Let’s loosen up on Starter Homes
Why the Government should make the Starter Homes scheme more locally-flexible
Author: Jack Airey |
In support of our new report, Power Behind The Home, Localis research fellow and report author Jack Airey writes on why the Government should reform the Starter Homes scheme to be more locally-flexible.
What makes a house affordable? When it comes to first time buyers, the drivers of their answers to this question will likely to be a mixture of the personal, local and (inter)national – e.g. factors such as local house prices, availability and obtainability of mortgage products (affected by both income and market conditions), buyer expectations and the deposit requirements of lenders (not forgetting access to the Bank of Mum and Dad).
Any Government-backed product designed to boost home ownership, such as the Starter Homes scheme, should take account of these factors and their variability by person and locality. As illustrated below, the financial means which drive affordability vary considerably depending on where you are. For example, average house prices in Copeland are three times as much as median annual earnings. In Kensington and Chelsea the ratio is thirty-two.
Sources: Mix-adjusted average house prices, House Price Index: July 2015, ONS; Median gross annual pay, Annual Survey of Hours and Earnings 2015, ONS (accessed via NOMIS).
Although the scheme has a London weighting – Starter Homes are capped at £450,000 inside London compared to £250,000 outside – it is insensitive to local differences in what constitutes an affordable path to home ownership. The capital city is not one housing market, and neither is the rest of the country.
Questions over the practical affordability of Starter Homes to local people matter because they are classified as an affordable tenure. Local authorities are duty-bound by the Housing and Planning Act to provide Starter Homes as part of affordable housing obligations which, councils say, is preventing the delivery of other types of affordable housing (such as socially-rented homes).
As we have written before, extending home ownership is a worthy aim. But it cannot come at the expense of the provision of genuinely affordable rental accommodation to those on lower incomes for whom home ownership is out of reach.