One of the key themes of the Levelling Up White Paper (published in February 2022) concerns addressing the unmet need for social housing. The White Paper acknowledges that the lack of supply of social housing is leaving people paying higher rents in the private market, unable to save for their own homes.
Still in its infancy, First Homes is a new type of affordable housing product brought forward by the Government to address this unmet need.
First Homes allows first time buyers to afford market housing by discounting the home by a minimum of 30% against the market value.
After the discount has been applied, the first sale must be at a price no higher than £250,000 or £420,000 in Greater London and must be sold to a person who meets the First Homes eligibility criteria.
Local Authorities have discretion to apply their own eligibility criteria for First Homes. This may involve lower income caps, a local connection test, or criteria based on employment status.
The 30% discount will apply in perpetuity, meaning it will be passed onto the next buyer each time the home is sold. On the first sale, a restriction will be registered on the property’s title at HM Land Registry to ensure the discount and other restrictions apply to future sales. The restriction is registered in favour of the local planning authority who will be required to provide its consent to every onward sale.
As First Homes are a form of affordable housing they are eligible for mandatory social housing relief from the Community Infrastructure Levy. To qualify for the relief a planning obligation must be entered into prior to the first sale of the dwelling designed to ensure that any subsequent sale of the dwelling is for no more than 70% of its market value.
Delivering First Homes
The Government set out its plans for the delivery of First Homes issued on 24 May 2021.
The Government expects Local Authorities to ensure delivery of First Homes through the development plan making system. At least 25% of all Section 106 affordable homes must be delivered as First Homes taking priority over other forms of sale products such as shared ownership.
First Homes will be secured through Section 106 obligations and through an exception sites policy where developments consisting primarily of First Homes will be able to come forward for planning permission outside of development plans.
The 25% requirement means, for example, if a local plan policy requires 80% of units to be shared ownership and 20% to be social rent, a policy compliant application would deliver 25% First Homes units, 20% social rent and 55% shared ownership.
The statutory development plan remains the starting point for planning decisions and until such time that First Homes are embedded within those development plan policies they will continue to be a material consideration to be taken into account by the local planning authority on a case by case basis.
There are a number of exemptions to the requirement for planning applications to deliver First Homes.
Paragraph 64 of the National Planning Policy Framework (NPPF) sets out that for major development involving the provision of housing, 10% of all homes on site should be affordable home ownership products, unless one of the exceptions applies.
Where specific developments are exempt from delivering affordable home ownership products under paragraph 64 of the NPPF, they are also be exempt from the requirement to deliver First Homes. This includes a scheme which is being brought forward solely for affordable housing, specialist accommodation for groups of people with specific needs, self-build development and development which is solely for build to rent homes (as also detailed in paragraph 65 of the NPPF).
As it will take some time for the First Homes policy requirement to be adopted in Local and Neighbourhood plans, the Government has promoted a pilot scheme to deliver an initial 1500 First Homes.
The pilot scheme is being delivered on Homes England sites in Bolsover and Cannock with Homes England offering developers grant funding to enable them to offer market housing on a First Homes basis.
Impact on shared ownership
The requirement to provide 25% of all affordable homes as First Homes will inevitably reduce the amount of shared ownership units available via Section 106 schemes.
If the number of shared ownership units is reduced this may result in some schemes becoming financially unviable for Housing Associations and result in an overall reduction in affordable housing provision via the Section 106 regime.
How we can help
Devonshires are part of the pilot scheme referred to above and is advising a number of clients who are considering the impact of First Homes on their existing and future developments.
Our service includes:
- Dealing with the administration of First Home schemes including drafting deeds of variation to Section 106 agreements, transfers and leases for First Homes;
- Advising a Housing Association on the impact of First Homes on a large scale regeneration scheme and remodelling the tenure mix to address viability.