Carter Jonas update on the Government's First Homes initiative

Comment by Matt Hare, Partner, Planning and Development, Carter Jonas Cambridge

In a ministerial statement on May 24th, we learned that the new tenure of affordable housing, First Homes, would come into effect from 28 June, having first been consulted upon by Government in February 2020. New Planning Practice Guidance on First Homes was published accordingly.

First Homes is a new form of discounted market housing, specifically for local first-time buyers, to be delivered on residential developments. They are to offer a minimum discount of 30% of the market value of new properties subject to the further requirement that the first sale of such properties must be priced no higher than £250,000 after the discount has been applied (or £420,000 in London).

First Homes will be subject to a restriction, to be secured by Section 106 agreement, requiring any future sales of the property to be subject to the same minimum 30% discount. The value caps will however fall away after the initial sale.

Local authorities will have the flexibility to enforce higher discounts of 40% or 50%, lower price caps, or more stringent allocation criteria if deemed necessary.

Eligible purchasers will have a joint household income of no more than £80,000 (£90,000 in London). There is no age restriction, but buyers must have a local connection (apart from active members of the Armed Forces and their spouses or partners). Again, a s106 will ensure that these restrictions are applied to the property at each future sale.

Currently, national planning policy requires that at least 10 per cent of homes on a new scheme are required to be delivered as affordable housing, although local policies often require a much higher proportion for delivery. Local authorities set local tenure mix requirements for affordable delivery which commonly vary between 70%-80% social rent / affordable rent, with the residual 20%-30% as intermediate housing (e.g. shared ownership).

The First Homes policy now means that a minimum of 25% of the affordable housing requirement of any eligible scheme must comprise First Homes. Government guidance on the matter is that once a minimum of 25% of First Homes has been accounted for, social rent should be delivered in the same percentage as set out in the local plan. The remainder of the affordable housing tenures should be delivered in line with the proportions set out in the local plan policy. This has led to concerns from some areas of the industry that the policy could dramatically reduce the delivery of shared ownership affordable housing.

Despite these concerns, the Government’s advice is clear “First Homes are the Government’s preferred discounted market tenure”.

There are, as ever, transitional arrangements that apply to the new policy and which are intended to avoid undue complications for development schemes that are advanced and/or which have been subject to tenure mix discussions with the local authority. Critically sites with full or outline planning permission gained before 28 December 2021 (or 28 March 2022 where there has been significant pre-application engagement) will not be subject to the requirements unless the developer wishes to be so.

With its potentially substantial discount, which holds in perpetuity, and compulsory delivery via s106 agreements, the First Homes initiative is stronger and bolder than any previous planning initiative to assist first-time buyers. This will be widely welcomed, particularly as prices continue to rise. But developers are anxious to gain assurances that schemes already in the pipeline under the current system can remain viable.

Image source- Carter Jonas

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