On June 28 2021 a new type of affordable housing product known as “First Homes” was launched on to the UK market. First Homes is the latest government initiative to help more people make the move into home ownership.
What is First Homes?
First Homes are new homes to be sold to first time buyers with a minimum 30% discount off the market value. There are various qualifying criteria including a requirement to be a first time buyer, have an income of no greater than £80,000 per annum (£90,000 in London) and the home value may not exceed £250,000 (£420,000 in London) once the discount has been applied. Local Authorities are also free to set additional “local” criteria (such as residency criteria) if they wish, and may increase the level of discount if they can demonstrate a need.
First Homes will be secured via Section 106 obligations on new schemes being brought forward for planning and should be reflected in local and neighbourhood plans. However, there will be exemptions for schemes where planning is already in place or under consideration, and for local and neighbourhood plans which are already at certain stages of preparation and publication. In addition, 100% affordable schemes will be exempt.
So what do registered providers need to know about First Homes?
In very basic terms, First Homes will need to be provided on all new schemes where the above exemptions do not apply and there is an expectation and requirement that 25% of affordable homes will be First Homes. This will form the government’s new preferred tenure over and above social rent. Social rent proportions are required to remain unchanged, however, meaning that the remaining tenures (for example affordable rent or shared ownership) will have their comparative proportional share of the development reduced as a result. This is likely to have a significant impact on the availability and viability of schemes for registered providers, due to the priority being given to it in the proportions of housing tenures required.
Therefore the big concern for registered providers is the reduction in the number of shared ownership properties that have long been used by providers to cross subsidise the provision of new social rent and affordable rent properties. There is the distinct possibility that this initiative could result in some developments becoming financially unviable to many registered providers. It is also likely that this could pose particular problems for smaller providers who concentrate on smaller s106 schemes and do not self-develop.
Further concerns include the negative impact on the desirability of shared ownership (reducing demand and returns accordingly) and the fact that this product is less affordable than the standard shared ownership model (which only requires a mortgage for the initial share while First Homes require a mortgage of at least 50%).
What should registered providers do now?
Read our summary Q & A and talk to us. We’re here to guide you through this new initiative, including all the planning and policy implications via our experienced planners in our planning team. It could and should be good news for buyers – let’s make sure it works for registered providers too.
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Kevin works with clients on a wide range of real estate maters to facilitate the delivery of their affordable housing developments.