Last week, the government launched a consultation on its flagship new First Homes policy, to allow first-time buyers to purchase market homes at discounted values. The concept was first floated in the Conservatives’ general election manifesto last autumn before being confirmed in December's Queen's Speech.
The policy appears similar to the Tories’ earlier and ill-fated Starter Homes initiative. Back in 2015, then prime minister David Cameron pledged that 200,000 Starter Homes would be delivered at a 20 per cent discount. In the end, the government failed to bring forward the necessary planning guidance and not a single unit Starter Homes emerged. Unlike Starter Homes, the discount on First Homes would be 30 per cent and held in perpetuity, which means the same reduction will have to be applied when the original purchaser decides to sell.
Last week's consultation document sets out a number of options for how First Homes will be delivered. In its manifesto, the Conservative Party suggested that it could be done through section 106 developer contributions, a move confirmed in the Queen’s Speech. The consultation says that, following this approach, the government would stipulate that a percentage of affordable homes to be delivered through section 106 obligations should be designated as First Homes for discounted sale. Thresholds of 40 per cent, 60 per cent and 80 per cent are suggested.
However, the document also proposes another alternative route in which the government would prescribe that a fixed quota of units on new developments of ten homes or above on "suitable sites" would be First Homes. Such a threshold was set at 20 per cent for the Starter Homes policy. The MHCLG said it would introduce these two options by either amending national policy or through legislation.
In addition to both of these options, the consultation says government also wants to amend the NPPF in relation to entry-level exception sites, which provide entry-level homes suitable for first-time buyers or the equivalent for those looking to rent. Under the proposals, such sites would have to predominantly deliver First Homes, supported by a small proportion of market homes on sites where they are "essential to ensure the development will be deliverable".
In terms of the two alternative options for delivering First Homes, senior consultants said the section 106 route would be preferable from a planning point of view. They pointed out that, even if central government prescribes a percentage of section 106 affordable housing that must be First Homes, local planning departments would still have discretion over the overall affordable housing levels in their areas.
However, some feel that the government is likely to go for a fixed quota on new developments, whatever its lingering murmurs about localism, and to introduce this through legislation. "Reading the document, there seems to be a clear desire to legislate," said Kathryn Ventham, a partner at planning consultancy Barton Willmore. "I detect a preference from government to include a mandatory percentage [in new developments]."
Grant Leggett, director and head of the London office at consultancy Boyer, agreed, adding that after the Starter Homes debacle, government is going to want to know it is in control. "It’s impossible not to compare First Homes with Starter Homes," he said. "Given that Starter Homes was such a failure, I think government will be determined to make First Homes work. The number of times they talk about home ownership in the consultation document is striking and they won’t want to have another failure on their hands."
As with Starter Homes, there is concern that, whichever option the government chooses, the policy could squeeze out other forms of affordable tenure. "Measures to cut the cost of buying a home, making it easier for first time buyers to get onto the ladder in their local area, are supported," said Sarah Platts, chair of local authority body the Planning Officers Society. "But the risk is that such a move would reduce the number of truly affordable homes being built for lower income households. Delivering on social housing commitments has to be a priority."
According to Leggett, there is only so much that developers can contribute before a scheme becomes unviable. "It's inevitable that other types of affordable homes would get pushed out," he said. "That’s the concern among councils and housing associations and housing charities – that the people in the greatest need suffer the most." Ventham said some developer clients are concerned about the cost of the policy, while Chris Brown, executive chairman at developer Igloo Regeneration, added: "It probably only really works in high value areas because in low value areas market value development is only just viable."
However, Alex Woolcott, associate in the planning team at law firm Winckworth Sherwood, pointed to a proposal in the consultation to exempt First Homes from the community infrastructure levy, which he said would help mitigate this. Technically speaking, other discount market sale products can already be exempted, but Woolcott said this depended on the approach of the charging authority and has been the exception rather than the rule.