LGA - Starter homes will be out of reach for majority of families in need of affordable homes in England

18 Feb 2016 10:21 AM

Discounted starter homes could be out of reach for the majority of families in need of an affordable home in many parts of the country, analysis released by the Local Government Association reveals.

First-time buyers will be able to buy 200,000 new starter homes over the next five years at a minimum discount of 20 per cent to the market value. Discounted prices will be capped at £450,000 in London and £250,000 elsewhere.

The LGA said the national starter homes scheme could help some people onto the housing ladder but that crucial details are yet to be confirmed. It is concerned it will help the fewest numbers of people in areas where the housing affordability crisis is most acute and will be out of reach for many people in need of an affordable home in the majority of local areas.

Although house-builders will be able to build and sell starter homes below the price caps, councils are concerned that this could be difficult for developers to achieve without compromising on quality, particularly in areas with higher house prices.

Town hall leaders are calling for the flexibilities to decide on the number, type and quality of starter homes so that they meet the needs of local communities. Councils also need powers to provide affordable rented homes that are crucial for enabling people to save money towards a deposit, and the means to secure investment in vital infrastructure that new home buyers will expect and will rely on.

Analysis by Savills for the LGA reveals:

• discounted Starter homes prices will be out of reach for all people in need of affordable housing in 220 council areas (67 per cent) and are out of reach for more than 90 per cent of people in need of affordable housing in a further 80 (25 per cent) council areas. People in need of affordable housing are defined as those who would have to spend more than 30 per cent of their household income to rent or buy a home.
• for the average earner with a minimal deposit (5 per cent) looking to buy an average priced house, a 20 per cent discount would make it possible to borrow enough to buy a starter home in just 45 per cent of all council areas in England. This includes all average priced homes in the North East of England, 95 per cent of the North West and 90 per cent of the East Midlands.
• being able to save a 20 per cent deposit would make an average priced home with a 20 per cent discount affordable to buy in a further 29 per cent of local areas. This includes a third of council areas in Yorkshire and Humber and the West Midlands.
• the average earner living in 85 per cent of London boroughs, 49 per cent of council areas in the south East and 40 per cent in the South West would need a deposit greater than 20 per cent to be able to buy an average priced home with a 20 per cent discount.

The 20 per cent discounts for new buyers would be funded by exempting developers from paying Section 106 contributions towards affordable rented housing and Community Infrastructure Levy contributions. 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.

The LGA is urging Lords to back amendments allowing councils to continue to ensure a mix of affordable homes based on local needs and to ensure that councils have the means to invest in the vital infrastructure home buyers and communities will rely on.

Discounts on starter homes should also be applied to them when they are resold to benefit future generations and help them also get on the housing ladder, it said.

Cllr Peter Box, LGA Housing spokesman, said:

"The shortage of houses in this country is a top concern for people who are finding that buying their first house is increasingly out of reach. Councils support measures to boost home ownership and starter homes are one of the ways this can be achieved.

"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. 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.

"In some places, such as the North-East and Midlands, the scheme will give people better chance to get on the housing ladder. However, a national scheme will not work for every area and fewer people will benefit from Starter Homes in areas where the housing crisis is most acute.

"Councils must have the flexibilities to shape the number, location and types of starter homes to ensure that they meet local need, and the powers to secure vital investment in associated roads, schools, health and other community services that people will rely on.

"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. 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."