Select committee inquiry
Starter Homes
Closed
What the inquiry looked at
“In April 2015, the Conservative Party manifesto committed to “200,000 Starter Homes, which will be sold at a 20% discount and will be built exclusively for first-time buyers under the age of 40”. The November 2015 Spending Review subsequently provided £2.3 billion to support the delivery of 60,000 Starter Homes, of the 200,000 previously announced. Between 2015 and 2018, government’s policy towards Starter Homes shifted. In May 2018, the Minister of State for Housing and Planning stated that the government had spent an estimated £250 million of the Starter Homes Land Fund, but in July 2018, the Ministry of Housing, Communities & Local Government (MHCLG) clarified that it had spent £250 million buying land to build affordable properties from two funds, the Starter Homes Land Fund and the Land Assembly Fund, with work under way to get the land ready for development, but that building had not yet started – and not one home has yet been built. The Government now has an “ambition” to build 300,000 new homes a year from the mid-2020s – but despite the hundreds of millions of pounds spent, the fate of the 200,000 Starter Homes pledged in the 2015 Conservative manifesto is unclear. Key findings of the NAO report on the Starter Homes project : - No Starter Homes have been built to date. The funding originally intended for Starter Homes has instead been spent on acquiring and preparing brownfield sites for housing more generally, some of which is expected to be affordable housing - MHCLG expected to introduce the legislation and planning guidance required for Starter Homes in 2019 but it is yet to lay the regulations in Parliament. - The Department no longer has a budget dedicated to the delivery of Starter Homes. After the 2015 manifesto pledge, the housing white paper in 2017 shifted housing policy. The original target of 200,000 Starter Homes morphed into a target to help 200,000 households into home ownership through a range of government-backed schemes. - The November 2017 Autumn Budget reallocated the funding earmarked for Starter Homes to the £9 billion Shared Ownership and Affordable Homes Programme and the Land Assembly Fund (LAF). - Between 2015-16 and 2017-18, the Department spent almost £174 million preparing sites originally intended for building Starter Homes – though no Starter Homes have been built on that land. In 2016-17 and 2017-18, the Department spent £151 million under the Starter Homes Land Fund (SHLF), but that spending also has not supported the building of Starter Homes. Instead, the Department used the SHLF to acquire and remediate suitable land, to then sell on to developers. In July of this year, after the UK’s Covid lockdown exposed and exacerbated the shortage of affordable housing in the UK, the Government announced new, sweeping reforms to the building planning regulations. It is not clear how this impacts or interacts with the Government’s previous targets, allocated and re-allocated, and spent funding, intended to build affordable new homes. In October, the Committee will question senior MHCLG officials on what is happening with plans to address the affordable housing crisis. If you have evidence on the issues raised in this inquiry please submit it here by Thursday 15 October.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
In the committee's words, from the summary of Thirty-first Report - Starter Homes ↗
The Ministry of Housing, Communities & Local Government has failed to deliver the 200,000 discounted Starter Homes it promised first-time buyers in 2015. Despite setting out the legislative framework for Starter Homes in 2016, the Department never put in place the necessary secondary legislation and regulations to make Starter Homes a reality. By 2017, Starter Homes as a distinct policy had been abandoned, although it was not until 2020 that the Department formally announced the end of the policy.
Since 2015, some 85,000 people had registered their interest in Starter Homes, only to hear in 2020 that they had been waiting in vain. The Department is now introducing a new policy with similar aims—First Homes—but is unable to say when they will be available for first-time buyers to purchase. This cycle of policy invention, abandonment and reinvention, stringing expectant young people along for years, and wasting time and resources on policies that come to nothing as ministers come and go with alarming frequency, is deplorable.
As we have heard before, the Department remains unable or unwilling to clarify how it will achieve its ambition of 300,000 new homes per year by the mid-2020s. We are also concerned about the blurring of the definition of affordable housing. It is essential that the Department is clear what ‘affordable’ means to different sectors of society and in different areas of the country. This Committee has reported regularly on housing delivery since 2015, and not one of the promised housing programmes has delivered its objectives. Indeed, most have fallen woefully short. The Department needs to set out realistic, staged plans that will have a more realistic prospect of delivering homes, rather than the mere promise of more homes. It badly needs to renew confidence among future tenants and owners that the homes they want and need will be built.
What the government said
The government responded on 24 March 2021.
Summary written by Accountability Index from the government's response.
The government agrees with some of the Committee's recommendations on Starter Homes and First Homes, and disagrees with others, including on clarifying how its housing schemes contribute to the 300,000 homes ambition.
- On openness over policy changes, it agrees and says the recommendation is implemented, stating that in 2020 the administration "informed Parliament that the Starter Homes policy was not going ahead".
- It disagrees with the recommendations to clarify how each scheme contributes to the 300,000 homes ambition and to write with a tenure assessment, saying it "has and continues to be transparent" and publishes quarterly progress data.
- It agrees to explain how it is addressing homelessness, rough sleeping and families in temporary accommodation, and "will update the Committee within three months", with a target implementation date of April 2021.
- It disagrees with embedding space and light standards in legislation, stating that "planning policy is the most appropriate mechanism". It agrees to make greater use of modern methods of construction, with a target implementation date of Autumn 2021.
Read the government's response ↗ Read the report ↗ Report an error
How the inquiry ran
Each dot is a dated item listed on this page, from the inquiry's opening on 17 September 2020 to 13 July 2021.
- Oral evidence 22 Oct 2020
- Report 9 Dec 2020
- Government response 24 Mar 2021
- Correspondence 13 Jul 2021
What it recommended 6 recommendations · 14 conclusions
2The Department’s reliance on developer contributions to fund First Homes is a complex mechanism lacking...
Recommended (the committee's words)
The Department’s reliance on developer contributions to fund First Homes is a complex mechanism lacking transparency and risks less money being available to local authorities for housing and infrastructure. First Homes differ from Starter Homes as they will be sold at a higher discount, only to local first-time buyers, and with a discount that will be passed on to future buyers when First Homes are resold. First Homes will also be delivered through the existing planning system so are not dependent on new legislation. The discount will be funded through developer contributions. Local authorities will be expected to ensure 25% of affordable homes built by developers contribute to the First Homes initiative. We have previously criticised the system of developer contributions for its complexity, and lack of transparency over how much developers actually contribute. The Department does not have a timetable or target for delivering First Homes but is planning a pilot to build 1,500 First Homes ‘within the next couple of years’, which it wants to learn from before further planning of the new scheme. However, the Department could not say when First Homes would become more widely available and blamed its lack of clear timetable or targets on the uncertainty of the housing market. Recommendation: As part of the First Homes pilot, the Department should model the effect of funding First Homes from developer contributions on local authorities’ ability to fund local infrastructure and other housing needs, such as social housing, and what the opportunity cost is of using developer contributions in this way. It should also set out clearly how the secondary resale market will work. 6 Starter Homes
3We are disappointed that the Department remains unable or unwilling to clarify how it will...
Recommended (the committee's words)
We are disappointed that the Department remains unable or unwilling to clarify how it will achieve its ambition of 300,000 new homes per year by the mid-2020s. We are wearily familiar with the Department’s lack of clarity over how it intends to meet its ambition—not target—of 300,000 new homes per year by the mid-2020s. The Department asserts that the ambition is ‘incredibly challenging’, made more so by the current uncertain housing market conditions. It claims that this makes it impossible to be transparent over the path to meet this ambition as it is in part dependent on how developers respond to market conditions. The Department has plans to increase the range and variety of new homes that are built, speed up building, and encourage more small and medium-sized developers to build homes and encourage developers to build out sites and not land bank. However, if the Department does not set targets and map the path to meeting its ambition for 300,000 new homes a year, it cannot measure progress or assess value for money across its array of housing policies. Recommendation: We are frustrated that once again we must repeat our recommendation that the Department should clarify how its range of housing schemes, including First Homes, will each contribute to its ambition of building 300,000 new homes per year by the mid-2020s. It should write to us within three months, including an assessment of how many homes of each tenure it expects will be delivered and what types of homes count towards its 300,000 ambition.
4We welcome Homes England’s commitment to provide us with regular updates on its progress delivering...
Recommended (the committee's words)
We welcome Homes England’s commitment to provide us with regular updates on its progress delivering affordable housing, but we are concerned that it and the Department has yet to clarify what ‘affordable’ actually means, and how much it costs to deliver affordable housing. The Department claims that ‘affordable’ means different things in different settings: different regions have differing requirements for housing that is affordable, and it varies in meaning across different housing programmes. Homes England uses the formal definition as set out in the 2018 version of the National Planning Policy Framework: broadly, ‘affordable’ means homes for rent, sale or shared ownership at less than market rates. The number and proportion of affordable homes planned for the sites intended for Starter Homes has increased from 1,700 (29%) to 2,370 (36%), reflecting an increased focus on affordable housing. However, we are concerned that the cost per affordable home of those funded by money intended for Starter Homes appears much greater than the cost per affordable home delivered by local authorities. The assessment of value derived from the funding intended for Starter Homes should encompass those homes delivered for market, and it should recognise that homes are being built on land that would otherwise be underused and not viable without government help, therefore will be more expensive than other types of affordable home. Recommendation: The Department should write to us within one month setting out a clear definition of ‘affordable housing’, whether this definition means they are for sale, shared ownership or rent, and whether, and how, the definition may vary for different circumstances and geographies. As agreed, Homes England should write to us every 6 months to update us on the numbers of affordable homes created, and of what type and tenure. Starter Homes 7
5The long-term success of the Department’s housing policies depends on it being able to engage...
Recommended (the committee's words)
The long-term success of the Department’s housing policies depends on it being able to engage effectively with organisations across the housing sector and provide clarity on funding, without losing sight of the needs of those who are unlikely to be able to buy or rent their own home without support. Success in delivering housing relies on close working with local authorities, good relationships with developers, and maximising value for money from the public subsidy of housing. Starter Homes and First Homes are, however, aimed at people who want to buy and have incomes that allow them to do so—they do not help people move out of temporary accommodation, which requires more social housing. The Department’s view is that diversity of housing supply is key to building out sites and increasing rates of take up of new housing. The £12.2 billion Affordable Homes Programme contains other types of new housing supply to meet a variety of needs. The Department counts student accommodation and converted offices as new housing, as they relieve pressure on housing more widely. To address the housing needs of the homeless and those in temporary accommodation, Homes England is trying to encourage the building of smaller, cheaper homes through investing in modular homes, encouraging sites with high levels of modular construction, and encouraging demand for this type of home given the doubts of some local planning authorities. Recommendation: The Department should write to us within three months to explain how it is addressing the problems of homelessness, rough sleeping, and families in temporary accommodation. It should increase its efforts to work more closely with local authorities and developers, make greater use of innovative methods such as modular forms of housing, and embed space and light standards in legislation to ensure housing is of decent quality. 8 Starter Homes 1 Discounted homes for first-time buyers
1On the basis of a report by the Comptroller and Auditor General, we took evidence...
Concluded (the committee's words)
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Ministry of Housing, Communities & Local Government (the Department) about its Starter Homes policy and other policies that aim to support people who need help to secure a home.1
40The November 2015 Spending Review provided £2.3 billion to support the delivery of 60,000 of...
Concluded (the committee's words)
The November 2015 Spending Review provided £2.3 billion to support the delivery of 60,000 of these planned homes.4 From 2015, the Home Builders Federation administered a register of people interested in buying a Starter Home, on behalf of the Department.5
6Homes England forecasts that around 36% of homes (2,370 of the total 6,600 planned homes)...
Concluded (the committee's words)
Homes England forecasts that around 36% of homes (2,370 of the total 6,600 planned homes) built on the land remediated through funding intended for Starter Homes will meet the definition of affordable housing.16 We were concerned though that funding intended to support first-time buyers will in fact result in so many market-value homes.17 Homes England told us that the Starter Homes programme intended to recover 75% of costs from onward sale of land to developers. It told us that, to date, it had recovered over 60% of costs.18 Homes England told us that, pre-pandemic, it expected to recover the remaining forecast receipts within 18 months but it could not yet provide a revised position in light of Covid-19.19 First Homes
7We asked the Department about the similarities between the new First Homes policy and the...
Concluded (the committee's words)
We asked the Department about the similarities between the new First Homes policy and the Starter Homes policy. The Department emphasised how they differ: • First Homes will be sold at a higher discount of at least 30%, compared with 20% for Starter Homes; • the discount will exist in perpetuity—it will be passed on to future buyers when First Homes are resold, unlike Starter Homes where the discount accrues to the homeowner over time; • First Homes will be sold only to local first-time buyers; and • First Homes will be delivered through the existing planning system so, unlike Starter Homes, are not dependent on new legislation.20 12 Qq 41–48 13 Q 87; C&AG’s Report, Figure 3 14 Qq 50–51 15 Q 63 16 Qq 52–54 17 Q 63 18 Q 58 19 Q 64 20 Qq 82–83 10 Starter Homes
8The Department told us that this was not going to be a quick policy to...
Concluded (the committee's words)
The Department told us that this was not going to be a quick policy to implement and it did not yet have a timetable for implementing First Homes or a target for how many it wants built.21 It explained that it was planning a pilot to build 1,500 First Homes “over the next couple of years”, which it wanted to learn from before further planning the new scheme.22 The Department told us that it will set out its plan for the pilot in “the coming weeks”. It did not know when First Homes would become more widely available and said it had deliberately not set a timetable or targets because of too much uncertainty in the housing market.23
9The Department explained that the First Homes discount will be funded through contributions from developers.24...
Recommended (the committee's words)
The Department explained that the First Homes discount will be funded through contributions from developers.24 Local authorities will be expected to ensure 25% of affordable homes built by developers contribute to the First Homes initiative.25 However, we have previously criticised approaches which rely on developer contributions—the Community Infrastructure Levy and section 106 agreements—for their complexity and lack of transparency over how much developers actually contribute.26 In our 2019 report Planning and the broken housing market, we were concerned that this approach too often favoured developers at the expense of local communities. We found that local authorities can lack the skills needed to negotiate contributions from developers through section 106 agreements. While they can also use the Community Infrastructure Levy to get contributions, implementing this is complex, time consuming and yields small returns in areas of low value. Only 47% of local authorities had implemented the Community Infrastructure Levy by 2019. We recommended that the Department should monitor whether its reforms to the Community Infrastructure Levy and section 106 were having the impact that was needed and adjust or adapt accordingly.27 21 Qq 81, 85, 90 22 Qq 83–85, 90 23 Qq 84, 90 24 Qq 83, 86 25 Q 83 26 Committee of Public Accounts Report, Planning and the broken housing market, One Hundred and Third Report of Session 2017–19, HC 1744, 26 June 2019 27 PAC’s Report, para 4 Starter Homes 11 2 Building more homes to meet housing need Target for new homes
10We have previously challenged the Department on its detailed plans and projections for how it...
Recommended (the committee's words)
We have previously challenged the Department on its detailed plans and projections for how it would achieve its target of building 300,000 new homes per year by the mid- 2020s, most recently in our report Planning and the broken housing market. We were concerned that meeting the target of 300,000 new homes a year would need a significant step-up in the level of house building and that current levels of new homes were not promising. In June 2019, we recommended that, by October 2019, the Department should set out publicly the full set of actions it was taking to achieve its target and include year-on- year projections of the number of new homes it expected to be built.28 In its response, the Government disagreed with our recommendation and said that, while it was committed to being transparent about tis objectives and progress towards them, it did not intend to publish either its forecasting model or year-on-year projections of net housing delivery.29
11We were disappointed that the Department remained unwilling to clarify how it will achieve this...
Concluded (the committee's words)
We were disappointed that the Department remained unwilling to clarify how it will achieve this rate of building, which it now refers to as an ambition rather than a target. We asked why it thought that there should not be greater transparency about how it would achieve 300,000 new homes per year. The Department argued that the ambition was an incredibly challenging one because of uncertainty in the housing market, which made it impossible to be transparent over the path to meeting this ambition. It further explained that the levers for delivering new housing were “not entirely within” Government’s control and were dependent on developers and how they respond to market conditions. It asserted that while it bad been making considerable progress towards the target before the pandemic, the current economic uncertainty had made forecasting what would happen in the housing market far more challenging.30
12The Department explained how its reforms to the planning system were intended to speed up...
Concluded (the committee's words)
The Department explained how its reforms to the planning system were intended to speed up building and, through increasing certainty with the system, encourage more small and medium-sized developers to build homes. It told us that it was also looking to encourage a greater range and variety of homes on large sites, which it believed will encourage build out.31 It explained that it was seeking views on how it could further encourage build out and reduce the practice of developers buying land, then delaying building on the land acquired for which they have planning permission.32 Affordable housing
13We asked the Department what it now meant when it referred to ‘affordable’ housing, particularly...
Concluded (the committee's words)
We asked the Department what it now meant when it referred to ‘affordable’ housing, particularly in relation to the funding originally intended for Starter Homes that was subsequently redirected to a broader range of housing, including affordable homes.33 The 28 PAC’s Report, para 1 29 Q 68, HM Treasury, Government response to the Committee of Public Accounts on the Ninety-Fifth and on the Ninety-Ninth to the One Hundred and Eleventh reports from Session 2017–19, CP 176, October 2019 30 Qq 68–69 31 Qq 72, 94–96 32 Qq 73, 94–95 33 Qq 60–61, 63; C&AG’s Report, para 9 12 Starter Homes Department said that ‘affordable’ meant different things in different contexts—different areas had different housing requirements for housing that is affordable, and it varied in meaning across different housing programmes.34 Homes England explained that when it referred to affordable homes it was using the formal definition as set out in the 2018 version of the National Planning Policy Framework, which covers homes for rent, sale or shared ownership at less than market rates.35 Homes England committed to providing us with regular updates on the breakdown of different types of affordable home it is delivering.36
14Homes England told us that the number and proportion of affordable homes planned for the...
Concluded (the committee's words)
Homes England told us that the number and proportion of affordable homes planned for the sites intended for Starter Homes has increased from 1,700 (29%) to 2,370 (36%), reflecting an increased focus on affordable housing.37 However, Homes England was unable to tell us how much each affordable home on these sites would cost.38 We queried why the expected cost per affordable home of those funded by money intended for Starter Homes appeared much greater than the cost per affordable home delivered by local authorities. By our own calculations, Homes England spent £83,700 per affordable home funded through the Starter Homes 2015 funding, and £37,700 per affordable home funded through the Starter Homes Land Fund, yet local authorities spent £17,200 per affordable home.39 The Department asserted that the assessment of value derived from the funding intended for Starter Homes should encompass also those homes delivered for market and not only consider the number of affordable homes that had been built. It argued that these sites were on land that would otherwise be underused and not viable for building without government help, therefore an assessment of value achieved should include the homes built and sold at market value. It explained that, inevitably, affordable homes build on such sites would be more expensive than affordable homes built on less risky sites. It also noted that the local authority funding for Starter Homes was for sites that were already owned by local authorities and so could not be directly compared with other programmes.40 Housing for the homeless, rough sleepers and families in temporary accommodation
15First Homes, and previously Starter Homes, are aimed at people who want to own their...
Concluded (the committee's words)
First Homes, and previously Starter Homes, are aimed at people who want to own their own home and have an income, as the schemes require applicants to raise a mortgage. They are not schemes intended to help house people in temporary accommodation or who are homeless. We asked the Department how it was addressing the needs of these groups. The Department explained that the £12.2 billion Affordable Homes Programme contained other types of new housing supply which were intended to meet a variety of housing needs and circumstances.41 The Department explained how diversity of housing supply was key to building out sites and increasing rates of take up of new housing (the rate at which new housing is absorbed by the local market). Take up increases if a broader range of housing types appeals to a broader range of those in housing need.42 34 Qq 61, 66–67 35 Q 65 36 Q 67 37 Qq 54, 64 38 Q 55 39 Q 56 40 Qq 56, 58–59 41 Qq 88–89 42 Qq 94–96 Starter Homes 13
16The Department and Homes England told that they were trying to encourage the building of...
Concluded (the committee's words)
The Department and Homes England told that they were trying to encourage the building of smaller, cheaper homes through investing in firms that build modular homes and encouraging sites with high levels of modular construction. It explained it was looking to increase demand for this type of home. However, Homes England cautioned that local authority planning committees were nervous of this type of home, so it was gathering the evidence to demonstrate to the sector that this was worthwhile and increase developer confidence.43
17We asked the Department how it would ensure that its approach delivered the right kind...
Concluded (the committee's words)
We asked the Department how it would ensure that its approach delivered the right kind of homes in the right places.44 We heard from the Department about a range of other actions it is pursuing: • It wants its planning reforms to encourage more small and medium-sized developers to be building homes.45 • It will promote more zero-carbon homes through the Future Homes Standard.46 • It is reviewing the release of public sector land for building.47 • It is considering its response to the recent consultation on the Housing Delivery Test, and how to align local targets for housing with the national ambition for 300,000 new homes per year.48
18We queried why student accommodation and converted offices count, in the Department’s statistics, as new...
Concluded (the committee's words)
We queried why student accommodation and converted offices count, in the Department’s statistics, as new housing when student accommodation is not necessarily a permanent home, and many office conversions are tiny, lack proper insulation, and could not be said to constitute a home. The Department countered that student accommodation relieved pressure on housing more widely, so it was justifiable to include as new housing. It acknowledged that some office conversions had been of poor quality, and explained it had introduced standards for the amount of natural light converted office space was required to provide and was working to introduce standards for the amount of space for converted office space.49
19Homes England recognised that success in delivering housing would rely on close working with local...
Concluded (the committee's words)
Homes England recognised that success in delivering housing would rely on close working with local authorities, good relationships with developers and mindfulness over land value as the key determinant of delivery and maximising value for money from public subsidy of housing.50 We asked the Department about its plan for long-term support, in recognition that building homes alone was not enough to keep people off the streets. The Department told us that, as part of its rough sleeping accommodation programme, it had made available £31 million to support rough sleepers transition into more sustainable pathways, as well as its £112 million rough sleeping initiative funding. We agreed with the Department that successful housing delivery was a long-term commitment and asked how it would ensure it was able to deliver this. The Department confirmed that was working through what funding it needed in future to continue with its support for rough sleepers.51 43 Q 80 44 Q 71 45 Qq 72–73 46 Qq 74–75 47 Qq 76–77 48 Qq 78–79 49 Q 97 50 Qq 56, 66 51 Qq 10–12, 87 14 Starter Homes
Evidence
Oral evidence sessions 1
- 22 Oct 2020Stater Homes3 witnesses, listed belowparliament.uk ↗
Who gave evidence 3 witnesses
- Jeremy PocklingtonPermanent Secretary, Ministry of Defence
- Nick WalkleyChief Executive, Homes England
- Tracey WalthoDirector General, Housing and Building Safety, Ministry of Housing, Communities and Local Government