The government has announced that if it wins the election it will double the number of homes that will be provided under its starter homes initiative. The scheme, which is designed to provide first-time buyers in England with discounted properties, is already supposed to provide 100,000 homes.
On Monday, the housing minister, Brandon Lewis, said that 31,000 people had already registered for the scheme.
How does it work?
Builders will create homes specifically for the scheme which will only be offered for sale to first-time buyers. The properties, which will be built on brownfield land, will be sold at a price that is at least 20% below the market rate. Under the latest announcement, 200,000 properties will have been made available by 2020.
The price of the new homes will be capped. In London, the maximum cost of a qualifying home will be set at £450,000; outside London it will be £250,000.
The government says that first-time buyers are currently paying an average of £218,000 for a home, so the scheme will typically save them £43,000.
Would-be buyers who are interested in the scheme can sign up here and receive information on new projects in their area.
Do I qualify?
If you are under 40 and have never owned a home before, then yes. You will, of course, need to be able to raise enough money to buy the property, and that could be a push, particularly in London.
Figures from the Council of Mortgage Lenders show that in the final three months of 2014 first-time buyers in London typically earned £56,314 and took out mortgages of £216,000 – some way off the £450,000 maximum price under the scheme.
Will I be able to get a mortgage?
Banks and building societies will be offering mortgages on the homes, but it’s not yet clear if it will be one specifically designed for the scheme or if they will give you an open choice from their ranges. On the Help to Buy new-build scheme, where borrowers can get a government loan of up to 20% of a property’s price, lenders offer separate deals, typically through mortgage brokers.
Whether you can actually get a mortgage will depend on how much you earn, your outgoings and your credit record – the usual things lenders look at when making a decision.
Are there any homes to buy yet?
No, and it could take a while before they are. The government says more than 30 builder firms have indicated that they support the scheme and may bring forward land to develop the new houses. However, it says building the first homes “is expected to start within months”, so don’t book the removal van yet.
Is the discount real?
This is one of the big questions – how will buyers know they are getting a genuine discount, particularly on developments which are entirely made up of starter homes so there is no benchmark being sold at the market-rate? And the answer is not clear, as the government has not said how it will ensure that the homes are being sold at a discount.
For first-time buyers it does not really matter, as it is more an issue of whether you can afford the property and get a mortgage on it. The government says the homes will be well proportioned and high quality, so the discount should not result in cheaper buildings. But councils waiving affordable housing money will presumably be keeping an eye on pricing.
How is it being funded?
Building the homes will cost less than usual because developers will be released from a number of standard requirements. They will be exempt from section 106 obligations, which require affordable housing to be included in building schemes or a payment in lieu to be made to the local council. The government says section 106 obligations typically add £15,000 to the cost of each new home being built. After the election, the Conservatives say they will look to exempt the homes from the community infrastructure levy – a fee used to pay for services such as roads and sewers.
The new starter homes will also be exempt from the zero-carbon standard, designed to ensure they emit no carbon.
What if I want to move?
The homes will be required to be available at this 20% discount for the first five years after they are built – any owner who wishes to sell during that time will have to sell to a first-time buyer and offer the same discount. The government is suggesting that the properties be sold with covenants restricting their resale.
During that same five years, the property cannot be let at the market rate either.
Will this solve the housing crisis?
Not on its own. Most experts agree that the UK needs around 250,000 new homes to be built each year in order to keep up with demand. While this may promote some extra building, it won’t bridge the shortfall between the 118,760 homes built last year in England and the number needed.
The National Housing Federation, which represents providers of affordable housing, describes the scheme as “yet another short-term initiative that fails to address the root of the problem”.
Is that the only criticism?
No. Housing experts are concerned about the removal of the requirements on builders to provide affordable housing – homes that people on low incomes can rent or buy, and pay for infrastructure.
On its policy blog the charity Shelter says: “We have found consistently that the biggest barrier with the public accepting new homes near them is if they think that the homes won’t come with decent local infrastructure. People are rightly worried that the schemes will add pressure to their services rather than relieve them.”
