: “ We fully support the government’s objective to improve access to home ownership for those who aspire to own their own home, but this has to be balanced with meeting identified local housing need as set out in Local Plans, supported by evidence and local public consultation. Lambeth desperately needs more genuinely affordable homes, not a new label on unaffordable homes.”
Notes to Editors:
On 23rd March 2016 the government launched a technical consultation seeking views on the details to be set out in regulations to support the starter homes clauses in the Housing and Planning Bill. The consultation closes on 18 May 2016.
The table below considers a notional new development in Lambeth (Brixton) containing 1 and 2 bedroom units, with an estimate of the monthly costs. It also includes a comparison for a typical ex-right to buy (RTB) property bought in the same local area. The figures are based on the following presumptions:-
• 1 bed market value £400k
• 2 bed market value £500k
• 3% interest rate for starter home / shared ownership purchase on a 25 year repayment mortgage
• The unbought s/o equity rent charged at 2.75% a year
• Annual service charge of £150 / month
• Shared ownership requires a 10% deposit, starter home 15%
• Ex-RTB one bed costs £280k, ex-RTB two bed costs £340k
Social rent Aff’ (80% market rent) LHA Market Rent S/O 25% inc Service Charge S/O 50% inc Service Charge Starter Home Ex RTB
1 bed £540 £1,040 £884 £1,300 £1,264 £1,462 £1,762 £1,279
2 bed £600 £1,200 £1,150 £1,500 £1,543 £1,790 £2,165 £1,520
The above examples compare the total monthly costs attributed to different types of housing options. These examples illustrate that starter homes are far less affordable than other housing options, including the purchase of an ex-right to buy property without a discount.
It is also worth noting that to be able to afford the two bedroom flat in the example above, spending no more than 30% of gross income on housing costs, would only be affordable to the wealthiest 14% of households in Lambeth and require significant deposits which are likely to be mainly available through family support. This will have the effect of widening social inequality.