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Uncertainty lingers behind the big promises of First Homes
20 August 2020
This piece was originally published in Housing Today.
You would have been forgiven for missing the publication of the Government’s response to its First Homes consultation. Released at the same time as the planning White Paper, the detail about how First Homes will work was never going to grab the headlines, but it could have a big impact on housebuilding long before the sunlit uplands of a new planning system as envisaged by the White Paper are upon us.
First Homes is a new for-sale affordable housing product prioritised for local first-time buyers. The Government has now confirmed First Homes will be: sold at a discount of at least 30% below market value; subject to two regional price caps (£420,000 in London and £250,000 in the rest of England) that will apply after the discount has been applied to all initial sales; and subject to household eligibility incomes caps (£90,000 in London and £80,000 across the rest of England).
Local Planning Authorities will be able to set local connection restrictions applicable for three months from the date of sale “provided they are able to evidence the necessity and viability of these restrictions”. After three months, local restrictions will disappear, with the homes becoming available to all first-time buyers in England at a 30% discount. These restrictions and the original level of discount will be passed onto future purchasers via a restrictive covenant against the title of the property.
In addition, Local Planning Authorities will be allowed to potentially require higher discounts to the market value of a First Home (40% or 50%), lower prices caps for the first three months and set lower eligibility income caps. Any such changes would have to be justified through the local plan making process, taking into account the impact on the viability of development.
The all-important question is how will first homes be built? Mindful of the fate of its forerunner, the never-delivered Starter Homes, the Government has sort to minimise the wiggle-room for developers and local authorities to prioritise other types of affordable housing.
To start with, the National Planning Policy Framework and guidance will set out that a minimum of 25% of homes delivered through a section 106 agreement should be First Homes, with local authorities having the discretion to choose a higher proportion on individual sties or across their area. However, this percentage may change as the Government “will consider the proportion of First Homes once they are embedded in the market” and keep “under consideration the option to strengthen the policy through primary legislation at a future date”. Planning policy will also be altered to allow First Homes to be delivered through exception sites (a site that is adjacent to an existing settlement and proportionate in size to it and is not protected from development). If you weren’t sure about the longevity of First Homes, it’s clear under this Government they are here to stay.
Setting to one side whether First Homes are a good idea (London First expressed concern about aspects of the proposals in our consultation response), the chosen route of implementation could have significant ramifications. Will local authorities look to preserve the different types of rented affordable housing delivered through developer contributions meaning that shared ownership homes get bumped out of the mix? If that does happen, what impact will this have on the viability of development as a heavily discounted First Home is unlikely to equate to the value a Registered Provider would typically pay for a shared ownership home. In turn, this could have implications on cash-flow as a Registered Provider would typically pay a lump sum up front to a developer for the shared ownership homes, but this can’t happen with First Homes where the developer will sell direct to the customer. And finally, how will First Homes work in a Build to Rent (BtR) scheme? The consultation is silent on this point, with the concern being that ownership and management of all the homes in a development is an integral feature of BtR, which is not compatible with for-sale First Homes.
The consultation has left plenty for all to be scratching their heads about. There’s even uncertainty on dates, with no indication on when this will all be implemented, although more details about a 1,500 First Homes pilot scheme will be announced soon. Watch this space.
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