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Starter Homes policy can ensure SME builders play their part in tackling housing crisis

The government’s Starter Homes policy is set to dramatically alter the housing market over the next few years. 

The pledge to deliver 200,000 new homes for young first-time buyers at 80 per cent of market price is now central to the government’s housing strategy.

“18 months-worth of housebuilding over the next five years will be Starter Homes”

To support this, in what is undoubtedly a controversial change, the Housing and Planning Bill currently passing through parliament will change the definition of ‘affordable housing’ to include Starter Homes.

In addition, it will usher in a requirement for all sites over a certain size (likely to be 10 units or more) to deliver a certain proportion of units (likely to be 20 per cent) as Starter Homes.

Combined with an amped-up brownfield development fund, the prime minister has promised 200,000 of these properties will be delivered by the end of this parliament in 2020.

Or in other words, based on current new-build completion rates, 18 months-worth of housebuilding over the next five years will be Starter Homes.

Double bill

It’s useful to look at the policy as consisting of two ‘strands’: the brownfield development strand, which was introduced by the coalition, and the ‘affordable housing’ strand, which has been introduced by the current Conservative government.

Though both strands aim to deliver the same thing, they will appeal to SME developers in different ways.

The brownfield strand intends to identify and unlock sites on former industrial and commercial land that has not been allocated for housing by local authorities.

These sites, which can be devilishly difficult to build on, will be exempt from section 106 and Community Infrastructure Levy payments, too often the development death knell for small local housebuilders.

Building out these sites will be further supported by a £1.2bn brownfield fund that was announced in the last Budget, which will be used to purchase and prepare land to offset some of the less attractive aspects of developing already-used plots.

The existence of such infrastructure could provide a boost to SME housebuilders, especially if the funds are also directed towards smaller urban infill sites – the kind of which SMEs thrive on – and that have high appeal for younger buyers.

Game-changing move

It’s the redefinition of affordable housing, however, that is potentially more of a decisive game-changer for small-sized firms.

“Starter Homes may end up helping the very firms which can, and must, play a more prominent role in housebuilding”

The concept of delivering social rented housing by cross-subsidising from private owner-occupied housing – and the imposition of this model on even the smallest sites – has had huge ramifications for the attractiveness of small-scale development.

The redefinition of affordable could unlock marginal sites for SMEs, providing a potential ancillary boost to housebuilding numbers. It should also prove to be a fillip to smaller firms, which could use the anticipated increased returns to expand and grow, improving the health of the country’s SME housebuilding capacity.

The Starter Homes initiative was introduced to tackle what the Conservatives see as the crisis in homeownership.

If it does end up providing some much-needed assistance to hard-pressed SME builders, it may help the very firms that can – and must – play a more prominent role in housebuilding.

As the chancellor would phrase it, Starter Homes can get Britain building again.

Brian Berry is chief executive of the Federation of Master Builders

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