First-time buyers to receive 30% discounts on First Homes

06 Dec 2020

The ‘First Homes’ scheme is a new product proposed to assist first-time buyers stepping onto the property ladder in their local area by providing discounts of at least 30% on new-build properties (compared to market values).  The discount is expected to be around £100,000 on average.
The Government’s responses to a consultation exercise early this year have been published, and it is currently working on the final details; updated planning policy will bring the scheme into effect in the near future.
The Government’s Planning For The Future white paper published in August 2020 contains proposals to replace both s106 agreements and the Community Infrastructure Levy with a new Infrastructure Levy, a nationally set charge which could be used to secure affordable housing.  However, the First Homes scheme is not intended to wait for the Government’s planning reforms to take effect: in the interim it is to be delivered through two routes in the planning system:
  • s106 developer contributions and
  • through an amendment to the policy on exception sites.
What is a First Home?
  • A property marketed and sold at a discount of at least 30% below market value.  Local authorities will be able to require a higher minimum discount of either 40% or 50%, if evidenced through their local plan-making process.
  • First Homes will be subject to a maximum price cap of £250,000 (£420,000 in London).
Who will be eligible?
  • First-time buyers (unless in exceptional circumstances, to be confirmed by the Government).
  • In order to ensure they are not priced out of the communities where they work or live, local people may be prioritised for the purchase of First Homes for an initial marketing period of three months (if required by the local authority through their planning policy).  Key workers, serving members, new veterans and bereaved spouses/partners of the Armed Forces will have first priority over other local people.
  • Buyers will be subject to a maximum income cap of £80,000 (£90,000 in London).
How will they remain affordable?

The Government intends for the First Home’s discount to have a perpetuity effect; it will be passed to future buyers when First Homes are resold so more people can be helped with home ownership.  This is expected to be secured through a standard form restrictive covenant applied to the title of the property.
How will they be secured?
  • National planning policy will require that a minimum of 25% of all affordable housing units secured through s106 agreements are First Homes.
  • National planning policy will update the entry-level exception site policy to become a First Homes exception site policy.
  • As mentioned, s106 agreements are intended to secure First Homes until the wider reform of the planning system.  Until then the Government hopes to develop standard s106 agreement clauses to secure the sale of First Homes required as part of new developments. 
  • The Community Infrastructure Levy Regulations have recently been updated to exempt First Homes from CIL payments.
Still to be determined

It is not yet clear which affordable housing tenures are likely to be reduced in order to make way for the requirement that 25% of all affordable housing units be First Homes.  Concerns have been raised that First Homes will be prioritised to the detriment of affordable homes offered through other avenues, such as social and affordable rented homes.  This is a crucial factor for developers and affordable housing providers considering the viability of residential development sites.
Furthermore whereas a 30% discount on a property in certain parts of the country may bring the property within the proposed price cap, a larger discount may be needed to bring homes in higher-value areas down to the proposed price cap.  In such instances it may be that the viability of the development does not allow for both First Homes and other types of affordable housing to be provided, or it could mean that only smaller units can be viably sold as First Homes.  This may mean that other forms of affordable housing are more attractive to buyers looking for larger family homes, including shared ownership, for which a new model has been proposed – see our blog for more information.
Developers and local planning authorities alike wait to see the changes in policy and guidance to be issued by the Government in due course, including how much flexibility will be permitted to ensure that an appropriate mix of housing can be provided as affordable.

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