A note from Thomas Eggar's development team on the impact of the draft Housing and Planning Bill 2015, as at 22 October 2015. Provided for information only and not for the purpose of giving legal advice.

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This briefing addresses the provisions in the Housing and Planning Bill 2015 relating to
affordable and low cost housing, including further detail on the new starter homes policy.
A briefing note has already been published by Nicola Gooch, and an update on
implications for the management of rental properties will follow shortly.
A lot of the detail will emerge from ancillary legislation, and in particular from
regulations to be published at a later date. Even so, there is enough in the draft Bill to
show that if passed in its current form, it will have a substantial impact on the provision
of affordable housing in the UK, and could lead to the disposal of substantial amounts of
affordable housing to private ownership.
The intention of the Bill is clearly to encourage and enable private home ownership.
Critics say that this is at the expense of sustaining the affordable housing sector and
providing rental housing for those in need of it.
The affordable housing sector had previously been very successful in attracting billions of
pounds in debt finance and through the capital markets. Investors and lenders to the
sector will be watching the impact of this Bill with keen interest.
1. Starter homes
Broadly, the Bill seeks to encourage widespread development of cheaper properties for
first-time buyers by allowing these to be provided, instead of on-site affordable housing.
The aim is for 200,000 starter homes to be constructed by 2020.
It is worth comparing the statutory requirements for starter homes in the Bill to the
usual requirements associated with affordable housing in section 106 agreements to
explore some key differences:
Criteria Affordable housing Starter homes
Type of dwelling Flats or houses Starter homes can be flats or houses,
but must be new dwellings, so
either constructed or adapted for
use as single dwellings, that have not
previously been occupied.
Amount of
housing
At present the amount of on-
site affordable housing is
mandated in planning policy
but subject to viability
assessment.
There is not yet an indication on how
any viability assessment for these
low cost starter homes would work.
It is not currently clear how a
Developer or local authority would
deal with the situation where homes
marketed as starter homes were not
able to be sold on that basis, because
of lack of demand or an over-supply.

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Criteria Affordable housing Starter homes
It is not clear how much the local
authority (or a developer) can make
those assessments itself.
Eligibility Housing for people whose
needs are not met on the
open market in the relevant
area (NPPF).
This can include social rented
housing, affordable rented
housing or the various
affordable home ownership
offerings.
Can only be available for purchase by
a qualifying first-time buyer who will
be:
• A first-time buyer;
• under the age of 40; and
• compliant with other
characteristics specified in
Regulations to be made at a
future date.
(these could relate to
nationality or a minimum age
but there is no mention of
economic status)
Discount This varies according to type
of affordable housing.
Tenants in a social rented
property enjoy a substantial
discount on market rent but
tenants in an affordable
rented property only enjoy a
discount of 20% to 40% of
market rent.
The property must be sold:
• at a discount of at least
20% of market value;
• for less than the price cap
(currently proposed as
£450,000 in Greater London
and £250,000 elsewhere)
Nominations The Local Authority will
typically be able to
nominate people from its
housing list to live in on-site
affordable housing.
There is no indication that these
starter homes need to be made
available in any way other than on
the open market.
Management /
ownership
Section 106 agreements will
provide that affordable
housing will be owned and
operated by an approved
registered provider (housing
association) or by the Local
Authority.
The housing association
would take sales risk, which
in practice was slight due to
widespread high demand for
affordable housing.
No such restrictions, so that unless
future regulations differ, the
developer can sell the starter
homes itself does not have to deal
with a body such as a housing
association.
On-site affordable housing is typically
sold at cost so the ability to sell
direct to owner occupiers with less of
a discount should be attractive to
Developers. On the other hand, this
will place sales risk on the
Developer. Previously, most
schemes of any size would involve a
pre-let or forward sale of a decent
percentage of the units to a housing
association.
The Bill does say that starter homes
can only be made “available for

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Criteria Affordable housing Starter homes
purchase” by qualifying first time
buyers.
Restrictions on
sale and letting
This varies according to type
of affordable housing
These may be specified in future
Regulations to be made by DCLG.
Developers will want to make sure
that they claw back the discount if
first-time buyer sells the starter
home for full market value. There is
no indication of how long this period
should be for.
Concerns have been expressed in the
media that starter homes may just
end up flooding the buy to let
market so this could be restricted by
future legislation.
Restrictions on
disposals
The Local Authority will
typically bind the
affordable housing land so
that it can only be used for
affordable housing until it is
purchased by a tenant
through the right to buy,
staircasing, or because of a
sale by the housing
association’s bank following a
loan default.
The legislation does not include any
reference to such restrictions
although it could be covered by the
proposal to set future regulations
restricting sales and lettings.
2. Introduction of right to buy for housing associations
As has been broadly publicised the majority of housing associations have now agreed
voluntarily to introduce the Right to Buy scheme to their tenants. Previously, housing
association tenants very rarely had the actual ‘Right to Buy’ that is available to council
tenants, although a less attractive ‘right to acquire’ was available in respect of many
housing association properties, if the property was constructed with government subsidy
since October 2006.
Because this new Right to Buy scheme is being introduced voluntarily, rather than
through statute, it makes sense that there are no detailed prescriptions in the Bill on the
terms of the new Right to Buy scheme. However, the assumption is that these will
closely correlate with those currently offered to council tenants.
The voluntary deal was based on an agreement that the Government would compensate
housing associations for the size of the discount they would need to offer to tenants. The
legislation states that the HCA may make grants to housing associations in respect of
Right to Buy discounts. The GLA will have grant making powers in London.
Many in the sector are questioning whether this limited provision goes as far as the deal
proposed it would. The Explanatory Notes to the Housing and Planning Bill indicate that
the intention is for this policy to be funded from payments by councils in respect of any
high-value vacant properties that they own. There is not yet any indication that

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additional grant monies will be allocated to housing associations. In the current climate
of austerity, it may be that following the Comprehensive Spending Review this is never
offered.
In addition, although ‘compensation’ can typically be spent as the recipient pleases,
housing grant is typically provided ‘with strings’ and for a particular purpose, so that it is
always sunk into the provision of affordable housing and is to be returned following
disposal of that housing if it is not re-invested. It is possible that DCLG will argue that
any future grant has to be re-invested into provision of starter homes.
The Regulatory Committee of the HCA must, if requested to do so, monitor compliance
with criteria set by DCLG with regards to disposing of properties under this voluntary
Right to Buy.
The Bill gives the Secretary of State a power to introduce regulations reducing the
amount of regulatory control that the HCA will have in future over housing associations,
presumably in partial compensation for the effects of the deal.
DCLG has published a funding prospectus for a £10 million fund for Local Authorities
interested in using surplus land as an exemplar starter homes led development. Details
are available through the DCLG website.
The focus on starter homes is leading to concern from some championing the new Build-
to-Rent sector, in case a focus on starter homes crowds-out previous efforts to kick-start
the provision of new build housing for institutions to hold and rent. It is important to
note, however, that the government has committed in excess of £1 billion to the Build to
Rent initiative and will not want to see that jeopardised.
3. Disposal by Councils of vacant high-value housing
It is likely that in future, Local Authorities will be required to make an annual payment to
the DCLG of an amount up to the market value of the council’s interest in any high-value
housing likely to become vacant during that year. Discounts may also apply to the
amount of payment required.
The intention is that, as and when ‘high-value’ council housing becomes vacant, Local
Authorities will be incentivised or nudged to dispose of that housing rather than retain it
and have to make a payment back to central government. There is no requirement in
the bill to dispose of the housing to people in need. It appears that it can and should be
marketed on the open market.
Regulations to be published in future will define what amounts to ‘high-value’ housing.
Think tank reports suggesting this policy have previously indicated that any housing
above the local mean average should be treated as high-value. This may inform the
approach taken in those future Regulations.
As set out above, the Bill suggests that revenue from the imposition of this policy will
fund payments to housing associations following tenants exercising the right to buy.

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4. Imposition of mandatory rents for high-income social tenants
The Bill provides that further regulations could be introduced, which will oblige housing
associations to charge a particular level of rent to high-income social tenants. The
regulations will define what a high income is considered to be, and may provide for the
mandatory rent to equal market rent or a proportion of market rent. The mandatory rent
could be different for people with different incomes or living in different areas. Previous
reports discussing the issue of solvent tenants living in subsidised housing indicate that a
household income of £30,000 could be considered a ‘high income’.
Regulations may give a housing association the legal power to increase rents and to
require tenants to provide necessary information or evidence to enable the housing
association to charge the appropriate level of rent.
Regulations may also require a housing association to charge full market rent to a tenant
failing to comply with a requirement to provide information. The Bill also enables HMRC
to disclose information to housing associations to assist them in determining what
mandatory rent should be charged to particular tenants.
If you would like to discuss this note further please contact Brian Dowling or Nicola
Gooch.
Brian Dowling
Senior Associate
DD: 01243 813240
brian.dowling@thomaseggar.com
Nicola Gooch
Associate
DD: 01243 742868
nicola.gooch@thomaseggar.com