Roberta Blackman-Woods, Labour MP for the City of Durham, said such a clause was needed to curb the threat of homes local to first-time buyers being snapped up by buy-to-let investors targeting the same lower-priced homes.
Overseas investors paying in cash to buy properties off-plan years ahead of final construction was making the problem particularly acute in London, she said.
If approved, the clause would give the local planning authority the power to insist that a ‘reasonable proportion’ of new homes being built in their area are marketed exclusively to first-time buyers for a specified period to start no earlier than six months before the homes are completed. Blackman-Woods acknowledged that the Starter Homes initiative was intended to boost the stock of affordable homes to young buyers but her proposal focused on protecting homes for local people to buy.
Her proposal was met with tough opposition from one Conservative MP who argued that the Chancellor’s announcement in the Autumn Statement that buy-to-let and second homes would face additional Stamp Duty charges would curb investor demand. Blackman-Woods said that overseas buyers often bought properties with no intention of renting them to rent them out but as safe havens to invest money. She said for this reason, Osborne’s recent fiscal strategy would have no effect on curbing their demand for UK property.
The Shadow minister referred to research carried out for the British Property Federation which showed in 2013, 61% of new homes in London were bought by investors and 49% of all new homes in central London were bought by overseas buyers.
“Housing stock is being sold so many years in advance of being built that cash buyers are favoured over those buying with a mortgage. For example, when someone clicks on the ‘enquire’ tab of the website for the new 624-apartment Wardian development on the Isle of Dogs they are asked to choose their location from London, Kuala Lumpur, Singapore, Hong Kong, Qatar, Abu Dhabi and Dubai. The scheme is not due for completion until 2019.”
Housing minister Brandon Lewis said the House needed to be careful about falling into the trap of attacking overseas investment which he said supported much of the building in the UK during the 2008 economic crash.
Lewis said he was satisfied that the Osborne’s mortgage interest tax relief cuts and Stamp Duty premiums for buy to let coupled with the Starter Homes initiative would sufficiently support the first-time buyer market.
He said: “Not only will developers be required to build a proportion of starter homes on all suitable, reasonably sized sites in future, but those starter homes will be at least 20% cheaper than the going market price. That will give more prospective first-time buyers the opportunity to buy an affordable home of their own, especially if linked with Help to Buy and the 5% deposit which the new clause would not necessarily achieve.”
The Shadow minister has withdrawn the proposal while further investigations are made.