The First Homes scheme is part of the Government’s commitment to overhaul the planning system and increase home ownership. It consulted on First Homes last year and on 24 May 2021 published Planning Practice Guidance on First Homes, accompanied by a Ministerial Statement. The guidance and statement provide details on this newest type of affordable tenure and how it will be implemented. Whilst the terminology will be very familiar to those involved in discount market sale affordable housing delivery there are some key differences, not least, because all schemes delivered by S106 applicant contributions must now provide a minimum affordable quantum of 25% as First Homes. This will have a major impact on the type and tenure of all affordable homes now to be delivered.
Here’s what you need to know:
- At least 25% of all affordable housing units delivered through applicant contributions must be First Homes. Template planning obligations are to be published which can be used as a basis to secure First Homes and the necessary restrictions on use and sale.
- First Homes must be provided at a minimum 30% discount from market value, although local authorities can require discounts of 40% or 50% for their local plan areas (not on a site-by-site basis). Applicants may also offer higher discounts.
- The discount will be registered against the title to the property, ensuring that it is secured in perpetuity (subject to exceptions). A model title restriction has been published to ensure consistency.
- The discounted sale price must not be higher than £250,000 (£420,000 in Greater London). Local authorities can lower this price cap if needed, but it cannot be raised. The price cap only applies to first sales.
- The eligibility criteria is as follows:
- buyers must be first-time buyers (as defined in paragraph 6 of schedule 6ZA of the Finance Act 2003) with a combined household income of no more than £80,000 (£90,000 in London) and have mortgage or home purchase plan funding for at least 50% of the discounted price.
- The eligibility criteria also applies to future sales and local authorities will presumably manage this process.
- Local authorities and neighbourhood plans can apply additional eligibility criteria including prioritisation of key workers, local connection criteria or revised income and price caps. Any additional eligibility criteria may only apply for three months, to ensure that these criteria do not unduly restrict re-sales.
- Delivery of the remaining 75% of affordable housing must prioritise social rent tenure first which must be provided in accordance with the local plan requirements. The remainder of the affordable tenures should be delivered in line with the proportions set out in local plans, meaning that First Homes are likely to squeeze out other intermediate products, particularly shared ownership.
- A standard Mortgagee Exclusion Clause will be included in the standard drafting to ensure that mortgagees and lenders are able to sell First Homes free of the restrictions if necessary. This will ensure that First Homes are widely mortgageable (unlike some discount market sale homes). In the event that a mortgagee uses its power of sale, the Local authority will be reimbursed up to the value of the discount.
- Applicants or individuals may sell First Homes on the open market if they cannot be sold as First Homes within 6 months of marketing and the local authority must be compensated for the value of the discount.
- First Homes will be exempt from CIL.
- Implementation/transitional arrangements:
- First Homes requirements will come into effect on 28 June 2021 and will be a material consideration but First Homes will not apply to emerging plans and neighbourhood plans that are at an advanced stage in the plan process.
- First Homes will be required for all applications determined after 28 December 2021 (28 March 2022 for applications that have had significant pre-application engagement on affordable housing).
- Local authorities should be flexible to allow applicants to introduce First Homes to the tenure mix of applications determined before 28 December 2021 if the applicant wishes to do so.
- First Homes policy will not apply to section 73 variations of planning permissions unless they vary the affordable housing provision (and are determined in line with the above timescales)