What will the First Homes scheme mean for developers?

The First Home scheme, recently announced by Government with a consultation running until 3 April, aims to help people in England buy their own home in their local area. It proposes to achieve this by building in a minimum 30% market value discount and locking this reduction to the property, so that if it is resold the discount is passed to the next buyer.

Planned to complement Help to Buy, First Home proposes to offer local people and key workers (for example, nurses or armed forces veterans) first refusal on such homes. According to housing secretary Robert Jenrick, this will translate to an average saving of £94,000 per home. In other words, First Homes lowers deposit and mortgage requirements for first time buyers.

It is a significant housing policy promised in the Conservative’s 2019 General Election manifesto and is already attracting support and concerns from many in the housing sector.

Yet how will the First Home scheme affect developers? We look at the consultation proposal in detail and provide a summary of the important points here.

Two options for developer contributions

The consultation suggests a renewal of Government grant funding for affordable homes would consider First Homes as part of the programme’s affordable housing mix. Developer contributions are the second primary means of funding affordable homes, and the proposal identifies two options on how developers should contribute towards the discount associated with First Home properties:

  1. As a percentage of affordable homes delivered through Section 106 planning obligations, or;
  2. As a percentage of all the homes delivered on suitable sites (more than 10 units)

The proposal considers limitations with both options. There is no legal obligation for Local Authorities to deliver affordable homes through Section 106, potentially limiting the number of First Homes built. The viability of sites and developments could be affected by the second option.

Making First Homes happen

The consultation document models potential numbers of First Homes as a percentage of Section 106 units, based on the number of affordable homes to own (typically shared ownership) delivered via the planning policy in 2018-19. If 40% of Section 106 units were First Homes, the programme would deliver 8,000 homes a year, 12,000 at 60% and 15,000 at 80%.

The Government also sees so-called “exception sites” playing a role in First Home delivery, anticipating that such sites would provide an additional 4,000 homes a year. Exception sites are allocated for entry-level housing suitable for first-time buyers and renters. The consultation admits there is “lack of clarity” around exception site policy and so it proposes to make the sites available for First Homes with “a small proportion” of market homes to make developments more deliverable.

To ensure developers contribute, the consultation asks whether changes to planning policy should be used, which might vary at Local Authority level through the Planning Framework, or if Government should legislate. One concession proposed is that First Homes would be exempt from the Community Infrastructure Levy (CIL) – though this has already attracted criticism in some quarters (more later).

Praise and criticism for the proposals

While most commentators applaud the desire shown by Government to build more affordable homes, especially aimed at local buyers and “front-line” professions, there is concern that First Homes could swing the pendulum too much towards ownership at the expense of affordable rent.

There is also nervousness around the proposal to exempt CIL contributions for First Homes. Developers may welcome any lightening of their financial load, but recent reports highlighting shortcomings of development design, and the Government’s own National Design Guide, may bring potentially reduced CIL contributions into conflict with the renewed focus on developments with better-designed infrastructure.

Have your say

The numbers proposed in the consultation paper provide an indication of the significant role the Government expects the First Homes scheme to play in providing homes for all in England. For developers, now is the time to have your say.

The consultation runs until Friday 3 April 2020 and responses can be lodged here.

Please Note: Every care was taken to ensure the information in this article was correct at the time of publication. Any written guidance provided does not replace the reader’s professional judgement and any construction project should comply with the relevant Building Regulations or applicable technical standards. However, for the most up to date LABC Warranty technical guidance please refer to your Risk Management Surveyor and the latest version of the LABC Warranty technical manual.

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