First Homes – The Last Change Standing?
On 6th August 2020, and with significantly less fanfare than the Planning White Paper published on the same day, a consultation paper was issued outlining a number of immediate changes to the planning system. One of the proposals was the introduction of First Homes.
The basic concept of First Homes is that they will address what the Government considers the greatest barrier to home ownership – affordability. First Homes will achieve this by homes being sold with a minimum discount of 30% below their full market value. First Homes as a concept is not new. Discount Market Sale (DMS) Housing already exists and you may also recall the Government launching ‘Starter Homes’ in 2015 – albeit none have ever been built.
However, unlike DMS Housing, First Homes will retain their discount in perpetuity meaning they have to be sold on to other future eligible future purchasers with the same percentage discount against the current market value. This will be secured through a legal mechanism. The Government plan to make First Homes a policy requirement with 25% of all new affordable homes to be delivered as First Homes. As for the remaining 75% of affordable homes the Government intends to protect Social Rent provision.
This will lead to an inevitable squeeze on the remaining affordable tenures like Shared Ownership housing, which the Government advise should be secured in the relative proportions set out in the Development Plan.
If for example, a Development Plan currently requires a 75% Social Rent : 25% Shared Ownership split, then once First Homes is introduced the affordable housing delivered will be 75% Social Rent: 25% First Homes, resulting in a total loss of any other form of affordable tenure.
The full implications of this change remain to be seen but it appears inevitable that the introduction of First Homes will lead to a substantial reduction in Shared Ownership housing.
But will First Homes actually be delivered unlike their Starter Homes predecessor? Whilst we have seen significant ‘U turns’ from the Government on other controversial proposals, First Homes seems likely to become planning policy. Indeed, we have already seen the Community Infrastructure Levy (CIL) Regulations amended to exclude First Homes from CIL and we anticipate the Written Ministerial Statement to implement First Homes will be laid before Parliament in due course.
That being said, Transitional Arrangements will apply and First Homes will not have to be delivered on sites already benefiting from outline or full planning permission or determined within 6 months of the implementation of the policy. This 6 month period is extended to 9 months if there has been significant pre-application engagement, so no doubt there will be some future debates about what constitutes ‘significant’ in this context.
Equally, where a Local or Neighbourhood Plan has been submitted for Examination or has reached Publication stage before First Homes is implemented and is subsequently submitted for Examination within 6 months of the implementation of First Homes, then no First Homes requirement will apply. Whether this will result in a rush of Local Planning Authorities (LPAs) seeking to submit Local Plans to avoid dealing with First Homes policies remains to be seen.
The introduction of a new policy requirement will however, introduce a further change to a planning system, which both Developers and LPAs will need to grapple with; a system which is already cripplingly under resourced and which the Government itself describes as “ineffective” and “crumbling”.
First Homes is certainly not a radical reform and whilst it is commendable that the Government are seeking to address the issue of affordability, it is apparent that introducing a further piecemeal amendment to planning policy is unlikely to deliver the “simpler, clearer and quicker” system the Government aspire to. Indeed, this change is likely only to slow down the system and as a consequence the delivery of new homes down – at least in the short term.
Key Facts About First Homes
- Until the Government makes a Written Ministerial Statement to Parliament, First Homes will not be implemented
- Once First Homes are introduced, a minimum of discount of 30% is required
- A minimum of 25% of Affordable Homes must be First Homes. The remaining 75% of affordable housing should protect Social Rent provision and secure any other tenure types in the relative proportions set out in the Development Plan
- The initial sale price of a First Home must not exceed £250,000 (or £420,000 in Greater London) once the minimum 30% discount has been applied
- The First Homes discount must be secured in perpetuity
- Purchasers must be first time buyers with a household income not exceeding £80,000 (or £90,000 in Greater London)
- LPAs and Neighbourhood Planning Groups can require higher minimum discounts, set lower cap levels and apply additional criteria (e.g. local connection or prioritisation for key workers) via a Plan, emerging policy or Supplementary Planning Document
- First Homes will be CIL exempt
- The entry level exception site policy is expected to be amended to be a First Homes exception site policy
The First Homes policy will have transitional arrangements with no requirement for First Homes to be delivered:
- On sites already benefitting from full or outline planning permission;
- On sites where full or outline planning permission is determined within 6 months of implementation of the First Homes policy (increases to 9 months if there has been significant pre-application engagement);
- In Local or Neighbourhood Plans already submitted for Examination before the implementation of the First Homes policy; or
- In Local or Neighbourhood Plans which have already reached publication stage before the implementation of the First Homes policy and are then subsequently submitted for Examination within 6 months of the implementation of the First Homes policy.
If you do have any questions, or would like to know more, please do not hesitate to contact Michelle Quan.