The 5 Year Only Starter Home Resale Prohibition will Just Push Up Land Prices and Render Programme Toothless

Yet another Alex Morton total clusterf**k.

Guardian

David Cameron will announce on Monday he wants 200,000 cut-price starter homes to be built for young first-time buyers in a scheme branded by some industry insiders as “RyanAir housing”.

The homes will be funded by lifting obligations on house builders to also provide affordable homes or build new infrastructure, such as roads or health services.

Cameron’s target doubles his plan announced last year to build 100,000 starter homes and comes as Ed Miliband prepares to re-emphasise a rival Labour plan to get young people on to the housing ladder.

The starter homes would be sold at a discount of 20% and the purchasers would not be allowed to sell them at full market value for at least five years, although they may be entitled to rent them out. They would largely be built on brownfield sites, previously used for industrial or commercial purposes and not already earmarked for housing.

Rent them out at full market rent?  Yet another taxpayer funded bung to buy to let, especially as the importunity cost from  lost afordable housing and that the state will need to pay for lost infrastructure is 8 billion (before you even consider cost benefit losses from additional hoiusing benefit from lost affordable housing).

The theory behind starter homes is that they are like ‘rural exceptions sites’ only ‘industrial exceptions sites’.  This theory holds if:

1) You would not get planning permissions any other way

2) it does not add to land costs as it comes off the S106 and affordable costs the developer would have to pay, these come off the price of the land if certain and dont add to land prices.

But the second wont apply if the affordability (resale) constraint doesnt apply in perpetuity and their is no restriction on renting out.  This will be priced into land costs and S106 and Affordable payments will be priced out.  As it will raise land prices the sites will become more unaffordable and the S106 and affordable exemption just becomes a state funded subsidy to land prices, like the badly designed first time buyer reforms. It is exactly the same as any other affordable housing scheme without in perpetuity restrictions, counterproductive, a state funded subsidy to land owners.  The housing sector figured this out a decade ago, catch up Alex.

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