UK: Developers Will Not Be Required To Pay Affordable Housing Contributions Under The "Starter Home Initiative" Scheme

Summary and implications

As part of the Government's long term economic plan to help young people enjoy the security of being able to own their own home, the Starter Home Initiative (the Scheme) was announced in December. It is intended that 100,000 new homes will be available over the next five years for first time buyers under the age of 40 at a 20 per cent discount (Starter Homes). The Scheme will involve changes to the planning system as outlined below.

Changes to the planning system

Under the Scheme a new Starter Homes Exceptions Site planning policy will be introduced to allow Starter Homes to be built on public and private underused or unviable brownfield sites that are not currently identified for housing in urban and rural areas (Exception Sites).

In focusing on brownfield sites the Government is aiming to bring forward additional land for housing without compromising existing communities and whilst preventing urban sprawl and protecting landscapes.

Under the Scheme planning applications for Exception Sites should be approved unless the Local Planning Authority can demonstrate that there are overriding considerations in relation to health, safety or infrastructure.

Planning obligations or conditions attached to planning permissions will ensure that the Starter Homes are only available with a minimum 20 per cent discount below open market value to first time buyers who are below the age of 40 at the time of purchase. To ensure the savings are passed on to homebuyers, the Starter Homes could not be re-sold at market value for a fixed period. The Government is currently proposing a period of between five and 15 years with a sliding scale where the discount reduces each year over the set period.

Developers will not be required to pay section 106 affordable housing contributions, including any tariff-based contributions to general infrastructure pots or Community Infrastructure Levy (CIL) charges, to enable the delivery of housing at the discounted price. The Government estimates that developers can currently face an average bill of £15,000 per affordable home in section 106 contributions and tariffs and £6,000 in CIL charges.

Exception Sites may include a small proportion of market value homes, at the LPA's discretion, where this is essential to secure the required level of discount for the Starter Homes on the site.

Backing by developers and LPAs

The Government is seeking to work with developers, land owners and LPAs to deliver the Scheme quickly. A number of leading house builders and nine LPAs have already pledged their support for the Scheme including Barratt, Cala, Countryside, Crest, Linden/Galliford Try, Miller, Persimmon, Redrow, Bellway, Grainger, Development Securities, Taylor Wimpey and the Royal Borough of Windsor and Maidenhead.

Justin Gaze, joint head of residential development at Knight Frank has said that the announcement of the Scheme is positive, but is going to need sites which land owners are willing to discount, government money and publicly owned land to support it and help fund the large percentage of affordable housing the Government is proposing.

Timing

The Government is seeking developers' views about the proposed planning policy changes outlined above and their implementation through the consultation. The consultation period is due to close on 9 February 2015.

A written ministerial statement to Parliament (the Statement) will be required in order for the policy changes to be introduced into the National Planning Policy Framework. The Government intends to use the responses from the consultation to produce the final draft of the Statement and aims to publish the Statement by the end of March 2015. Amendments will also need to be made to the CIL Regulations.

To identify demand for Starter Homes, the Government was due to open a register at the beginning of 2015 for first time buyers interested in the Scheme.

Potential impact

The Government believes that the Scheme should not have a major detrimental impact on the section 106 contributions towards affordable housing raised from other major developments as the Starter Homes will be provided in addition to other planned housing. The Government has further clarified that LPAs will still be able to seek section 106 contributions for any necessary site specific infrastructure improvements related to developments.

Whilst the aim of the Scheme is to provide more low cost, high quality homes for first time buyers, the Royal Institute of Chartered Surveyors has commented that although the lifting of section 106 and CIL charges is a positive move, housing supply needs to increase across all tenures, not just owner occupation and such changes will mean fewer affordable homes, for sale or for rent, coming onto the market.

Please click here to review the consultation.

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