THE BLOG
11/10/2015 20:17 BST | Updated 11/10/2016 06:12 BST

Starter Homes and the End of Social Housing

Starter homes have two fatal flaws, and unfortunately one is their foundation stone. Firstly, they do not work for families on ordinary incomes. Shelter's analysis shows that Starter Homes will be unaffordable for families on average earnings in 58% of the country. It seems cruel to even mention how unaffordable they are for people on the National Living Wage...

Starter homes have two fatal flaws, and unfortunately one is their foundation stone.

Firstly, they do not work for families on ordinary incomes. Shelter's analysis shows that Starter Homes will be unaffordable for families on average earnings in 58% of the country. It seems cruel to even mention how unaffordable they are for people on the National Living Wage. This will be a slow burn political headache for the government as the people who cheered yesterday's announcement do the sums and discover that Starter Homes are a non-starter for them.

This wouldn't matter so much if Starter Homes were just adding more homes to the existing mix of housing supply: but the second big problem with Starter Homes is that they will now be built instead of genuinely affordable homes, rather than in addition. Instead of proposing a housing policy that works for those on all income brackets the government is diverting investment away from houses for people on low to middle incomes into housing for the better off.

The Prime Minister proposes to change the law to include Starter Homes in the definition of affordable housing, which would mean counting homes which can cost as much as £450,000 as 'affordable'. This will mean that developers who are currently compelled to build social rent and shared ownership properties will now be able to build more profitable Starter Homes instead. Section 106 arrangements currently account for about 37% of all new social rented properties, so a sizeable proportion of much needed supply is about to be lost.

To compound the problem, local authorities will not be able to insist that developers in their area continue to build for the widest range of incomes. They will be forced to accept Starter Homes as part of Section 106 negotiations. Even if they have homeless families stuck in temporary accommodation; even if local businesses complain that they can't recruit employees to low paid positions; even if they know market prices are completely out of step with local wages; and even if they know they have no chance of meeting the need for social housing from their own dwindling stock.

This isn't about the devil in the detail. This now has to be seen as the intention.

It follows the Right to Buy agreement with the National Housing Federation that will sell off social rented homes at a discount, and replace them with shared ownership or Starter Homes.

It follows the plan to forcibly sell council houses to the highest bidder, to fund those Right to Buy discounts.

It follows the forced reduction in social rents which the OBR predicts could mean 14,000 fewer social homes are built over this parliament.

It follows the introduction of Affordable Rent, which at up to 80% of market rents wasn't even affordable for those on the lowest incomes.

It follows the repeated refusal to let councils that want to build council homes borrow to be able to do so.

And given the full-throated endorsement of homeownership as the only game in town, it's a fair bet that it precedes the announcement in the Comprehensive Spending Review that any grant funding should be directed to low cost homeownership rather than a genuinely affordable rental product.

All of which leaves very little for those who realistically can't buy anytime soon. There's nothing wrong with home-ownership obviously, but even at its 2003 peak ownership topped out at 71%. As KPMG point out, there will always remain a sizeable proportion of households who need an alternative, either temporarily or for the long-term. But with existing supply sold off and little if anything being built, social housing will no longer be able to perform that role. This will leave those on the lowest incomes at the mercy of the private rented sector.

This is of course the deliberate if unstated policy intent, which makes it cruelly perverse that the government is at the same time squeezing the support available for low income private renters. The breezy 1980s assertion that "housing benefit could take the strain" of cutting investment in affordable housing has been much mocked and rued in light of the resultant cost of housing benefit. But there was at least an honesty in admitting that if the state won't invest in supply then it will have to subsidise individuals. As we've previously highlighted, refusing to do either is simply to accept a great many more people living with poor conditions, insecurity and struggling to make ends meet.