This House of Commons Library Briefing Paper describes the specific Government initiatives which have been developed in order to assist first-time buyers into home ownership and, in some cases, to help existing owners who are seeking to move. The paper includes some comment on these schemes.
This information should not be relied upon as legal or professional advice. Read the disclaimer.
What is a First Home?
The Government’s First Homes scheme is designed to help first-time buyers and key workers in England purchase a discounted new-build property.
The scheme has the following features:
- First Homes are discounted by a minimum of 30% against the market value, but local areas (local authorities and neighbourhood planning groups) might require a larger minimum discount of 40% or 50% to ensure the homes are affordable to local people.
- the discount will apply in perpetuity, meaning it will be passed on to the next buyer each time the home is sold. Subsequent buyers must meet the First Homes eligibility criteria (see below). On the first sale, a restriction will be registered on the property’s title at HM Land Registry to ensure the discount and other restrictions apply to future sales.
- the first sale must be at a price no higher than £250,000 (or £420,000 in London) after the discount is applied. Local areas have discretion to set lower price caps if they can demonstrate a need. The price cap will not apply to any subsequent sales.
- First Homes are intended to be used as a person’s sole or primary residence.
Who is eligible to buy a First Home?
Purchasers must be first-time buyers (as defined in paragraph 6 of schedule 6ZA of the Finance Act 2003) and have a household income not exceeding £80,000 (£90,000 in London).
Purchasers must use a mortgage or home purchase plan (if required to comply with Islamic law) to fund at least 50% of the discounted purchase price.
In addition, local areas have discretion to apply their own eligibility criteria. This may involve lower income caps, a local connection test, or criteria based on employment status. The Government has encouraged authorities to prioritise key workers, especially if they’ve identified a local need for certain professions.
How will First Homes be funded?
First Homes are defined as affordable housing for planning purposes. They’ll be delivered via the planning system, through:
- section 106 planning obligations, also known as developer contributions, which are negotiated between the developer and the local planning authority; and
- a First Homes exception sites policy, which means developments consisting primarily of First Homes can come forward for planning permission outside of local development plans (with the exception of certain rural areas).
The Government set out its plans for the delivery of First Homes in a Written Statement on 24 May 2021. Changes to planning policy came into effect from 28 June 2021, along with transitional arrangements. The policy requires that a minimum of 25% of all affordable homes secured through developer contributions should be First Homes.
The assumption is that First Homes will have minimal financial implications for property developers because they’ll only change the tenure mix developer contributions are spent on, not the overall value of those contributions.
Once the scheme is fully operational it’s expected to deliver at least 10,000 First Homes every year.
When will First Homes be available to buy?
First Homes were launched on early delivery sites in Bolsover, East Midlands and Cannock, Staffordshire, in early summer 2021. In August 2021, the Government invited home builders to bid for a share of a £150 million fund to support the scheme’s roll-out. The funding is expected to deliver 1,500 First Homes across the country by September 2023.
Several banks and building societies announced (PDF) they’ll offer 95% loan-to-value mortgages for First Homes to support their roll-out.
Once the scheme is fully up and running, the Government expects First Homes to be offered on a limited number of plots in most new developments. Enquiries about, and applications for, a First Home should be directed to the relevant site developer.
The social housing sector has expressed concern that First Homes will displace other affordable housing tenures, in particular shared ownership. The Chartered Institute for Housing has also criticised the scheme for over-riding local needs assessments and creating an additional administrative burden for local authorities.
DLUHC and MHCLG, Guidance: First Homes, December 2021
Commons Library briefing paper: Extending home ownership: Government Initiatives
The Commons Library does not intend the information in this article to address the specific circumstances of any particular individual. We have published it to support the work of MPs. You should not rely upon it as legal or professional advice, or as a substitute for it. We do not accept any liability whatsoever for any errors, omissions or misstatements contained herein. You should consult a suitably qualified professional if you require specific advice or information. Read our briefing for information about sources of legal advice and help.
This paper covers the commitment to extend the Right to Buy to housing association tenants. There’s no implementation date. The Government intends to work with associations to develop the scheme.
An explanation of how planning and housing policies might be used to ensure local people benefit from housing provision.