Starter Homes Contents

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2Building more homes to meet housing need

Target for new homes

10.We have previously challenged the Department on its detailed plans and projections for how it would achieve its target of building 300,000 new homes per year by the mid-2020s, most recently in our report Planning and the broken housing market. We were concerned that meeting the target of 300,000 new homes a year would need a significant step-up in the level of house building and that current levels of new homes were not promising. In June 2019, we recommended that, by October 2019, the Department should set out publicly the full set of actions it was taking to achieve its target and include year-on-year projections of the number of new homes it expected to be built.28 In its response, the Government disagreed with our recommendation and said that, while it was committed to being transparent about tis objectives and progress towards them, it did not intend to publish either its forecasting model or year-on-year projections of net housing delivery.29

11.We were disappointed that the Department remained unwilling to clarify how it will achieve this rate of building, which it now refers to as an ambition rather than a target. We asked why it thought that there should not be greater transparency about how it would achieve 300,000 new homes per year. The Department argued that the ambition was an incredibly challenging one because of uncertainty in the housing market, which made it impossible to be transparent over the path to meeting this ambition. It further explained that the levers for delivering new housing were “not entirely within” Government’s control and were dependent on developers and how they respond to market conditions. It asserted that while it bad been making considerable progress towards the target before the pandemic, the current economic uncertainty had made forecasting what would happen in the housing market far more challenging.30

12.The Department explained how its reforms to the planning system were intended to speed up building and, through increasing certainty with the system, encourage more small and medium-sized developers to build homes. It told us that it was also looking to encourage a greater range and variety of homes on large sites, which it believed will encourage build out.31 It explained that it was seeking views on how it could further encourage build out and reduce the practice of developers buying land, then delaying building on the land acquired for which they have planning permission.32

Affordable housing

13.We asked the Department what it now meant when it referred to ‘affordable’ housing, particularly in relation to the funding originally intended for Starter Homes that was subsequently redirected to a broader range of housing, including affordable homes.33 The Department said that ‘affordable’ meant different things in different contexts—different areas had different housing requirements for housing that is affordable, and it varied in meaning across different housing programmes.34 Homes England explained that when it referred to affordable homes it was using the formal definition as set out in the 2018 version of the National Planning Policy Framework, which covers homes for rent, sale or shared ownership at less than market rates.35 Homes England committed to providing us with regular updates on the breakdown of different types of affordable home it is delivering.36

14.Homes England told us that the number and proportion of affordable homes planned for the sites intended for Starter Homes has increased from 1,700 (29%) to 2,370 (36%), reflecting an increased focus on affordable housing.37 However, Homes England was unable to tell us how much each affordable home on these sites would cost.38 We queried why the expected cost per affordable home of those funded by money intended for Starter Homes appeared much greater than the cost per affordable home delivered by local authorities. By our own calculations, Homes England spent £83,700 per affordable home funded through the Starter Homes 2015 funding, and £37,700 per affordable home funded through the Starter Homes Land Fund, yet local authorities spent £17,200 per affordable home.39 The Department asserted that the assessment of value derived from the funding intended for Starter Homes should encompass also those homes delivered for market and not only consider the number of affordable homes that had been built. It argued that these sites were on land that would otherwise be underused and not viable for building without government help, therefore an assessment of value achieved should include the homes built and sold at market value. It explained that, inevitably, affordable homes build on such sites would be more expensive than affordable homes built on less risky sites. It also noted that the local authority funding for Starter Homes was for sites that were already owned by local authorities and so could not be directly compared with other programmes.40

Housing for the homeless, rough sleepers and families in temporary accommodation

15.First Homes, and previously Starter Homes, are aimed at people who want to own their own home and have an income, as the schemes require applicants to raise a mortgage. They are not schemes intended to help house people in temporary accommodation or who are homeless. We asked the Department how it was addressing the needs of these groups. The Department explained that the £12.2 billion Affordable Homes Programme contained other types of new housing supply which were intended to meet a variety of housing needs and circumstances.41 The Department explained how diversity of housing supply was key to building out sites and increasing rates of take up of new housing (the rate at which new housing is absorbed by the local market). Take up increases if a broader range of housing types appeals to a broader range of those in housing need.42

16.The Department and Homes England told that they were trying to encourage the building of smaller, cheaper homes through investing in firms that build modular homes and encouraging sites with high levels of modular construction. It explained it was looking to increase demand for this type of home. However, Homes England cautioned that local authority planning committees were nervous of this type of home, so it was gathering the evidence to demonstrate to the sector that this was worthwhile and increase developer confidence.43

17.We asked the Department how it would ensure that its approach delivered the right kind of homes in the right places.44 We heard from the Department about a range of other actions it is pursuing:

• It wants its planning reforms to encourage more small and medium-sized developers to be building homes.45
• It will promote more zero-carbon homes through the Future Homes Standard.46
• It is reviewing the release of public sector land for building.47
• It is considering its response to the recent consultation on the Housing Delivery Test, and how to align local targets for housing with the national ambition for 300,000 new homes per year.48

18.We queried why student accommodation and converted offices count, in the Department’s statistics, as new housing when student accommodation is not necessarily a permanent home, and many office conversions are tiny, lack proper insulation, and could not be said to constitute a home. The Department countered that student accommodation relieved pressure on housing more widely, so it was justifiable to include as new housing. It acknowledged that some office conversions had been of poor quality, and explained it had introduced standards for the amount of natural light converted office space was required to provide and was working to introduce standards for the amount of space for converted office space.49

19.Homes England recognised that success in delivering housing would rely on close working with local authorities, good relationships with developers and mindfulness over land value as the key determinant of delivery and maximising value for money from public subsidy of housing.50 We asked the Department about its plan for long-term support, in recognition that building homes alone was not enough to keep people off the streets. The Department told us that, as part of its rough sleeping accommodation programme, it had made available £31 million to support rough sleepers transition into more sustainable pathways, as well as its £112 million rough sleeping initiative funding. We agreed with the Department that successful housing delivery was a long-term commitment and asked how it would ensure it was able to deliver this. The Department confirmed that was working through what funding it needed in future to continue with its support for rough sleepers.51