Residential developers may have to subsidise Starter Home Initiative.

Housing loans for nurses, teachers and other key workers in areas of high house prices was the rabbit pulled from the hat in the Housing Green Paper, with loans for the Starter Home Initiative set to come from a cash-limited challenge fund.

But hopes of many key workers - whipped up by hype from national media about £50 000 interest free loans - are likely to be dashed. The tight conditions of the “key criteria” in the green paper suggest that this will be little more than another low-cost housing scheme helping at most a few thousand people each year.

Any residential developers wondering whether the initiative might provide an alternative to including rented housing within a scheme should spare themselves the effort, unless they are prepared to add a hefty subsidy. The scale of the challenge fund will depend on how much the DETR is able to squeeze from the Government’s spending review, due to be completed this summer. The paper says that the initiative “would operate on a competitive basis, with innovative proposals invited from registered social landlords and others”.

The key criteria suggest it will only apply where affordability is a serious problem and there is excess demand for housing. It will be focused on homes in the bottom quarter price range.

Proposals will be expected to show “robust” assessment of local need, and schemes must show that they offer good value for money relative to options such as social housing for rent.

The paper also recognises that annual funding programmes for social housing may need to be changed to allow the recommendations of Sir John Egan’s Construction Task Force to take effect and to help establish new construction techniques such as prefabrication. These issues are being reviewed with the Housing Corporation to boost their share of the Approved Development Programme. Other points from the green paper include:

    Key criteria in the green paper suggest this will be little more than yet another low-cost housing scheme

  • support for stock transfers to housing associations with an annual programme of 200 000 homes
  • a new option for a few of the best local authorities to retain their stock and raise housing investment money through arms-length management companies
  • possible tax breaks for the private rented sector
  • greater use of planning to achieve extra affordable housing
  • a standardised system of tenure, lettings and rents for social housing with the latter taking up to ten years to bring in alongside housing benefit reform.

For the rest, the green paper provides a detailed analysis of the problems facing housing and helpful suggestions for a more rational approach to tackling them. But the key is extra cash to improve existing homes and grow social housing provision.

While public expenditure is due to rise over the next few years according to the Treasury, the issue for housing will be by how much? And how will that extra be spread between the various calls on housing cash - Starter Home Initiative, repairs backlog, new social housing, wider definitions of homelessness, private sector rented incentive. The answers will depend on how successful ministers are in the spending review.