The results of the Government’s First Homes consultation are finally here, detailing the plans for implementation and eligibility whilst promising a holy grail of “at least” 30% discounts for first-time buyers! Ministers will be keen to stress they are fulfilling their 2019 manifesto pledge but the proposals do raise questions which are yet to be answered. How will the criteria for the scheme be policed going forward?
These are the headline grabbers from the Government’s response and our thoughts on them:
Discounts – to qualify as a First Home the dwellings must be marketed and sold as least 30% below the market value. Despite looking like a hefty discount this will still leave new homes outside the reach of many in London. Local planning authorities will be able to raise this minimum discount to 40% or 50% on homes in their authority provided such higher discounts are required and viable. It’s a vote winner but we wonder what “viable” will actually mean?
Price caps – First Homes will be subject to two geographic price caps; initially set at £250,000 in England and £420,000 in London (after the discount is applied). Are these just too low?
Income caps – in order to be eligible for a First Home the household income must not exceed £80,000 in England and £90,000 in London. These caps are fairly high. Will lower caps need to be employed across the board to genuinely reach lower income households. The Government wants key workers who have taken the strain of the last few months to benefit from the scheme. But any lower caps will only be able to be set for the first 3 months of sale so homes at lower caps will need to be snapped up fast before the pool of first time buyers increases. Will we see something akin to a nominations agreement being imposed on developers to make sure First Homes reach their intended owners?
Local Connection restrictions - local planning authorities will be able to set “local connection” restrictions to benefit from the scheme. It’s not clear what being ‘local’ will mean. Must first time buyers already live or work (or both!) within the boundaries of the authority for a set period of time before purchasing their First Home? Again such restrictions will only apply for a period of 3 months from when the property is first marketed. What does “marketed” mean? We see issues arising in the negotiation of S106 agreements as local authorities try to control how long a developer must wait for eligible locals to reserve their new home. Hopefully the regulations will strike a balance between providing the necessary window and opportunity for eligible First Home buyers to get their reservation in without a detrimental effect on the reservation rates of developers.
Primary Residence – First Home buyers must never have owned or part owned a property anywhere in the world before and must intend to occupy the property as their main dwelling. How will this be enforced; through the S106 agreement? Can First Home buyers could still get a lodger or let rooms on short term holiday lets as long as they still use the property as their primary residence? Both ways of supplementing the homeowner’s income but might they be a breach of the planning or S106 agreement restrictions (let alone the lease as the courts start to crack down on this)?
There are lots of questions to be answered as the scheme is rolled out. We will be sure to get answers to you soon as the First Homes scheme. But we hope that First Homes will indeed compliment Help to Buy as the Government helps the industry “build build build”.
The government has set out how it plans to structure the First Homes scheme to provide discounted homes for first-time buyers in England.