Starter homes will be out of reach for majority of families, LGA warns

Starter homes could be out of reach fro the majority of families in England, according to new analysis from the Local Government Association (LGA).

Under the national starter homes 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 per cent off the market value, with discounted prices capped at £450,000 in London and £250,000 elsewhere in the UK.

However, the LGA has warned that, while this may help some people onto the housing ladder, it is concerned that it will help the fewest numbers of people in areas where the housing affordability crisis is most acute.

People deemed as needing affordable housing are defined as those who would have to spend more than 30 per cent of their household income to rent or buy a home. Analysis from the LGA found that these affordable houses would be out of reach for all people in need of affordable housing in 220 council areas, and will be out of reach for more than 90 per cent of people in need of affordable housing in a further 80 council areas.

The LGA claims that, for an average earner looking to purchase an average priced house, a 20 per cent discount would make it possible to buy a home in just 45 per cent of all council areas in England.

The analysis also found that an average earner living in 85 per cent of London’s boroughs would need a deposit of more than 20 per cent in order to buy an average priced house with a 20 per cent discount.

The 20 per cent discounts will be funded by expecting developers from paying Section 106 contributions towards affordable rented housing and Community Infrastructure Levy contributions, but the LGA is concerned that this system will severely limit the amount of social and affordable rented homes available, while still leaving many first-time buyers unable to get onto the housing ladder.

Peter Box, LGA housing spokesman, said: "The shortage of houses in this country is a top concern for people who are finding that buying their first house is increasingly out of reach. Councils support measures to boost home ownership and starter homes are one of the ways this can be achieved.

"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.”