Research: Starter Homes- will they be affordable?
Affordability of Starter Homes
Starter Homes are the major affordable house building policy of the government. The Prime Minister has promised that 200,000 will be built by 2020, a substantial proportion of total housing supply over that period. These homes will be built by private builders and will be sold at 80% of market prices for no more than £450,000 in London and £250,000 in the rest of England. Crucially, early indications are that the government will fund these discounts by cancelling or replacing other forms of affordable housing such as Social Rent or Shared Ownership.
Our analysis shows that the Starter Homes programme will not help the majority of people on the new National Living Wage or average wages into home-ownership in England by 2020. It won't even help many people on higher than average wages in many areas of England. The only group it appears to help on a significant scale will be those already earning high salaries who should be able to afford on the open market without Government assistance.
This analysis looks at three typical household formations in each local authority in England earning a range of different salaries to assess whether they are likely to be able to afford to buy a Starter Home.
Starter Homes for families earning average wages will be unaffordable in over half (58%) of local authorities across the country in 2020.
Families on the National Living Wage will only be able to afford a Starter Home in two percent of local authorities.
Single people on low or average wages will struggle to afford a Starter Home in 2020 in the majority of local authorities. Even those on a higher than average salary they would be restricted from affording to buy in three quarters of local authorities.
London, the South East and the East have the lowest number of areas where affordable Starter Homes under the schemes threshold could be built, despite high demand in these areas.
These findings suggest that the Starter Homes policy is no silver bullet for affordable housing. Starter Homes will not be affordable for average working families across all of London and most of the South of England, the areas where housing is most unaffordable. Rather than replacing other forms of affordable housing like Shared Ownership and Social Rent, the new Starter Homes should be additional to them, as was suggested originally in the Conservative manifesto for the General Election but no longer seems to be government policy.
Starter Homes would primarily help those on very high salaries or couples without children, but they are not a good replacement for other forms of affordable housing and will not help the majority of people on average wages struggling to get an affordable, decent home. The government needs to look very closely at this policy before going down the wrong track.