Cameron Pledges to Double Starter Homes to Boost Supply

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Prime Minister David Cameron pledged to double the number of homes built for first-time buyers by the end of the next parliamentary term in a bid to tackle Britain’s housing shortage.

In a speech in Colchester, Essex, on Monday setting out the final part of his Tory party’s six-point campaign platform for the May 7 election, Cameron said 200,000 properties will be built by 2020 under his starter-homes plan. Prices of the homes, only available to first-time buyers under the age of 40, will be capped at 450,000 pounds ($692,000) in London and 250,000 pounds outside the capital. Reduced planning constraints will make it easier for developers to cut building costs, allowing the homes to be sold at a 20 percent discount.

“This policy will work not least because the property developers, the builders, the building industry are all coming out and saying they’ll deliver it,” Cameron said in answer to questions. “Here in Britain we haven’t delivered enough homes for young people to buy.”

Cameron’s Tory-led coalition has already sought to address a housing shortage with policies such as Help-to-Buy loans and mortgage guarantees and an existing pledge to build 100,000 starter homes. While mortgage rates are at record lows, a lack of supply and high demand has pushed up house prices.

Rebuffing Labour

This latest pledge is part of Cameron’s attempt to rebuff opposition Labour Party criticism that his policies only benefit the wealthiest. The average national house price is now 279,004 pounds, up 6.6 percent from a year earlier, a report by Rightmove Plc showed in February. The average for Greater London has risen 9.7 percent to 582,438 pounds.

He restated the Conservatives’ commitment to extend the first-part of the Help-to-Buy program, targeted at buyers of newly built homes, to 2020. The plan offers homebuyers an interest-free government loan of 20 percent of a property’s value if the buyer makes a 5 percent down payment. Cameron said 77,000 buyers have already used the program.

“Our commitment is to extend the equity-loan part of Help-to-Buy for the whole of the next parliament, helping another 120,000 families to buy a home of their own,” Cameron said.

The starter homes won’t be available to buy-to-let investors and developers such as Taylor Wimpey Plc and Barratt Developments Plc have already signed up to the plan. A special levy to claw back the 20 percent cost reduction of the home will be applied to buyers who seek to sell the property within the first five years of purchase, Cameron said.

Miliband Response

“In the last five years we’ve put 90 billion pounds of both public and private investment into building more homes,” Conservative Party Chairman Grant Shapps told Sky News television on Sunday. “Going forward, we are going to have a very similar program where we enable houses to get built by yes, some government support, that is part of what we’re talking about, but also by the market stepping up to the plate.”

Labour leader Ed Miliband, also speaking on Monday, said only his party can deliver fairer rents and the new homes needed. He accused the government of failing to address a rise in living costs that’s left families worse off since Cameron took office five years ago, according to remarks released by his office.

“This government has betrayed working families with a sustained crisis in living standards” and “nowhere is his failure more dismal than on housing,” Miliband said in Hove, on England’s south coast. “We are building less than half the number of homes we need and young people are being priced out of the market with the average house price now eight times the average wage.”