Discounted starter homes will be unaffordable for the majority of families in England, the Local Government Association (LGA) says.
A new analysis carried out by Savills on behalf of the LGA revealed starter homes will be out of reach for all people in need of affordable housing in 67% of council areas.
It also showed in 25% of council areas 90% of people in need of affordable housing--defined as those who would have to spend 30% of their household income to rent or buy a home—wouldn’t be able to afford a starter home.
Under the Government’s scheme first-time buyers will be able to buy 200,000 new starter homes over the next five years at a minimum discount of 20% to the market value.
Discounted prices will be capped at £450,000 in London and £250,000 elsewhere.
The LGA acknowledges it could help some people onto the housing ladder, but it warns it will help the fewest numbers of people in areas where the housing affordability crisis is most acute.
The LGA’s analysis also discovered that for the average earner with a minimal deposit (5%) looking to buy an average priced house, a 20% discount would make it possible to borrow enough to buy a starter home in just 45% of all council areas in England.
This includes all average priced homes in the North East of England, 95% of the North West and 90% of the East Midlands.
The new study also revealed that being able to save a 20% deposit would make an average priced home with a 20% discount affordable to buy in a further 29% of local areas. This includes a third of council areas in Yorkshire and Humber and the West Midlands.
The average earner living in 85% of London boroughs, 49% of council areas in the south East and 40% in the South West would need a deposit greater than 20% to be able to buy an average priced home with a 20% discount.
The LGA also argues the starter home scheme could mean less social and affordable rented homes would be built.
The 20% discounts for new buyers would be funded by exempting developers from paying Section 106 contributions towards affordable rented housing and Community Infrastructure Levy contributions.
According to its own analysis, the Government has suggested that should 100,000 starter homes be built through the planning system, between 56,000 and 71,000 social and affordable rented homes would not be built.
The LGA says town hall leaders should have the flexibilities to decide on the number, type and quality of starter homes so that they meet the needs of local communities.
Councils also need powers, the LGA says, to provide affordable rented homes that are crucial for enabling people to save money towards a deposit, and the means to secure investment in vital infrastructure that new home buyers will expect and will rely on.
Cllr Peter Box, LGA housing spokesman, said:
‘This new analysis shows that starter homes will be out of reach for the majority of people that are in need of an affordable home. Not everybody is ready to buy, and it is crucial that councils are still able to ensure there is a mix of homes that are affordable for those people that need them.
‘In some places, such as the North-East and Midlands, the scheme will give people better chance to get on the housing ladder. However, a national scheme will not work for every area and fewer people will benefit from Starter Homes in areas where the housing crisis is most acute.’
