First-time buyers will be able to get 30% off their home in a major new government discount scheme.
House prices will be drastically cut on special new homes for local people, key workers and first-time buyers on new build properties – with Londoners earning up to £90,000 able to benefit.
Housing Secretary Robert Jenrick unveiled the ‘First Homes’ scheme as part of a shake-up of planning rules aimed at boosting housebuilding in England.
He said it will allow “local first-time buyers to be able to settle where they have ties and raise families of their own”.
The discounts for local people will last for three months – and if the property is unsold, then first-time buyers from other parts of England will be eligible.
Deposits will be limited to 50%. And when the original buyer sells up, a covenant on the Title Deed will force them to pass on the 30% discount to the next owner.
And in areas where house prices are higher, local councils will be able to demand higher discounts of 40-50% below market value from developers, if they can prove there is a need for more affordable homes in their community.
But it’s not all sunshine and roses.
It’s not clear how many of these new homes will actually be available. It’s also not fully clear how they’ll be prioritised for key workers.
Some people on £90,000 salaries will be eligible for the scheme in London – hardly those most in need.
And there’s admission that First Homes will erode other affordable housing – including social rent.
So what are the pitfalls in the big plan? We’ve run the rule over the small print so you don’t have to.
1. People on £90,000 salaries can benefit
Londoners with incomes of up to £90,000 will be eligible for the new discount.
Outside London, the salary limit will be capped at £80,000.
The limit is on “household income” – so of course, if both members of a couple have a job, the threshold will feel much lower.
But if a family only has one worker, or the buyer is single, some people on pretty mega salaries could find themselves benefiting from the scheme.
The government appears to recognise this could be a problem. Its documents say “there may be local circumstances where lower caps are necessary”.
Councils will have the power to set salary caps lower than £80k or £90k – though they’ll only apply for the first three months the home is on the market.
Councils could also take buyers’ incomes – though not their assets – into consideration when looking at who should get first dibs on any oversubscribed scheme.
Prices of the homes themselves will be capped at £250,000 outside London and £420,000 in the capital.
2. It’ll mean fewer homes for affordable rent
Buried in the small print is a startling confession.
The government admits the scheme could chip away at other kinds of affordable homes – including those for “social rent”.
This is crucial, because many of the people who need a home most desperately can’t afford to buy. They need somewhere to rent, cheaply.
The confession emerged in an impact assessment that found there’ll be “both positive and negative” impacts on disadvantaged groups.
The positive is that they’ll get discounted home ownership, and more homes on the market.
But the negative is there would be “a reduction in the number of homes available in other affordable housing tenures, particularly social and affordable rent”.
The government decided to go for the scheme anyway, because “our analysis suggests that the reduction in the number of homes delivered in these tenures is likely to be relatively small, compared to the number of First Homes delivered.”
3. It’s not clear how key workers will get priority
The government pledged the new scheme will have “an emphasis on key workers”, like NHS staff or police. Officials added councils will be able to “prioritise” First Homes for these workers.
But the detail of the plans doesn’t actually spell out how they’ll be put to the front of the queue.
Councils will have the power to lower the salary cap to ensure key workers aren’t elbowed out by others on middle incomes.
There will, of course, be a “local connections” test.
And the prospect has been dangled of allowing key workers who aren’t first-time buyers to use the scheme for upsizing (see below).
But today’s plans contain no suggestion that non -key-workers will be barred from buying a First Home.
In other words, it appears the system will try to gear towards key workers in the way it’s designed, but there doesn’t seem to be an actual cast-iron guarantee they’ll come first.
4. Some people can get the discount even if they’re not first-time buyers
First Homes should “as a rule” only be sold to first-time buyers.
But a consultation found some people wanted the scheme to be open to “key workers” who are selling their first home and upsizing to a new place.
So the government says in “certain, limited circumstances”, people who aren’t first-time buyers will be able to benefit from the scheme.
The government will publish a list of circumstances under which non-first-time buyers can be eligible for First Homes.
That list, or who’ll be on it, is yet to be confirmed.
5. Not all buyers will need to be local
First Homes will need to be sold to people with “local connections”.
The definition of this – and how to prove you’ve got local links – will be decided by each area’s council.
But this restriction will only apply for the first three months the home is on the market.
While developers will need to show they’ve been “actively marketing” First Homes to local people, if it remains unsold, it’ll then open up more widely.
At that point, the home will become available to all first-time buyers across England at a 30% discount.
6. Buyers can let out their ‘First Homes’ for up to two years
First Home buyers will need to occupy the home as their “primary residence”.
However, they’ll then be allowed to let them out for up to two years – as long as they notify the local council.
This is designed to ensure people can move away from the area or find alternative arrangements in a rough patch.
The two-year period could be extended in certain circumstances, with the council’s permission.
These include a job posting or deployment elsewhere, a relationship breakdown, fleeing domestic violence, redundancy or caring for a relative or friend.
While these will no doubt help many people in need, the two-year clause could potentially attract others who don’t need the help as much. Buyers will also be able to let out their home short-term if they go on holiday.
7. Don’t expect lots of ‘First Homes’ in a hurry
The only firm, immediate commitment in today’s document is to a pilot of 1,500 First Homes to be delivered through the Affordable Homes Programme.
Beyond that, it’s not yet clear when developers would be compelled to start providing First Homes.
The government says “25% of all affordable housing units secured through developer contributions” on a scheme will need to be First Homes.
But this is a relatively small fraction of a scheme when you consider much of each scheme will not be “affordable”.
First Homes will initially be funded through something called Section 106 agreements, but these are being scrapped by the government. They will then be funded by a new-style levy designed to replace Section 106.