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The National Audit Office (NAO) has exposed the government’s starter-homes policy as hollow – saying none of the intended 200,000 starter homes have been constructed to date because the necessary legislation is not in place.

And MHCLG no longer has a budget dedicated to the delivery of starter homes.

The government announced the 200,000 in 2015 and MHCLG spent some £174m on acquiring and preparing sites.

The NAO finds these sites are now being used for housing more generally – some of which is affordable.

Responding to the report, Meg Hillier MP, chair of the Commons public Accounts Committee, said MHCLG needs to focus on delivery and not raise, and then dash, expectations.

“Despite setting aside over £2bn to build 60,000 new starter homes, none were built,” she said.

“Since 2010 many housing programmes announced with much fanfare have fallen away with money then recycled into the next announcement.”

Starter Homes were intended to be houses built exclusively for first-time buyers under the age of 40 and sold at a 20% discount.

The November 2015 Spending Review provided £2.3bn to support the creation of 60,000 Starter Homes with the Housing and Planning Act (2016) setting out the legislative framework for Starter Homes.

However, the NAO finds that without additional secondary legislation, even houses that conform to the intended Starter Home specifications cannot be marketed as Starter Homes.

MHCLG expected to introduce the secondary legislation and planning guidance required for Starter Homes in 2019.

But the NAO says MHCLG has not yet presented the regulations to Parliament and no longer has a budget dedicated to the delivery of Starter Homes.

The report’s key findings include:

  • No Starter Homes have been built to date, with funding originally intended for Starter Homes spent on acquiring and preparing brownfield sites for housing more generally, some of which is affordable housing

The report acknowledges it is possible that developers have built and sold homes that conform to the intended Starter Home specifications as outlined in the Housing and Planning Act (2016), although the exact specifications are not yet defined.

However, legally these cannot be marketed as Starter Homes until the necessary secondary legislation is enacted.

  • The Starter Homes legislative provisions are not yet in force, though the statutory framework for Starter Homes – the Housing and Planning Act (2016) – received Royal Assent on  May that year

The report finds that, although the relevant sections of the Act have not yet come into force, MHCLG was expected to introduce the secondary legislation and planning guidance required for Starter Homes in 2019 but it is yet to lay the regulations in Parliament.

NAO acknowledges developers can, and do, market discounted properties as ‘starter homes’ as part of their contribution to affordable housing, but such properties do not necessarily conform to all the intended requirements of Starter Homes as defined in the Housing and Planning Act (2016).

  • MHCLG no longer has a budget dedicated to the delivery of Starter Homes

The concept of Starter Homes was first introduced at the Conservative Party conference in September 2014, and the Housing and Planning Act (2016) set out the relevant legislative framework.

However, the housing White Paper in 2017 marked a shift in housing policy, replacing the target of 200,000 starter homes with a target to help 200,000 households into home ownership through a range of government‑backed schemes, including Starter Homes, shared ownership, Right To Buy and Help To Buy products.

The November 2017 Autumn Budget reallocated funding earmarked for starter homes to the £9bn Shared Ownership and Affordable Homes Programme and the Land Assembly Fund (LAF)

Between 2015-16 and 2017-18, MHCLG is shown to have spent almost £174m preparing sites originally intended for building starter homes through three main sources of funding: Starter Homes 2015 funding, the Starter Homes Local Authority Funding Programme (the Programme), and the Starter Homes Land Fund (SHLF) 11.

In 2015-16, Homes England spent £15.4m of the Starter Homes 2015 funding preparing brownfield land.

Although £26m of funding had been made available by MHCLG, the NAO report says the full amount was not spent because Homes England did not identify enough sites within 2015-16, the year when the funding was available, and the unspent funding was returned to the Treasury.

Homes England is forecasting that the funding will generate 379 new homes, of which it expects 98 to be affordable, although the forecasts are subject to change depending on the progress of the individual developments.

MHCLG is forecasting that it will spend an additional £1.3m (from the SHLF) on the seven acquisitions and four existing sites being prepared.

Receipts from the from the onward sale of the land are forecast by MHCLG at £8.5m – with £4.8m received as of March this year.

The NAO report notes that, of estimated receipts from the sale of the land to developers, Homes England’s forecast spend equates to around £21,600 per home.

Since August 2015, MHCLG has spent £6.45m supporting councils through the programme.

Homes England awarded 19 grants to 14 councils outside of London, and the Greater London Authority – which administered the funding for Starter Homes in the capital – awarded a grant to a single borough for the preparation of vacant and underused brownfield land for starter homes.

The report says the councils are forecasting the funding will generate 444 new homes in total, of which it expects 374, nearly 85%, to be affordable – this spend equates to around £14,500 per home.

In 2016-17 and 2017-18, MHCLG spent £151m under the SHLF, but the spending has not supported the building of starter homes.

The NAO finds MHCLG used the SHLF to acquire and remediate suitable land to then sell on to developers, with MHCLG forecasting the spend will create 1,268 affordable homes and 3,907 market homes.

However, without the necessary secondary legislation, the NAO says these homes cannot be marketed as starter homes.

MHCLG is forecasting receipts of £137.2m from the onward sale of the land and had received £8.9m of this expected income as of March this year.

The SHLF ended in March 2018 and, by July this year, MHCLG had spent a further £19m on remediation of the sites acquired under the SHLF; and forecasts that an additional £15m will be spent on the sites before they are disposed of – with the funding drawn from other funds.

Net of estimated receipts, NAO says Homes England’s forecast spend equates to around £9,200 per home.

The November 2017 Autumn Budget reallocated unused funding from the SHLF to the LAF, intended to support housing more generally.

In 2017-18, the Department spent £97m from the SHLF – but under LAF criteria – on acquiring land needing work and preparing it for the market.

This spend makes up the remainder of the £250m spend referred to by the then Minister of State for Housing and Planning to Parliament in May last year.

The NAO report notes that it was not spend dedicated to the delivery of Starter Homes, but to the acquisition and assembly of land to support the provision of housing more generally.

Funding was used to acquire four sites on which MHCLG expects to deliver more than 4,500 homes.

MHCLG is noted in the report as not having the proposed numbers of affordable homes for the four sites purchased, as they are still subject to planning applications.

Homes England, however, is acknowledged as aiming to provide levels of affordable housing on all sites consistent with applicable housing policy – subject to the decisions of local planning authorities.

Background – Starter homes

In April 2015, the Tory manifesto committed to “200,000 Starter Homes, which will be sold at a 20% discount and will be built exclusively for first-time buyers under the age of 40”.

The November 2015 Spending Review subsequently provided £2.3bn to support the delivery of 60,000 Starter Homes of the 200,000 previously announced.

The Housing and Planning Act (2016) set out the legislative framework for Starter Homes, and the Department ran a consultation on Starter Homes Regulations (the regulations) between March and June 2016.

Between 2015 and 2018, the government’s policy toward Starter Homes shifted.

In May 2018, the then Minister of State for Housing and Planning stated that the government had spent an estimated £250m of the Starter Homes Land Fund.

In July last year, MHCLG clarified it had spent £250m buying land to build affordable properties from two funds – the Starter Homes Land Fund and the Land Assembly Fund – with work under way to get the land ready for development, but that building had not yet started.

The NAO launched its investigation following criticism of the progress made toward starter homes, with the aim of establishing the status of starter h omes policy and legislation and the impact of MHCLG investment in Starter Homes.