First Homes: Bringing You Up To Date

The Government’s thinking on First Homes edges forward. Following a number of consultations, the Government has now updated its proposals. Claire Fallows explains the current position.

What are First Homes?

By way of reminder, First Homes are intended to be available to buy at a minimum discount of 30% below market value, with the discount remaining in perpetuity (subject to exclusions including for mortgagees). After the discount is applied, the initial sale price cannot exceed £250,000 or £420,000 in Greater London.

They will be sold to eligible purchasers, generally first time buyers with a household income not exceeding £80,000 or £90,000 in Greater London. Authorities and neighbourhood planning groups will be able to prioritise local need for First Homes and require higher discounts (40%, 50% or higher) and lower price caps if appropriate through planning policy documents.

How will First Homes be delivered?

The Government intends that 25% of all homes delivered through section 106 obligations should be sold as First Homes. It is also committed to introducing First Homes exception site policies (replacing entry site exception sites), allowing unallocated sites to be developed for First Homes with a small proportion of market homes or other types of affordable housing to support viability. The Government will work on guidance on what proportion is appropriate. There will not be a site size threshold (again guidance will be produced to ensure that this policy is not abused), but First Homes exception sites will not apply in designated rural areas.

These commitments will require changes to national planning policy guidance. The Government intends to achieve these through a Written Ministerial Statement in due course, which will set an implementation date.  The statement will set out the policy framework, including the process of setting developer contributions for First Homes, the types of developments to be exempt, transitional arrangements for plan making and policy for exception sites.

Changes to the community infrastructure levy to exempt First Homes from the levy have already taken effect.

What is the impact on other affordable housing tenures?

As a minimum of 25% of affordable housing secured through section 106 obligations will be First Homes, that leaves 75% to be allocated across other tenures.  The Government intends that where development plans secure a requirement for social rented units, those should be prioritised (such that where the local plan allocates up to 75% of units as social rent, all those units should be provided).  Other tenure types should be secured in the relative proportions set out in the development plan.  The Government recognises that this may reduce the availability of shared ownership units and intends to monitor the impact of this on registered providers.

Obviously in many high value areas, the policy requirement for affordable housing is expressly subject to viability testing and review mechanisms.  The precise tenure package is a matter of negotiation and the priority to be given to First Homes will impact upon those negotiations.

What exemptions are proposed?

Exempted sites will comprise those already exempted from the requirement to deliver affordable housing under the NPPF ie build to rent schemes, specialist accommodation such as student or housing for older persons, self-build and affordable housing schemes and entry level and rural exception sites.

Do transitional arrangements apply?

Local or neighbourhood plans submitted for examination before implementation of the policy or that have reached publication stage before implementation and are submitted for examination within 6 months of implementation will not need to reflect the First Homes requirement.

The 25% requirement will not apply to sites with full or outline planning permissions in place or determined (or where a right to appeal has arisen) within 6 months of implementation (or 9 months if there has been significant pre-application engagement). Developers should however be allowed to introduce First Homes if they want to do so. There may be disputes therefore as to the circumstances in which the requirement applies and whether First Homes can and should be introduced into negotiations. 

For more information, please contact Claire Fallows or your usual Charles Russell Speechlys contact in our Real Estate Planning team.