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07/06/2021

A new form of discounted housing: First Homes explained 

Housing / iStock-175452390

Want the ins and outs on the government’s new First Homes Scheme? Jessica McSweeney breaks it down

The new affordable housing tenure First Homes is the latest evolution in the government’s long-held ambition to get people onto the property ladder. On 24 May it was announced that First Homes will come into effect from 28 June and new Planning Practice Guidance on First Homes https://www.gov.uk/guidance/first-homes has been published to support the announcement. 

First Homes are to be sold to first time buyers at a minimum 30 per cent discount. Offered only to people with a local connection (existing residents, those with local employment requirements, a family connection or caring responsibilities), key workers and members of the armed forces, the First Homes eligibility criteria also include a household income cap of £80,000 (£90,000 in London) and an upper price limit on the property of £250,000 (£420,000 in London) once the 30 per cent discount has been applied. 

First Homes will be a national requirement, but the scheme allows some flexibility at a local level and the 30 per cent discount can be increased to 40 per cent or 50 per cent if the local authority can demonstrate the need for a greater discount. Although the price cannot exceed £250,000 or £420,000, lower maximum price caps can be set if there is evidence of need, as can lower income caps.  

In terms of delivery, policy compliant planning applications will deliver 25 per cent of all affordable homes on site as First Homes or, where policy allows for off-site contributions, 25 per cent of the affordable housing contributions should be towards First Homes. 

"With discounts of up to 50 per cent, First Homes may also sell at levels lower than that which a registered provider might pay for an equivalent shared ownership unit, impacting the viability of the scheme"

Once a minimum of 25 per cent of First Homes has been accounted for within the affordable offer, social rent should be delivered in the same percentage as set out in the relevant local plan. The remainder of the affordable housing tenures should be delivered in line with the proportions set out in the local plan policy. 

Where does this leave shared ownership if the overall affordable housing percentage is not increased? There is concern that in many places the requirement for First Homes will undercut the provision of shared ownership units. With discounts of up to 50 per cent, First Homes may also sell at levels lower than that which a registered provider might pay for an equivalent shared ownership unit, impacting the viability of the scheme. However, with the government’s new shared ownership model also set to come into effect shortly, the values of shared ownership units are also likely to be affected. 

For sites which are already advancing through the pre-application and application stages, First Homes will not be required where planning applications are determined before 28 December 2021 (or 28 March 2022 if there has been significant pre-application engagement). 

However, for major developments which will not be determined prior to the end of the year, applicants will need to get to grips with First Homes quickly and ensure they are accounted for as part of emerging proposals. 

Jessica McSweeney is a partner with Carter Jonas (London)

Photo credit | iStock

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