Experts urge government to rethink Starter Homes plan

The Starter Homes scheme, a key plank of the government’s drive to boost home ownership, offers questionable value for public money and will hand a big windfall to a lucky few, according to a group of leading figures in the housing sector.

Ministers are to spend £2.1bn in an effort to bring 200,000 homes to market under the scheme, which will offer a 20 per cent discount to the market price of a newly built house or flat to first-time buyers under 40.

But the Lyons Commission — a group headed by Michael Lyons, former BBC Trust chairman, and which includes leading figures from housebuilders, housing associations and councils — has urged the government to rethink plans to allow buyers to sell these homes at full market rates after five years.

“We feel very strongly as a commission that if the government is going to invest in these properties it should be in perpetuity,” said Mr Lyons. “Instead of giving a very limited number of people a windfall gain, this should be spread more evenly.”

He suggested covenants should be attached to the properties — which will be limited to those with market prices of less than £250,000, or £450,000 in London — to ensure they can only be sold on at affordable rates.

The comments follow a warning from Savills, the listed estate agency, that Starter Homes “could distort the new homes sales market without significantly increasing the number of new homes delivered overall”.

Ministers are expected to launch a consultation this month on how to implement the scheme. Housebuilders have given it a cautious welcome but are understood to be concerned about the scheme undercutting their own pricing.

Others, including the Construction Products Association, have noted that it and other subsidy schemes such as Help to Buy stimulate demand but do not necessarily increase supply.

The Lyons Commission was originally assembled by the Labour party in 2013 to formulate housing policy but has continued to meet independently. It includes Mark Clare, a former chief executive of Barratt Homes, Kate Henderson, chief executive of the Town and Country Planning Association, and Richard Parker, head of housing at PwC, as well as investors and academics.

In a new report, the group praised the Conservative government’s emphasis on housing but said its focus on home ownership and private sector delivery would probably leave it unable to meet its new building targets.

“The government’s bold commitment to build one million homes by 2020 is to be welcomed but it won’t be achieved by focusing purely on homes for sale. That’s like leading an orchestra made up only of the strings section,” said Mr Lyons.

His group warned that Starter Homes, which will be considered “affordable” for planning purposes, may cut into provision of affordable homes to rent.

“No one questions the widespread ambition amongst young people to own their own homes but most realise they are being priced out of the market and meanwhile have to chase after increasingly expensive, often poorly priced homes to rent,” Mr Lyons said.

“This won’t be solved by building a few heavily subsidised starter homes.”