A scheme to offer first dibs on new homes in London has moved a step closer with some of the housing industry’s biggest players signing up.
Members of the Home Builders Federation (HBF) and the g15, which represents London’s largest housing associations, have offered to restrict sales of their lower-cost new build properties in London to UK buyers.
This will mean that properties up to £350,000 will be restricted to UK buyers only for three months before any overseas marketing can take place. The Mayor of London, Sadiq Khan, has also confirmed that those who live or work in the capital will be offered first dibs exclusively for up to a month within this time period.
The voluntary industry offer follows research commissioned by Khan last year which revealed that half of new properties bought by overseas buyers in London were homes under £500,000 – typically the price range for many first-time buyers and those looking to access support through schemes such as ‘Help to Buy’.
Changes to marketing plans
In practical terms, housing associations that have committed to this scheme will need to review – and potentially change – their marketing plans for upcoming developments.
Whilst adhering to the scheme it will be necessary to consider the position under applicable section 106 agreements (and potentially nomination agreements) as we have already experienced an increase in recent years for local authorities to look to impose marketing polices aimed at local residents.
Balancing the obligations under the first dibs scheme with section 106 obligations together with the volatility of the housing market will require a degree of advance thought and application which we have seen housing associations already adapting to. This requirement reinforces the need to bring the sales process into play at the very beginning of a site acquisition to ensure that acquisition contracts for developments have the necessary marketing and sales obligations/requirements in place to be able to comply with and adapt to the needs of purchasers.
When working with a development partner, it will become increasingly important to secure access to show homes. This may involve insisting on a contractual provision that requires the homebuilder to bring forward one unit for marketing purposes to help with off-plan sales and maximise the effect of the ‘first dibs’ policy.
Housing associations should also consider putting greater obligations in development agreements for homebuilders to provide Land Registry compliant plans (which is often more difficult than one would think) and spec information for marketing materials at least three to six months before practical completion.
Where possible, advertising signage and locations for such signage should be agreed with homebuilders with plans attached to the development agreement or as a backstop an obligation on the parties to agree such locations acting reasonably.
Khan will now work with homebuilders to put their offer into action, including potentially making homes available through his new ‘Homes for Londoners’ portal, currently under development on the City Hall website.
However, it is not yet clear how some of the more practical elements will be rolled out. At this stage, we do not know when the clock will start ticking on the three-month sales period and this could affect how long housing associations will have to market properties to UK buyers and the initial exclusivity period for Londoners. Furthermore, there is no information as yet on whether there will be a formal notification process of compliance with the policy and if so, who will be responsible for notifying, the lawyers or the housing associations / homebuilders?
As acknowledged by Khan, there is also a need for supplementary measures to help tackle other barriers for first-time buyers in London. For example, the ‘first dibs’ scheme could have a much bigger impact if the proposal for lenders to guarantee mortgage offers for up to 24 months goes ahead. The combined effect of both of these initiatives could be significant and start to create a more level playing field between investors and first-time buyers especially in the off-plan market.
That said, the ‘first dibs’ policy is still a step forward and although there remain some unanswered questions, it is a viable platform to continue the debate as to how best provide affordable homes in the capital for Londoners and UK buyers.
For further information please contact Lucy Woollard or Rachel Keenan in our Real Estate & Projects Team.