One of the measures in the Housing and Planning Act is ‘Starter Homes’. This policy is designed to reverse the recent decline in home ownership by offering first-time buyers under the age of 40 a discount of 20 per cent on properties valued up to £250,000 (or £450,000 in Greater London).

It is planned that 200,000 of these starter homes will be made available by 2020. To focus on this policy, government is drastically reducing financial support for all other forms of housing and is ending financial support for new social housing completely.

The policy will be introduced by government regulation but perhaps they should think again.

One concern about Starter Homes is that it is targeted at the wrong people. Research by the Local Government Association reveals that prices will be out of reach for over 90 per cent of people in need of affordable housing in over 90 per cent of council areas.

Shelter has calculated that to be able to afford a ‘Starter Home’ a person would need:

* In England, an income of £50,000 a year and a deposit of £40,000.

* In London, an income of £77,000 a year and a deposit of £98,000.

The average value of a house in Cumbria is £145,000 and the average annual income of households in Cumbria is £25,000. Therefore, the Starter Homes scheme will benefit very few people in Cumbria and raises the question: Why should the average Cumbrian with an annual income of £25,000 and a house worth £145,000 pay their taxes to subsidise a person with an annual income of £77,000 and capital of £98,000 who wants to buy a house worth £450,000?

‘Starter Homes’ will also fail to deliver its objective of more home-owners. This is because supply in the housing market is ‘inelastic’, meaning that if there is an increase in demand there is an increase in prices rather than an increase in supply.

This is why house building by private developers has been remarkably constant ever since the 1950s, despite economic fluctuations and significant long-term price increases. Therefore, any scheme based on subsidising home ownership is doomed to failure because it will simply increase prices and reduce affordability.

One reason why supply is so ‘inelastic’ is that the construction market both nationally and locally is dominated by a small number of large developers.

If the government really wants to increase home-ownership I would suggest that they:

* Abandon ‘Starter Homes’

* Reduce public subsidies in the private housing market.

* Increase the ‘elasticity’ of supply by introducing more competition to the construction industry.

* Redistribute wealth and income in favour of people on low to average incomes so that more can afford home-ownership

I hope that we will now see fundamental change in the government’s approach to home ownership.

Adrian Waite

Appleby