Ros Trotman, a partner in Thrings’ Planning team, takes a close look at First Homes, a new type of affordable housing for first-time buyers.
What are First Homes?
First Homes are effectively discounted market sale housing available to eligible first-time buyers. More specifically, the criteria in the new Planning Practice Policy Guidance (PPG) includes:
- a minimum 30% discount against the market value of the property;
- sold to a first-time buyer (individual or individuals) whose combined income does not exceed £80,000 (or £90,000 in Greater London) in the tax year immediately preceding the year of purchase, with a mortgage or home purchase plan to fund a minimum of 50% of the discounted purchase price (and any other locally set criteria);
- 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) (these caps only apply on first sale).
The government wants 25% of all new affordable housing to be First Homes.
How will First Homes be secured?
First Homes will be secured through the planning system through section 106 agreements which will ensure First Homes remain in perpetuity unless exceptions apply.
In addition, the PPG provides for a restriction to be registered at first sale on the title for the property at HM Land Registry to ensure it remains a First Home on each subsequent sale.
When is this happening?
In a written ministerial statement issued on 24 May, housing minister Christopher Pincher MP confirmed the changes would come into effect from 28 June 2021.
The Ministry of Housing, Communities and Local Government has already published new Planning Practice Guidance on First Homes and updated its standalone guidance on the housing needs of different groups in relation to rural exception sites.
What does this mean for sites now?
First Homes would be considered to meet the definition of “affordable housing” for planning purposes. However, they also need to comply with any other applicable planning policies and/or building regulations.
As First Homes can be included within the 10% of all homes on site which should be affordable for new development, local planning authorities (LPAs) may need to review the tenure mix for the remainder of the affordable housing they are seeking to secure. They may also need to clarify how existing policies should be interpreted in the light of First Homes requirements using the most appropriate tool available to them.
Draft local plans and neighbourhood plans progressed based on the existing National Planning Policy Framework (NPPF) requirements are not required to reflect the First Homes policy requirements if they have been submitted for examination before 28 June 2021. Any emerging plans that reach
publication stage by this date do not have to comply either, as long as they are submitted for examination before 28 December 2021. Inspectors dealing with the examination of such plans will need to consider whether to propose an early update of the plan.
Where local plans and neighbourhood plans are adopted under the aforementioned transitional arrangements, First Homes requirements do not need to be applied until such time as the requirements are introduced through a subsequent update.
The 25% First Homes requirement will not apply to sites with full or outline planning permissions already in place or determined, or where a right to appeal against non-determination has arisen, before 28 December 2021 or to sites where there has been significant pre-application engagement before 28 March 2022.
If an applicant wants to include First Homes, local authorities should allow developers to introduce First Homes to the tenure mix if they wish to do so.
What does the 25% requirement mean for other types of affordable housing?
Once a minimum of 25% of First Homes has been accounted for, social rent should be delivered in the same percentage as set out in the local plan. The remainder of the affordable housing tenures should be delivered in line with the proportions set out in the local plan policy.
A worked example provided in the PPG sets out that if the local plan 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.
What about mortgagees?
The section 106 agreements should provide for a mortgagee to be able to realise the full market value of the property and return any surplus up to the value of the First Homes discount.
Can a First Home be sub-let?
Yes, for a maximum period of two years, as long as the LPA is notified. Longer periods can be agreed with the LPA where good reasons apply.
Comment
This is big news for anyone involved in new housing.
Housebuilders will have the option of selling the First Homes to those that are eligible rather than transferring all of the affordable housing to an affordable housing provider. Clearly, other types of affordable housing will be impacted by the provision for 25% of all affordable housing being First Homes.
However, this will certainly help many first-time buyers get a foot on the property ladder over coming years.
If you would like to discuss any aspect of this article, or for more information about First Homes, please contact Ros Trotman or another member of Thrings’ Planning team
