Consultation paper says one in five homes will be a starter home

The consultation document (25-page / 580 KB PDF) sets out proposals on the eligibility and restrictions of buying and selling a starter home, the minimum threshold criteria and monitoring requirements. The government is seeking views from developers, local authorities and other relevant bodies. The consultation closes on 18 May.

Any first-time buyer who is under the age of 40 will be eligible to buy a starter home. The proposal confirms that if the property is being purchased jointly and only one purchaser is eligible; they should still be able to jointly purchase a starter home. The age restriction will be lifted for any injured military personnel or partners of those who lost their lives in service.

The government has recommended imposing restrictions for those who would like to sell their starter home. The consultation paper suggests "a tapered approach which enables the starter home to be sold at an increasing proportion of market value" and they can only be sold to other qualifying first-time buyers. Once the property has been occupied for eight years, the restrictions will not apply.

The document states that developments which cover over half a hectare or include 10 or more units will be required to build starter homes. This minimum criterion is inline with the planning definition of a "major development" and also ensures that it does not force small sites to provide starter homes, making them financially unviable.

Any qualifying development will be required to allocate 20% of homes as starter homes. The government considered setting a varied starter home obligation based on regional differences but decided to set a "single national requirement" to prevent it being too complex.

According to the document, a "general exemption" will be applied where clear evidence proves it would make the development unviable, but this will only be used in "tightly defined circumstances." The government acknowledges that starter homes may not be appropriate for all schemes and the regulations will "identify types of developments which will not be subject to the starter homes requirements". Suggested developments include specialist care accommodation, estate regeneration developments, custom build and purpose build student housing.

It is proposed that most starter homes will be delivered on-site but the government will allow some flexibility when this could make the development no longer viable, especially in areas of high value. In such circumstances, "commuted sums would have to be used by the local planning authority for providing starter homes elsewhere" said the document.

Planning expert Lucy Close of Pinsent Masons, the law firm behind Out-Law.com said the consultation document has been long-awaited by the property industry and local government alike.

"Whilst there are aspects of the document which will be welcomed by developers such as allowing for PRS and retirement housing to meet its starter home requirements via off-site contributions, there are still a number of points which remain unclear," Close said. "One such point being the time period under which buyers must pay back the 20% discount if they sell as there appears to still be some discrepancy between the government’s proposals and some lenders' views. Therefore we must remember that this is still a consultation and so there will still be some unanswered questions until we see the regulations following the Housing and Planning Bill’s royal assent."

"One important question which remains in terms of starter homes is the inter-relationship with other affordable housing tenures," said Close. "Many local authorities and MPs have raised concerns that starter homes could reduce the opportunity to provide for other affordable tenures. The consultation does not grapple with the case where for example local policy imposes a 20% affordable housing requirement and yet the national 20% starter homes obligation will essentially already mitigate the affordable housing local policy in full - the result being no affordable housing for those not fulfilling the starter homes criteria. This is explosive stuff, as has been seen from the debates in both Houses, as clearly there are many other people under 40 who will be in need of affordable housing which will not be catered for in the example given."

Planning expert Rebecca Warren, also of Pinsent Masons, said: "Another important message is that starter homes takes priority over affordable housing in viability negotiations. The consultation is clear that the percentage of starter homes should only ever be reduced for viability reasons where the percentage of other affordable tenures has been reduced to zero. This will not play well with many local authorities who already have to sacrifice affordable housing in viability negotiations. Those wishing to push for local discretion on applicability of these arrangements will need to act now as the consultation does at least pose a question on implementation of these arrangements."

"We may see local authorities pressing developers to submit applications in advance of the starter homes regulations coming into force, given the regulations will not apply retrospectively to applications already submitted. Indeed, it may be a useful bargaining tool for developers in seeking support for schemes where there is known to be animosity towards starter homes by the local authority. However, there may be traps for the unwary here as this will not necessarily guarantee a faster determination of the application, but of course the threat of withdrawal of the application and submission under the new regime can always be used to focus minds," said Warren.