The First Homes Scheme launched earlier this year as the Government’s latest initiative aimed at helping first-time buyers and key workers on to the property ladder. The scheme enables first-time buyers to purchase a home with a discount of at least 30% on the market value, making mortgages and deposits more affordable.
Those eligible for a home under the scheme must be local first-time buyers or key workers, and have a household income which does not exceed £80,000, or £90,000 in Greater London. After the discount has been applied, the first sale of a First Home must be at a price no higher than £250,000, or £420,000 in Greater London. The Government estimate this will save homebuyers on average £70,000. The scheme applies to new-build properties only.
Meeting local need
Local authorities are given some discretion over the scheme so that it suits the needs of the local area. They can require a higher minimum discount of 40% or 50%, set a lower local sale price cap, and require a local connection test to ensure the scheme is meeting the needs of the local community. Key workers will also be prioritised.
The First Homes discount will apply to homes forever, meaning that new buyers in an area will continue to benefit from the discount even when the property is sold. Whilst this sounds promising, there seems to be a lack of clarity as to how these homes will be sold in the future, and how the discount will be transferred.
First Homes policies for Local Plans
First Homes will be considered to meet the definition of ‘affordable housing’, should account for at least 25% of all affordable housing units delivered by developers, and will be secured through S106 agreements. Paragraph 65 of the NPPF seeks for 10% of homes in major developments to be for affordable ownership, and First Homes fall into this category. The minimum requirement of 25% of all affordable homes to be First Homes will need to be written into Local Plans and Neighbourhood Plans, although any local or neighbourhood plan that had progressed to the publication stage (or further) by 28th June 2021 will not have to include a policy relating to First Homes until a subsequent update. Local authorities should then prioritise securing their policy requirements for social rented properties once they have secured the First Homes requirement. Other tenure types should be secured in the relative proportions set out in the development plan.
Opportunities for house builders
House builders are being invited to work with the Government to deliver First Homes across England, and as of last month can bid for a share of £150 million to support the roll-out of a pilot scheme. The current package aims to deliver 1,500 new First Homes by March 2023. Successful bidders will gain finance to engage local people and mortgage lenders, understand the level of customer demand and learn about the delivery process ahead of the full roll out through planning. Projects are underway in Bolsover and Cannock in the East Midlands and Newton Aycliffe in Durham.
Issues with delivery and discounts?
This appears to be a re-working of the ‘Starter Homes’ scheme under the Cameron Government which offered a discount of 20% for first time buyers under 40 and had a budget of £2.3bn. The key differences relate to the amount of the discount, that this will exist in perpetuity, that they will only be sold to local first-time buyers, and they will not be dependent on new legislation, instead being delivered through the existing planning system.
However, there is some scepticism over the potential impact of this scheme. No Starter Homes had been delivered by 2020 and the initiative has been abandoned. There are reservations over the impact on the delivery of other (arguably more impactful) forms of affordable housing, the complexity of delivery through planning obligations, the potential impact on the viability of some schemes, and the lack of a definitive timetable or targets. There are also concerns over the discount being quickly swallowed up by fast-rising house price increases and that the scale of delivery – eventually 10,000 homes a year – will be insufficient to have a meaningful impact on housing affordability.
Final thoughts
So, an initiative worth knowing about. Anything that makes it easier to gain a foothold in our overheated housing market should be welcomed. As for whether it will solve the intractable problem of housing affordability in the long term, the jury is out.
- Aggie Morris, Planner
Image by mastersenaiper from Pixabay