The Government’s First Homes announcements this week mean that we all need to understand the practicalities as to how this new form of discounted market sale housing will work and to plan around three key implementation dates.
On 24 May 2021 we had the formal ministerial statement together with the publication of MHCLG guidance providing “further detail on First Homes and their implementation”. For prospective purchasers there is also the Government’s Own Your Own Home website.
The three key dates are as follows:
28 June 2021
From the guidance: “ Local plans and neighbourhood plans submitted for examination before 28 June 2021, or that have reached publication stage by 28 June 2021 and subsequently submitted for examination by 28 December 2021, will not be required to reflect the First Homes policy requirement”
(However: “Planning Inspectors should consider through the examination whether a requirement for an early update of the local plan might be appropriate.”)
28 December 2021
From the guidance: “The new First Homes policy requirement does not apply for the following:
• 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”
28 March 2022
It also does not apply to “applications for full or outline planning permission where there has been significant pre-application engagement which are determined before 28 March 2022”.
So if you wish to avoid the new requirement and you are not in an area where a plan has been adopted under the transitional arrangements, you need to have submitted your application so that it will be determined (or so that that the statutory right to appeal on the basis of non-determination has arisen) by 28 December 2021 and if there is any doubt as to whether you will meet that deadline it would be prudent to have engaged in “significant pre-application engagement” such that the deadline for achieving permission is 28 March 2022.
“If an applicant wishes to amend a planning application to include First Homes which is already submitted and likely to be granted before these dates, the local planning authority should be flexible in accepting First Homes as an alternative type of tenure.
Local authorities should have flexibility to accept alternative tenure mixes for planning applications that are determined within the timescales identified above, although they should consider whether First Homes could be easily substituted for another tenure, either at 25% or a lower proportion.”
From the guidance:
“What is a First Home?
First Homes are a specific kind of discounted market sale housing and should be considered to meet the definition of ‘affordable housing’ for planning purposes. Specifically, First Homes are discounted market sale units which:
a) must be discounted by a minimum of 30% against the market value;
b) are sold to a person or persons meeting the First Homes eligibility criteria […];
c) on their first sale, will have a restriction registered on the title at HM Land Registry to ensure this discount (as a percentage of current market value) and certain other restrictions are passed on at each subsequent title transfer; and,
d) 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).
First Homes are the government’s preferred discounted market tenure and should account for at least 25% of all affordable housing units delivered by developers through planning obligations.”
“Who is eligible to purchase a First Home?
A purchaser (or, if a joint purchase, all the purchasers) of a First Home should be a first-time buyer as defined in paragraph 6 of schedule 6ZA of the Finance Act 2003 for the purposes of Stamp Duty Relief for first-time buyers.
Purchasers of First Homes, whether individuals, couples or group purchasers, should have a combined annual household income not exceeding £80,000 (or £90,000 in Greater London) in the tax year immediately preceding the year of purchase.
A purchaser of a First Home should have a mortgage or home purchase plan (if required to comply with Islamic law) to fund a minimum of 50% of the discounted purchase price.
These national standard criteria should also apply at all future sales of a First Home.”
“How should the remaining 75% of affordable housing be secured through developer contributions?
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.
For example, if a local plan policy requires an affordable housing mix of 20% shared ownership units, 40% affordable rent units and 40% social rent units, a planning application compliant with national policy would deliver an affordable housing tenure mix of 25% First Homes and 40% social rent. The remainder (35%) would be split in line with the ratio set out in the local plan policy, which is 40% affordable rent to 20% shared ownership, or 2:1. 35% split in this way results in 12% shared ownership; and 23% affordable rent.
In another 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.
If a local authority has an up-to-date policy on cash contributions in lieu of onsite contributions, then a planning application compliant with national policy will align with this approach.”
The requirement will be secured by our trusty friend, the section 106 agreement (or unilateral undertaking). The guidance states: “The government will publish template planning obligations for this purpose, which the local planning authority can use as a basis for agreements prepared locally.” A workable template (stress the word “workable”) would be very useful indeed.
How will this policy mechanism work across very different housing market areas across the country and what might be the unintended consequences? I recommend an excellent Lichfields blog post, First Homes: dicing with the discount (Rachel Clements and Bethan Haynes, 27 May 2021).
They ask where can First Homes potentially have the biggest impact?
“First Homes have the potential to have the greatest impact in areas where first-time buyers are currently priced out of the open market (at the entry-level) but where First Homes would be within reach, when the minimum 30% discount is applied. We estimate this represents around one in five authorities in England – around 63 in total.”
Will it avoid the problems that caused the previous Starter Homes concept to fail (e.g see my 29 February 2020 blog post Starter Homes Were A Non Starter – What Future For First Homes?)? What do we make of this continuing political decision to intervene in the market in the interests of encouraging home ownership at the expense (where viability is impacted) of affordable housing for rent, for those on a lower rung of the housing ladder?
There is plenty more to say on the subject, for instance the new opportunity arising to bring forward First Homes exception sites on allocated land outside the green belt or designated rural areas. But for now, I suspect that developers and local planning authorities alike will be wanting to do some basic number-crunching and to bear those three deadlines in mind.
Simon Ricketts, 28 May 2021
Personal views, et cetera
This Tuesday evening’s Planning Law, Unplanned Clubhouse session (6pm, 1 June) takes on a more general subject: “Has work taken over your life? Life hacks, work hacks”. Do come along and share your views, or just listen to the chat. An invitation to the app is here.