The government’s starter homes initiative could deliver a taxpayer-backed windfall of £141,000 each to 200,000 lucky first-time buyers, but 2 million more aspiring homeowners will be stuck renting, campaigners say.



The scheme, which allows developers to replace shared ownership and affordable rented homes with properties sold at a 20% discount, has been widely criticised since it was first announced in December 2014. One of the key concerns for housing campaigners is that the homes can be sold on at the open-market rate after five years.

Lobby group Generation Rent said that this meant a “£27bn raffle” in which the original buyers stood to gain, while those who missed out would find it ever harder to get on the housing ladder. It said the scheme’s potential rewards “far exceed the already generous returns of home ownership”.

The figures are based on average newbuild house prices and numbers of new homes being built around the country. The average cost of a newbuild property in England stands at £297,000, according to the Office for National Statistics. So as a starter home it would be bought at £238,000, Generation Rent said. If house prices rise at 5% a year, after five years the same property could be sold for £379,000. Outside London, the maximum cost of a qualifying home is £250,000 but in the capital that rises to £450,000. Generation Rent said buyers could stand to make a profit of £228,139 on a home bought for £383,200.



The group is calling for the homes to be subject to rules saying that they can only be sold on at a 20% discount. Betsy Dillner, the director of Generation Rent, said this would help multiple first-time buyers “instead of a jammy handful of winners in a multibillion pound raffle”.

She added: “The government said its starter homes would be exclusively for first-time buyers, but by letting them vanish into the open market after five years, they’re betraying the millions who are stuck renting.”

The housing charity Shelter last year described the properties as “non-starter homes”, saying that by 2020 in more than half of the country they would be unaffordable for families earning average wages.

Shelter’s chief executive, Campbell Robb, said: “While the government is offering these discounted homes to a select few, for those who aren’t so lucky, all they’re offering is more time spent in expensive and unstable private renting, or living with mum and dad well into their 30s.

“This crisis can be turned around, but only if the government moves beyond schemes that only help the well off, and starts investing in homes that ordinary families can actually afford as well.”

As the House of Lords prepare to debate the policy as part of the housing bill this week, experts said there were many unanswered questions surrounding the policy. Neal Hudson, an associate director at property firm Savills, said that despite the scheme being a key plank of government housing policy “there is still a massive amount of detail outstanding on how it will work”.

He added: “There is likely to be a lot of uncertainty about how much people should be paying for land because they are not sure how they will be able to use it.”



Hudson said uncertainty remained over how the prices of starter homes would be determined if there were no comparable properties nearby, and how mortgage lenders would treat a property that could not be sold at market rate for five years.

Other analysts have questioned how the policy will run alongside the government’s help-to-buy loan scheme, where buyers are offered a 20% interest-free loan but must repay it when they sell.

In January the head of housebuilder Taylor Wimpey said that confusion over how the scheme would work was causing problems for developers. Pete Redfern said: “It’s quite hard if you’re looking at a future site to know how that policy balance will end up, because local authorities feel more threatened by starter homes than by anything else.”

Research carried out by Savills for the Local Government Association (LGA) found that the discounted starter home prices were out of reach for all people in need of affordable housing in 220 council areas and for more than 90% in a further 80 council areas.