1. Governance
October 9, 2015updated 04 Aug 2023 8:35am

David Cameron's starter homes: yet another policy that'll make the housing crisis worse

By Jonn Elledge

You know, I tried to think positive. Maybe, I thought, on hearing that David Cameron was going to make an exciting announcement on reforming the planning system on Wednesday, just maybe, this is it. Maybe they’re finally getting serious.

After all, the line coming out of Number 10 was that the policies announced by the prime minister would turn “Generation Rent” into “Generation Buy”. Surely that meant the government was going to build a lot more houses. Surely.

But no, they’re not doing that. Of course they’re not. David Cameron’s new wheeze is just the latest installment in the government’s continuing scheme to buy the gratitude of a lucky few by throwing a few crumbs down from the table. For the rest of the stubbornly still-existent Generation Rent, the best case scenario here is that this latest announcement changes nothing. The worst case scenario is, well, we’ll come to that.

A quick primer on the plan, in case you aren’t the sort of person who reads up on Section 106 agreements for a giggle. At the moment, property developers who want to build homes for sale are required to build other things too, to get their schemes through the planning system. That can be social housing, which will be sold on to housing associations or councils, and let out at below-market rents; or it can be other community facilities.

What David Cameron announced on Wednesday is that the definition of “affordable homes” governing Section 106 Agreements is to be broadened. In future, it’ll include the government’s “Starter Homes”: those reserved for first time buyers under 40, and sold at a discount of 20 per cent to market rates.

In other words, developers will be given permission to build homes which they can sell, provided that they build other homes. Which they can sell.

The logic here is presumably that developers aren’t building quickly enough because they can’t make enough money – that Section 106 is just too damn stringent. As unlikely as it sounds, it is at least possible that some brownfield land is going undeveloped, because no one can make enough money building on it under the current regime. The theory here is that making house-building more profitable will unlock that land and, bingo, more houses.

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But having asked a few people in the housing sector who know more about these things than me, I was shocked, shocked, to learn that no, of course that isn’t what is actually going to happen.

Starter Homes, you see, take longer to sell, because unlike affordable housing, they don’t come with a guaranteed buyer. That creates cash flow problems, which might hit development.

Trying to sell cut-price homes on the same site as market-price ones will probably slow things down too, by making the latter less attractive to a big chunk of buyers.

This cheery map shows where “starter homes” will be affordable to low-income households. Image: Shelter.

Worst of all, though, even if this scheme does make house-building more profitable, that will only serve to make land more valuable to developers. That, because of the way the housing market currently works, will push prices up yet further.

In other words, I asked Pete Jefferys, a policy officer at housing charity Shelter, won’t this just make things worse? “In terms of affordable housing, definitely,” he told me. “In terms of housebuilding it’s hard to say – but I see no reason why it will improve things.”

If this government really does want to turn Generation Rent into Generation Buy – if the Conservatives really do want to be the party of home ownership, again, rather than the one of buy-to-let landlords it is at the moment – it is entirely within its power to do so.

There is no shortage of land to build on (even if we leave the sainted green belt alone, there’s enough to keep us going for a few years). There’s no shortage of institutional investors that would be delighted to help fund a major public building programme. Getting a new generation of council houses built would be, if not easy, then certainly not that difficult.

So why is Cameron still mucking around with schemes that won’t benefit anyone beyond a few relatively rich 30-somethings? Because, one assumes, he doesn’t think the state should be building houses. The state’s only role is to make life easier for developers, and hope and pray that they decide at last to go against their own financial interests, and double the rate at which they build homes.

I may have mentioned this before, but – we are so monumentally screwed.

This article was originally posted on our sister site, NewStatesman.com.

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