Living the dream? The Design and Delivery of First Homes

The Government has issued a consultation paper seeking views on design and delivery of a new discounted housing product: First Homes.

First Homes – Getting You on the Ladder, identifies steps that Government believes are needed, including:

Increasing the number of new homes made available and sold to local people at a discount;
Improving understanding within the planning system as to what “discounted homes” means;
Improving developers’ and funders’ understanding of “discounted homes” as a product, allowing more effective engagement to increase product delivery;
Ensuring that discount levels are set realistically in affected areas; and
Introducing steps to ensure the discounted sale price remains the same “in perpetuity”, delivering long-term community benefits.

The consultation runs until 3 April 2020. These proposals relate to England only.

What Are First Homes?

These are new flats and houses, sold at a discount of at least 30%, to people who live or work locally.

Priority will be given to first-time buyers, serving or veterans of HM Armed Forces, and key workers including police, nurses, and teachers.

Critically, the discount is to pass to future buyers when a home is resold. First homes will only be able for purchase and occupation by local people – they are not to be sold as buy-to-lets or holiday homes.

How Will They Be Delivered and Retained as Affordable?

Both legislative and non-legislative options are being considered. In other words, a change in the law or national planning policy, or a combination of both.

Government stresses that the 30% figure is a minimum and may need to be higher in areas where affordability is challenging, such as London and the South East. Local planning authorities will be given discretion to set higher discounts in those areas.

However, the scheme should not subsidise the purchase of exceptionally expensive property and Government is considering introducing financial caps on the value of eligible properties.

In terms of retention, this will be achieved through restrictive title covenants to ensure that the property is sold with the original percentage discount preserved.

Discussion

Using discounted market housing as an acceptable affordable housing product has fallen in and out of favour with successive Governments since the 1990s and remains a relatively small part of overall affordable housing delivery, with only 1,000 discounted market sale properties built each year.

The starter home, unveiled in 2015, failed to deliver any of the promised 200,000 affordable homes for first-time buyers. Though still within the definition of “affordable housing” in the national planning policy framework, no reference to this or its interaction with the new first homes product is made in the consultation paper.

It seems clear that first homes will be given priority in the drive to get first-time buyers on the housing ladder. Incentives for developers include a national exemption in England from community infrastructure levy for that element of a development providing first homes.

Also (and notwithstanding reference to these homes being affordable “in perpetuity”), lenders are to be assured that they will not be prevented from realising full market value of any first home if they take possession of the property following borrower default.

Government also intends to put delivery of first homes on a statutory footing, to avoid delivery being sidestepped by landowners, developers or local planning authorities unhappy that first homes provision may result in other affordable tenures (social rented/shared ownership/affordable rent) being undelivered.

There is a clear risk that, in the drive for first homes, the overarching financial viability of schemes becomes a barrier to delivery of other much needed community benefits or infrastructure required by that authority.

Despite these concerns, any initiative that seeks to increase first-time buyer access to the housing market in their local area is to be welcomed. It is, however, important to remember that such measures recognise and balance the various competing requirements arising from development.

Otherwise, there is a risk that we fail to deliver mixed and balanced communities and the full extent of the community benefits arising from new development that they demand.