DCLG consults on Starter Homes Regulations

We wrote on 22 January 2016 about the Starter Homes provisions contained in the Housing and Planning Bill (see 'Starter Homes: Good Start or Non Starter?'). As set out in that article, much of the framework for how starter homes will come forward was reserved for regulations.

The Department for Communities and Local Government ("DCLG") has now issued a consultation paper entitled 'Starter Homes Regulations' which can be read here. It seeks views on the framework to be established in regulations, and grapples with the following issues:

1.  What restrictions should be placed on starter homes.
2.  How the age eligibility criteria should work.
3.  What threshold (in terms of site or development size) should apply to the starter home requirement.
4.  What should the percentage requirement be.
5.  Should exemptions apply.
6.  Should off site payments be acceptable.

It should also be noted that the deadline for responses to the previous consultation on starter homes (which can be found here and concerned broadening the definition of affordable housing to include starter homes) has been extended to 22 April to provide those interested with the opportunity to review the framework for the proposed regulations before responding.

Restrictions and age eligibility

The consultation proposes that:

  • Starter homes should not be sold at full market value for a restricted period, 5 years is mentioned, but in any event DCLG does not support a period of longer than 8 years.
  • Tapering should apply, whereby sales can take place during the restricted period (but only to other qualifying first time buyers), and the later on in the period you are the lesser the enforced reduction from market value. All sales (not just the first) in the restricted period would be so controlled, but once the period has come to an end the property can be freely sold.
  • Owners be prohibited from renting out starter homes, to prevent them being used as buy to let properties.
  • Purchasers must be first time buyers under 40. However, the paper proposes two exceptions: joint purchasers where one is under 40 and one is not; and first time buyers who have suffered particular hardship as a result of military service (who would not be subject to the age restriction at all).

Thresholds and the percentage requirement

The proposed threshold when the starter homes requirement will kick in is pitched to coincide with the definition of 'major development' in the Development Management Procedure Order meaning that the requirement would apply to sites of 10 dwellings or more, or 0.5 or more hectares. Both a higher (20/25) and lower (6) threshold of units are mooted but rejected in the paper, albeit views are sought as to what threshold responders consider appropriate.

The percentage requirement is well publicised, and the paper does not deviate from the widely reported 20%, justified on the basis of evidence (see Appendix A of the paper) suggesting that this level should not render your 'average' development unviable. The paper provides that this will be secured by section 106 agreements (albeit should planning conditions be ruled out?) and that the 20% would apply nation wide. Therefore, regional variations in viability are not expressly accounted for, but see the proposed exemptions described below.

Exemptions and off site payments

A 'general viability exemption' is set out in the paper, requiring developers to clearly demonstrate that the starter homes requirement renders the scheme unviable, it cannot be supported and no other affordable housing contributions are being provided. This will not be a new process for many developers and local authorities, as viability assessments are now part and parcel of the planning system it seems. The assessment must be agreed by the local authority, and DCLG proposes flexibility by allowing some of the 20% requirement to be delivered, if 20% is not possible. This then leads to the question of whether the regulations should set out a prescriptive viability test or whether the follow the current flexible, some would say chaotic, section 106 negotiation model.

Aside from viability, a number of exemptions are proposed, albeit in outline terms only, chiefly because such forms of development are not suited to on site provision (whether due to viability or practicality). They are:

  • Dedicated supported housing developments providing specialist accommodation for a particular group.
  • Estate regeneration schemes and other affordable housing led developments.
  • Purpose built student accommodation housing.
  • Custom build developments.

If on site provision is not possible the Housing and Planning Bill does allow for off site contributions in lieu, and this is repeated in the paper. The contribution would be  up to the cost to the developer of meeting the starter homes requirement. The papers sketches out one further detail: PRS (private rented sector) developments and housing designed specifically with older people in mind (but with no support) should only be requirement to make a payment in lieu, and not face an on site requirement.

It would seem likely from previous consultations that the Government will stick to what is put forward in the consultation paper. Nevertheless, views are sought by DCLG on all of the issues set out above but they must be submitted by 18 May 2016.

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