Starter Homes Contents

1Discounted homes for first-time buyers

1.On the basis of a report by the Comptroller and Auditor General, we took evidence from the Ministry of Housing, Communities & Local Government (the Department) about its Starter Homes policy and other policies that aim to support people who need help to secure a home.1

2.An aim of the Ministry of Housing, Communities & Local Government (the Department) is to support the delivery of a million new homes in England between April 2015 and the end of 2020, half a million more by the end of 2022, and be on track to deliver 300,000 net additional homes per year by the mid-2020s.2 Through increasing the supply of housing, the Department also aims to improve the affordability of housing. These ambitions are supported by an extensive array of policies.3 In April 2015, the government committed to delivering 200,000 Starter Homes which would be sold at a 20% discount compared to market value, and available exclusively for first-time buyers under the age of 40. The November 2015 Spending Review provided £2.3 billion to support the delivery of 60,000 of these planned homes.4 From 2015, the Home Builders Federation administered a register of people interested in buying a Starter Home, on behalf of the Department.5

3.By July 2019, the Department had spent £192 million on remediating land intended for building Starter Homes, but no homes had been built.6 The main reason for this was the Department’s failure to enact the necessary secondary legislation following the Housing and Planning Act, 2016, without which developers could not legally build and market Starter Homes.7 The spending is, however, supporting the development of homes more generally, including some affordable housing.8 In January 2020, the Department confirmed the Starter Homes policy was no longer being pursued.9 In February 2020, the Department launched a consultation on its new First Homes initiative, which aims to deliver discounted homes for local first-time buyers. While having similar aims to Starter Homes, First Homes will be different in some significant ways.10

Starter Homes

4.The Department told us that Starter Homes were deprioritised in 2017 when the Housing White Paper Fixing our broken housing market indicated a shift in housing policy in favour of wider variety of affordable housing.11 However, the Department continued to develop and consult upon the necessary secondary legislation to enact Starter Homes. It was January 2020 before the Department confirmed to Parliament, and therefore publicly admitted, that the Starter Homes policy had been abandoned altogether. The Department confirmed it spent approximately £173 million preparing for the building of Starter Homes, net of receipts from onward sale of land to developers, but no Starter Homes were built as the secondary legislation was never laid.12 When asked about the challenges created for the Department by the frequent changes in ministers, it told us of the benefits of policy stability, particularly in the area of housing where better outcomes are achieved if long-term programmes are planned over time and implemented carefully in partnership with local authorities and the housing sector.13

5.The Department confirmed that around 85,000 people had registered their interest in Starter Homes since 2015 with the Home Builders Federation. It told us that in 2020 the Federation had sent a letter to everyone on the register explaining that Starter Homes were no longer available and what the alternative housing options were.14 The Department did not share our frustration that 85,000 people have waited up to five years to potentially buy a Starter Home, only to be let down, arguing that the government had provided a great deal of support in recent years for such people, including an expanded Affordable Homes programme.15

6.Homes England forecasts that around 36% of homes (2,370 of the total 6,600 planned homes) built on the land remediated through funding intended for Starter Homes will meet the definition of affordable housing.16 We were concerned though that funding intended to support first-time buyers will in fact result in so many market-value homes.17 Homes England told us that the Starter Homes programme intended to recover 75% of costs from onward sale of land to developers. It told us that, to date, it had recovered over 60% of costs.18 Homes England told us that, pre-pandemic, it expected to recover the remaining forecast receipts within 18 months but it could not yet provide a revised position in light of Covid-19.19

First Homes

7.We asked the Department about the similarities between the new First Homes policy and the Starter Homes policy. The Department emphasised how they differ:

8.The Department told us that this was not going to be a quick policy to implement and it did not yet have a timetable for implementing First Homes or a target for how many it wants built.21 It explained that it was planning a pilot to build 1,500 First Homes “over the next couple of years”, which it wanted to learn from before further planning the new scheme.22 The Department told us that it will set out its plan for the pilot in “the coming weeks”. It did not know when First Homes would become more widely available and said it had deliberately not set a timetable or targets because of too much uncertainty in the housing market.23

9.The Department explained that the First Homes discount will be funded through contributions from developers.24 Local authorities will be expected to ensure 25% of affordable homes built by developers contribute to the First Homes initiative.25 However, we have previously criticised approaches which rely on developer contributions—the Community Infrastructure Levy and section 106 agreements—for their complexity and lack of transparency over how much developers actually contribute.26 In our 2019 report Planning and the broken housing market, we were concerned that this approach too often favoured developers at the expense of local communities. We found that local authorities can lack the skills needed to negotiate contributions from developers through section 106 agreements. While they can also use the Community Infrastructure Levy to get contributions, implementing this is complex, time consuming and yields small returns in areas of low value. Only 47% of local authorities had implemented the Community Infrastructure Levy by 2019. We recommended that the Department should monitor whether its reforms to the Community Infrastructure Levy and section 106 were having the impact that was needed and adjust or adapt accordingly.27

1 C&AG’s Report, Investigation into Starter Homes, Session 2019, HC 275, 5 November 2019

2 Qq 38, 68; C&AG’s Report, para 1

3 C&AG’s Report, para 2

4 Q 40; C&AG’s Report, para 4

5 Q 51

6 Q 42; C&AG’s Report, para 7

7 Qq 44–46

8 Qq 54, 63–64

9 Q 44

10 Qq 82–83

11 Qq 48–49

12 Qq 41–48

13 Q 87; C&AG’s Report, Figure 3

14 Qq 50–51

15 Q 63

16 Qq 52–54

17 Q 63

18 Q 58

19 Q 64

20 Qq 82–83

21 Qq 81, 85, 90

22 Qq 83–85, 90

23 Qq 84, 90

24 Qq 83, 86

25 Q 83

26 Committee of Public Accounts Report, Planning and the broken housing market, One Hundred and Third Report of Session 2017–19, HC 1744, 26 June 2019

27 PAC’s Report, para 4

Published: 9 December 2020 Site information    Accessibility statement