Ryan Bembridge analyses the plethora of schemes aimed at first-time buyers entering and leaving the dysfunctional mortgage market
Starter Homes Initiative
Another first-time buyer scheme is the Starter Homes Initiative, which was announced in March last year but still hasn’t been rolled out.
It is supposed to allow 200,000 first-time buyers purchase new homes at a 20% discount with a maximum value of £250,000 outside London and £450,000 in London, but Boulger thinks the targets set are unrealistic.
“I can’t see the government building 200,000 of these starter homes by 2020,” he says. “Because of a limited supply of builders homes built using the scheme will replace others. Builders won’t have the resources to build 200,000 houses on top of existing projects.”
He adds: “It’s frankly incompetent that the government announced the scheme last March and still hasn’t announced the final rules but I’m guessing the delay is down to compliance to EU rules.”
In this year’s Budget the government finally raised the issue of the scheme again, inviting local authorities outside London to show an interest in using the £1.2bn Starter Home Land Fund which will be used to prepare brownfield land for starter homes.
Something it hasn’t addressed however is currently buyers will be able to sell the home on for the full market price in five years and effectively pocket the 20% discount – much to the BSA’s and tenant campaign Generation Rent’s disgust.
“We welcome the launch of the Starter Homes Land Fund however the current proposal that buyers of these starter homes will, after just five years, be able to sell these homes at full market value is a mistake that will cost the next generation,” the BSA said in a statement.
Generation Rent previously branded the scheme a “lottery” which will widen the dichotomy of haves and have nots.
IMLA’s Peter Williams agrees there is “considerable resistance” to the scheme, as he says lenders and builders are unsure about how the homes will be valued. One suggestion raised was using an independent RICS surveyor.
“The practical details of running the scheme are causing major concerns for lenders and builders,” says Williams. “There’s concern the scheme won’t work in the way the government hopes.
“I assume it will get off the ground but there are lots of practical problems like what’s the real price being discounted? It’s a discounted product – a discount on what?”
Boulger wonders who will ultimately end up paying for this 20% discount. “From what I’ve gathered the 20% discount is funded by developers not having to pay the community infrastructure levy,” he says.
“If they are getting a subsidy somebody will probably end up paying, perhaps with increased council tax in the area.”
