Background – Existing Policy Provision
The Starter Homes initiative first appeared in December 2014 in the Consultation Document ‘Stepping on the Property Ladder’. This followed on from the Conservative Party manifesto that pledged to build an ambitious 200,000 starter homes by 2020.
By March 2015, the Government had launched a new national Starter Home Exception Site policy. Contained within National Planning Policy Guidance (NPPG), it was an attempt to free up the planning system and deliver more low cost, high quality homes for first time buyers.
The guidance directs LPA’s to work in a positive and proactive way with landowners and developers to secure a supply of sites suitable for Starter Housing; particularly focusing upon opportunities for exception sites.
Existing guidance directs approval of Starter Homes on exception sites unless the LPA can demonstrate that there are overriding conflicts with the NPPF that cannot be mitigated. Suitable sites include under-used or unviable land allocated for commercial or industrial purposes but where remediation and infrastructure costs do not render Starter Homes financially unviable. This may include sites with:
- A land value significantly below that of other sites with a similar permitted use in the area;
- A high percentage of vacant units (and long vacancies);
- An employment allocation not actively marketed for a period of time or actively marketed with no interest;
- There has been a lack of recent development activity to improve the commercial and industrial site.
LPAs have local discretion whether to permit Starter Homes on Rural Exception Sites.
Exception sites may include a small proportion of market homes as part of a development proposal, at the LPA’s discretion, where this is essential to secure the required level of discount for the Starter Homes on the site.
As a general rule, Starter Homes exception sites should not be required to make section 106 affordable housing or tariff style contributions in return for offering buyers a discount of at least 20% on the market value.
Five Year Supply of Housing
Under the existing provisions, LPAs are not required to make allowance for Starter Homes in its five-year housing land supply until it has compelling evidence that they will consistently become available in the local area.
HCA funding is already available to help kick start the delivery of exceptions sites, including the remediation and de-risking of local authority sites (£8 million is committed on 27 sites). Sites will largely be sold to developers via a design-led Starter Home competition. A further £36m is available in 2016; most is already reserved by the HCA to acquire further suitable exceptions sites.
Councils have also been invited to bid for a share of a new £1.2 billion Starter Home Land Fund with expressions of interest welcomed until the end of 2016. The land fund is intended to operate until 2019, with Government expecting construction to commence from 2018.
The HCA will manage the fund and create partnerships with LPA’s to acquire, remediate and de-risk land for Starter Homes to be built out by developers. Schemes will need to provide at least 50% Starter Homes alongside some ‘additionality’. For example, sites should not be already allocated for housing in local plans or should present opportunities for higher density development. Stalled sites will be considered and the expectation is that most sites will be brownfield but greenfield sites can also be supported where there is community support.
New Starter Home Provisions
The new provisions in relation to Starter Homes became embodied in law on 12 May 2016 when the Housing and Planning Bill received Royal Assent.
Embodiment into Law
The provisions of the Housing and Planning Act relating to the delivery of Starter Homes does not come into immediate effect. The Starter Homes regulations under section 2, 3(6), 4 or 5 (see s214 of the Act) will require a draft to be laid before and approved by a resolution of each House of Parliament on dates to be specified by the Communities Secretary in future regulations. It is understood that a number of regulations are likely to be made in October 2016 although there is a long way to go to resolve the detail before then.
LPA’s Duty to Promote
Part 1 of the Act places a statutory duty on local planning authorities to actively promote Starter Homes through local plan preparation and in determining planning applications.
What is a ‘Starter Home’?
Starter Homes are expected to be high quality and well designed (A new Design Advisory Panel is developing an initial set of exemplar design templates) and should be offered for sale at a minimum of 20% below its open market value (secured via planning obligation) and limited solely to qualifying first time buyers under the age of 40 years old.
The discounted price of a Starter Home should be no more than £250,000 outside London and £450,000 in London.
The Government, through the publication of the ‘Starter Homes Regulations: Technical Consultation’ (closed on 18 May 2016), have been seeking views on the details of how the new Starter Homes initiative would work. This will inform the future regulations to be published by the Communities Secretary.
Alongside the existing provision permitting the delivery of Starter Homes on Exception Sites, the Act introduces a new requirement for Starter Homes to be provided as a proportion of an open market residential development.
Residential applications (above a certain site size or number of units; schemes of ‘above 10 units or 0.5 hectares’ are suggested in the consultation) will be required to provide a proportion of those units as Starter Homes. The suggestion is that 20% of the dwellings on site should be Starter Homes.
It is anticipated that Starter Homes will eventually be included in the NPPG definition of Affordable Housing and determined as such during the course of an application. We understand that Starter Homes will take primacy over other forms of affordable housing provision.
Limitations on resale and letting
The Act suggests that measures will be put in place to limit the re-sale and letting of Starter Homes. The Secretary of State will – through regulation – place restrictions on resale and occupation to ensure that Starter Homes are purchased by owner occupiers rather than for rental investment or short‐term speculation.
The Act provides for a ‘tapered’ approach whereby the Starter Home can be resold at an increasing proportion of market value, stepping up to 100% over a set period of time. The Government supports a taper period of 5 years although various timescales are suggested.
A qualifying person must be under 40 years of age. The Government are considering exceptions to the definition of a qualifying person (to be introduced through regulations). This may include situations where there are joint purchasers (one being below the 40 years of age threshold and the other above). Other exceptions could include military service.
To provide for the Starter Homes initiative an amendment to the legal definition of a ‘first-time buyer’ (as set out in s57AA (2) of the Finance Act 2003) is expected soon.
The Government has also consulted on possible exemptions to the provision of Starter Homes as part of a wider housing development. A general exemption is proposed for where Starter Homes would render a site unviable. Other possible exemptions include specialist housing developments such as residential care with on-site support, student accommodation and custom build developments.
Off-Site Commuted Sums
It is expected that qualifying schemes will deliver Starter Homes on site. The Government have consulted on situations where an off-site commuted sum might be more appropriate. Examples of relevant situations include residential care where there is on-site support and PRS schemes.
Much of the working details relating to the roll out of Starter Homes will be contained within the regulations which are expected to be published shortly. DPP are closely monitoring the details and will release further analysis as it emerges.
Whilst we await the outcome of the Government deliberations with anticipation, it is our view that the new Starter Home regulations are unlikely to deliver much in the way of additional housing for the UK.
Once the new provisions in relation to Starter Homes are brought into force and Starter Homes fall under the official definition of ‘affordable housing’ it is clear that the rate of delivery of the more traditional types of affordable housing will decline; particularly given the statutory duty placed upon LPA’s to actively promote Starter Homes. Therefore do Starter Homes:-
- Spell the end for traditional social housing in the UK and does it suggest further growth in the Private Rented Sector?
- What are the implications for those who still cannot afford (or do not quality for) Starter Homes?
- Will Starter Homes unlock unviable and stalled sites?
What is clear is that the new changes are unlikely to have an impact on the amount of long term affordable housing that is available in the UK.
Other noteworthy topics in the Act
Alongside the introduction of the Starter Homes legislation, the Act introduces some additional significant changes. The list below is not exhaustive:
- Pilot schemes testing the use of alternative providers to process planning applications;
- Step-in powers for government when local authorities aren’t preparing their local plans fast enough;
- Allows planning applications for non‐major development to be submitted to and decided by the Planning Inspectorate where the local planning authority has a track record of very poor performance in the speed or quality of its decision‐making;
- Some minor amendments to the neighbourhood planning process. More on this anticipated shortly;
- Allows local authorities to apply to the government to create a ‘planning freedoms scheme’, which can display planning provisions ‘to facilitate an increase in the amount of housing’ in an area;
- Introduces ‘permission in principle’ (PiP) for housing-led developments (at the point when the site is allocated in an adopted local or neighbourhood plan or a local brownfield register). To get detailed consent following PiP, a ‘technical details consent’ is required;
- In March 2015 Parliament passed the Self‐build and Custom Housebuilding Act 2015. The Housing and Planning Bill goes further and will require local planning authorities to ensure that there are sufficient serviced permissioned plots consistent with the local demand on their custom build registers.
We would be happy to answer any query in relation to the Act or what implications such changes will have.