Starter Homes for Who?
One of the most eye-brow raising commitments made by David Cameron and the Tories at their recent conference was Starter Homes. A Starter Home is one that will be built by a private developer and then sold at 80% of the market rate. Where the funding for the 20% discount comes from is unclear at this stage, but the suspicion is it will be at the expense of funding for social rent or shared ownership properties. The properties are for first-time buyers and can cost up to £250,000 outside London and up to £450,000 within London. The Government want to build 200,000 of these over the next five years.
The first rung of the housing ladder has become increasingly unattainable, particularly over the last fifteen years, and there are no signs of that improving in the near future. Five years from now, a couple in their mid-twenties, who both attended university, could be trying to buy a London flat for north of £250,000. To do this they will need a deposit of around £60,000, saved up whilst paying over £1,000 per month out in rent and managing student debts of near £30,000 each. By anyone’s judgements that is a tough ask, one that leaves the option of buying a property open only to select groups, such as those with affluent parents, Londoners who can work whilst staying in their parental home, childless couples with high dual incomes, or those benefitting from a windfall, such as inheritance money.
In addition, the London market for property is more competitive than ever, with Estate Agents creating near panic through their increasingly common method of using open days, pitting potential buyers against each other face-to-face. The panic is driving demand, and by consequence price. There is also a huge flow of investment money flowing into London property, seen as an increasingly safe bet for high growth rates, combined with high rental yields. For those in the club, the homeowners and multi-homeowners, it’s great. The demand is making us all better off, creating a third income within dual-income households. For those outside the club, it’s an increasingly depressing nightmare.
This is why market intervention is needed, particularly in London. Starter Homes are marketed by the Tories as the solution to the problem, but the question is who for? In London, those on National Living Wage will never be able to buy them, nor will families with children, politicians need to be honest about this, with themselves and the people they represent. Generation Rent has happened, the cost isn’t going down, but the access to genuinely affordable social rent properties is. If we get to a point where those NLW families can’t pay their rent in London they will move out to cheaper areas. On the face of it a natural solution, created by natural market forces. However, consider if one member of that family collects your bins and the other works in the local school cafeteria? Who does those jobs when that family cannot? To properly function, London society needs people who can afford to live and work locally. This is why diverting money away from social rent and pushing it towards Starter Homes seems to me to be such a misguided decision.
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