There has been a particular focus on first time buyers over the last decade or so as the ability to get on the property ladder has become increasingly challenging. A number of policy responses to the problem (e.g. Help to Buy and Starter Homes) have been attempted, however, the prospect of home ownership still remains out of reach for many people. In February this year, therefore, the Government issued the First Homes – Getting You On the Ladder consultation paper, which introduces a new discounted market housing product called “First Homes” that they hope will assist in addressing this issue.
So, what exactly are First Homes? They are dwellings to be sold at a discount of at least 30 percent to local people who live or work in a particular area and who want to stay in the community where they live or work but are struggling to purchase a home at market prices. Priority is to be given to first time buyers, however, it will also be open to serving personnel or veterans of the Armed Forces, and key workers (including police, nurses, and teachers).
The discount is to be maintained in perpetuity and passed on to future buyers when the dwelling is resold, to help maintain future provision of this type of affordable housing. This will be achieved through use of restrictive covenants that ensure that the property is sold at the original percentage discount at every re-sale. The one exception being where there is default on a mortgage, the lender would be allowed to sell the property on at full market price.
The 30% discount figure is to be a minimum and could be discounted further by Local Planning Authorities in areas where affordability is particularly challenging (e.g. London and the South East). The scheme is not, however, to be used to subsidise the purchase of exceptionally expensive property so the use of national and/or regional financial caps is proposed.
The intention is for First Homes to be given priority in the push to increase the number of first time buyers on the housing ladder. Incentives for developers being considered include a national exemption in England from the Community Infrastructure Levy for the element of a development providing First Homes. The Government is also looking at measures to put delivery of First Homes on a statutory footing, to avoid it being sidestepped by those unhappy that First Homes provision may result in other affordable housing tenures (social rented/shared ownership/affordable rent) being undelivered.
The Government is still considering how best to ensure delivery of First Homes; both legislative and non-legislative options are on the table. Options being considered include, prescribing in legislation a percentage requirement to be secured through section 106 agreements, or that a percentage of all homes on developments of 10 or more are First Homes. The other non-legislative option involves amending the entry-level exception sites policy in the National Planning Policy Framework to specify that it is First Homes specifically that should be delivered on these sites, whilst also allowing for an element of market housing to feature where this is necessary to ensure delivery (something which is not allowed at present).
The use of low cost or discounted market housing as an acceptable affordable housing product has been tried on a number of occasions previously and it remains a relatively small part of overall affordable housing delivery (only around 1,000 discounted market sale housing properties are built each year). Also, it has been reported that the previous Starter Home initiative from 2015 has failed to deliver any of the 200,000 affordable homes for first time buyers that it promised.
The main differences between discounted market housing and First Homes is that the minimum discount is 30% rather than 20% and there is a specific focus on first time buyers. However, the way First Homes is ultimately implemented could be the key difference, particularly if a requirement is embedded in legislation or their use is specifically required by national planning policy.
Any initiative that seeks to increase access to the housing market by first time buyers is to be welcomed and First Homes does seem to have the chance to be more effective. Its implementation and the impact it has on financial viability of schemes will determine whether it succeeds or goes the way of the flatlining Starter Homes.
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