David Cameron has announced proposals to help the Government reach a target of building 200,000 more ‘low-cost’ homes for first-time buyers in the next five years. Charles Felgate discusses what this may mean for developers and local authorities.
The proposal put forward by the Prime Minister at the Conservative Party Conference would change the definition of affordable housing to include not just properties for rent, but starter homes as well, forming part of the Government’s ongoing programme to build low-cost homes for first-time buyers under the age of 40.
It will mean developers will have fulfilled their obligations to a council if they build homes for purchase, rather than having to rent out newly built housing. Under the scheme, houses must be 20% below the market price and capped at £450,000 inside London and £250,000 elsewhere.
The proposal is an extension of the starter homes exception policy added to Planning Practice Guidance in March 2015 and it is clearly a continuation of a number of other planning measures, all of which have a theme of encouraging housebuilding, consistent with the Government’s overarching policy of achieving economic growth.
However, one cannot help but wonder whether this proposal will be popular with local authorities who are at the sharp end of affordable housing delivery.
A recent example of the tension between government policy and local authority delivery is a recent judicial review case involving West Berkshire Council and Reading Borough Council.
The two councils put their case to the High Court regarding a proposal that the threshold for affordable housing and tariff style contributions be changed, in order to address a perception that affordable housing requirements were stalling the delivery of residential development.
The judge at first instance explained that viability testing of affordable housing requirements is carried out in local plan preparation and tested by way of examination, such that local plan policies may therefore be the best place to determine local affordable housing requirements.
The West Berkshire and Reading case must be seen in the context of the consultation that took place in respect of that proposal, and permission to appeal has recently been granted. However it shows that the Government is certainly pushing an agenda to ensure that housebuilding is not unduly fettered.
The devil in the Prime Minister’s announcement will, as always, be in the detail, but one can see that if this proposal does find its way into policy, then it will likely be popular with housebuilders, in that it will enable them to deal with qualifying purchasers direct, without having to depend on affordable providers having purchase funds available.
One issue the Government would have to address would be what steps it intends to require to maintain the discount to market prices and to avoid the first-time buyer reaping a windfall when they sell and move up the property ladder.
In addition, mortgage lenders have in the past been reluctant to lend on the security of a limited market for disposal. The issue of how such housing is to remain affordable in perpetuity will need to be carefully thought through.