Housing White Paper: Government pulls back from mandatory ‘starter homes’ requirement

It has also dropped a planned mandatory requirement for starter homes to make up 20% of the housing on all new sites over a certain size, introduced an income eligibility cap and increased the length of time before a starter home can be resold at market value from between five to eight years to 15 years.

 There will instead be  a policy change, made through an amendment to the National Planning Policy Framework, to make 10% of the homes on new sites affordable, with any starter home requirement within that percentage set at an "appropriate level" by the local authority.

In its 'white paper' on housing policy, the government said that it had dropped the mandatory 20% target in response to concerns "that this would not respond to local needs".

"Instead we want local authorities to deliver starter homes as part of a mixed package of affordable housing of all tenures that can respond to local needs and local markets," it said.

"We believe that it is right to continue to provide more of the right type of new housing to allow young people to get on the housing ladder. We will therefore look for local planning authorities to work with developers to deliver a range of affordable housing products, which could allow tenants to become homeowners over a period of time. These include starter homes, shared ownership homes and discounted market sales products," it said.

The government is also consulting on possible changes to planning rules which would allow developers to include more affordable properties for rent as part of their affordable housing commitments. It defines 'affordable rent' as at least 20% below the market rate.

"In line with the prime minister's pledge of help for 'generation rent', the government proposal to widen the scope of 'affordable housing' to cover housing owned by private landlords will help broaden the attraction of the sector to investors - and, in the meantime, the compulsory requirement for starter homes has been quietly shelved," said housing law expert Anne Bowden of Pinsent Masons, the law firm behind Out-Law.com.

The Conservative Party had pledged to deliver 200,000 starter homes by 2020 as part of its 2015 general election manifesto. The white paper has amended this figure to cover a "wider range" of affordable housing programmes, with starter homes included as "an important part of this offer". It has also narrowed the target market of the product by introducing a 'household income eligibility cap' of £80,000, rising to £90,000 in London; to ensure that the product is only available to "those that genuinely need support to purchase a new home".

Young first-time buyers wishing to purchase a starter home will be required to do so by way of a mortgage, rather than in cash; and will have to repay some or all of the discount on the purchase price if they sell on a starter home within the first 15 years of ownership. These requirements will "reduce the risk of speculation ... whilst allowing home owners to move onwards when the time is right", according to the government.

"After much air time in the Commons and the Lords, it would appear that the government is minded to concede to a longer repayment period of 15 years rather than the eight years that then housing minister Brandon Lewis vigorously argued for," said housing law expert Rebecca Warren of Pinsent Masons.

"Equally, ground has been given on the mandatory nature of starter home, which suggests the local government lobbying has had effect. Instead, councils will be able to agree a minimum/maximum amount of starter homes with developers, which in many cases is unlikely to see any starter homes being delivered due to local political preference or viability concerns," she said.

Warren said that the broader 10% affordable housing requirement was a "much more pragmatic approach, and one that we consider will be welcomed by many in local government and the development industry".