Planning matters

The starter homes regime is defined on the face of the Act by sections 1-8. Section 2 specifies that starter homes are:

• new dwellings;

• available for purchase by ‘qualifying first-time buyers’ only; these are defined as people who don’t already own a home and who are aged 23-40;

• to be sold at a discount of at least 20% of their market value, and always for less than the price cap (currently set to £450,000 in Greater London; £250,000 outside London).

At the moment, starter homes are to be delivered in England only. Accordingly, ss 4 and 5 determine that an English Local Planning Authority (LPA):

• must carry out its relevant planning functions with a view to promoting the supply of starter homes in England;

• will be only allowed to grant planning permission for certain developments if specified requirements relating to starter homes are met;

• has the power to dispense applications made in respect of a rural exception site from the starter homes requirement.

Regulations under ss 2, 4 and 5 require a draft of those regulations to be laid before and approved by a resolution of each House of Parliament (as do regulations under s3(6) which make provision about the use of money paid by a person who sells a starter home within a specified period)

The Housing and Planning Act 2016 outlines the framework within which starter homes will be delivered in England, while the DCLG’s starter homes regulations: technical consultation (launched in March) is helpful in understanding what the Government is willing to introduce at a later stage. However, most of the operational details still need to be specified and will be set via regulations.

The Act enables the Secretary of State to make regulations concerning a wide range of issue and, specifically, to:

• specify restriction on sale or letting of starter homes, including how the amount of the payment or discount is to be determined, and providing for reductions according to the length of time since the dwelling was first sold;

• specify additional criteria in relation to ‘Qualifying first-time buyer’ and/or disapply the age requirement for specified categories of people;

• amend the definition of ‘first-time buyer’, as given by section 57AA(2) of the Finance Act 2003 (as this forms part of the legal definition of ‘qualifying first time buyer’);

• specify circumstances in which a dwelling may still be a starter home even if it is available for purchase by joint purchasers not all of whom meet the age requirement (as explained in the starter home consultation);

• amend the price cap; and provide for different price caps to apply: a) in different areas in Greater London; b) in different areas outside Greater London;

• set the starter homes requirement that is to be met in order for an English LPA to grant planning permission (the starter homes consultation document envisages a 20% nation-wide requirement, and to apply this to sites  of 10 units or more or 0.5 or more hectares);

• confer discretions on an English LPA;

As many details are to be specified via regulations, there are currently many unknowns around how starter homes regime will effectively work.

Firstly, it is yet to be understood how the ‘at least’ 20% discount on market price will be estimated and, specifically, how market prices will be assessed for different areas within the same Local Authority, for example.

Another element that is likely to have a considerable impact relates to the likely introduction of restrictions on sale and the operational mechanisms of the tapered approach. The unknowns here are many, since it’s not yet clear:

• how long the discount period will last. The initial intention was for the discount period to last 5 years, during which time the starter homes wouldn’t be sold; the consultation document mentioned the possibility for a tapered approach (up to 8 years), when the starter home could have been sold to another qualifying first-time buyer at a discount to decrease for each year of occupation. The Lords pushed this forward when they agreed an amendment that extended the restricted sale period to 20 years, before Commons eventually rejected it.

• how the discount repayment would be calculated, whether it is to be based on the initial value of the starter home or on the market value at the time of selling.

• who would be the ‘specified persons’ (s3) which are going to effectively benefit from the payment in respect of the starter homes discount and how this correlates with the government’s intention to guarantee that the dwelling’s value uplift will benefit the qualifying first time buyers.

Finally, it is not yet clear how the starter homes requirement for certain developments would relate to viability constraints, specifically in areas where the market values are already quite affordable.

Further blogs in this series cover Permission in Principle, other planning provisions in the Act and its commencement; further regulations on commencement are also covered.