First Homes?
Back in June 2019 I wrote a star-gazing passle piece trying to take the clues from the revised Community Infrastructure Levy Regulations as to what Starter Homes might look like. Buried in amongst the Queens Speech (December 2019) the eagle eyed amongst you may have spotted a change in terminology.
Good-bye Starter Homes! Hello First Homes!
Those of you eagerly watching the White Paper Consultation in the Summer of 2020 may have spotted that the conclusion of that Consultation come out. This response was updated on 1 April 2021 - don't worry I've given it a week to check I'm not being April fooled; this is a blog I've been meaning to write for some time. Be warned the Secretary of State for Housing, Communities and Local Government will now lay a Written Ministerial Statement before Parliament, in due course, which will outline changes to national planning policy in order to ensure First Homes are built. These changes will take effect on a date to be specified.
Current government practice is for this to happen at 23:59 the day before a bank holiday, so be warned, First Homes could also be just around the corner.
What is the difference between a Starter Home and First Home?
Proportion
Initial consultations on Starter Homes were for 20% of all homes on a development to be sold as Starter Homes. First Homes however will look for a minimum of 25% of homes delivered through developer contributions to be First Homes, i.e. 25% of the affordable housing, not 20% of all of the homes. With regards to the allocation of the remaining 75% of units after the First Homes requirement has been met, national policy will be that:
- The provision for Social Rent as already described in the development plan should be protected (a local authority should prioritise securing their policy requirements on social rent, once they have secured the 25% First Homes requirement).
- Where other affordable housing units can be secured, these tenure-types should be secured in the relative proportions set out in the development plan.
- In situations where the local plan allocates more than 75% of contributions to Social Rent, the 25% First Homes requirement will remain.
Currently, paragraph 64 of the National Planning Policy Framework (NPPF) exempts developments from the requirement to deliver affordable home ownership tenures which provide solely for Build to Rent homes, provide specialist accommodation for a group of people with specific needs, or are Self-Build. There remains some confusion (through contradictory government consultation responses) as to whether exception sites are suitable for First Homes (particularly given that the discount is now secured in perpetuity).
Discount
Starter Homes were to have a discount of at least 20% - new homes costing up to £250,000 (£450,000 in London), to be available at a minimum 20% discount on market value to eligible first-time buyers. There was nothing in the briefing paper, or otherwise, to indicate that Local Authorities would have discretion to set lower or higher discounts on properties.
The White Paper discussed First Homes having a discount of 30% (against the market value) for first time buyers with Local Authorities having discretion to set higher discounts on properties on a site-by-site basis. By the time the Government response was updated last week Local authorities and neighbourhood planning groups can require higher minimum discounts at 40% or 50% if need can be evidenced through the most appropriate method available to them (either in the local or neighbourhood plan, an emerging policy or, where appropriate, a Supplementary Planning Document). After the discount is applied the initial sale price of a First Home must not exceed £250,000 (or £420,000 in Greater London).
How is the discount secured?
Starter Homes were proposed to be at an initial discount with the only restriction being to repay an element of that discount if the home was sold on in the first 5 years. It was "developer gain" straight to the voting constituent in its purest form. The White Paper discussed First Homes being secured by s.106, with a restrictive covenant being placed on title to ensure the discount is applied to future sales on. Local authorities will have to oversee this but a mortgagee enforcing their security will not.*
A Starter Homes discount was only ever intended to last for the first 5 years of a homes' life, a First Home is a life-time discount. The application of the First Homes discount in perpetuity is consistent across each round of consultation.
For those not in the loop this is a government commitment that those who have served (and their families), should face no disadvantage compared to other citizens in the provision of public and commercial services.*& To the best of my knowledge Starter Homes did not consider this. The White Paper consultation proposed that for First Homes current and recent Armed Forces personnel will be taken to have met the local eligibility criteria for First Homes in any local area under any circumstances. Councils will also be able to use the scheme for front-line workers in their area such as police, nurses, prison officers and teachers. The latest response looks to define "recent" as having served int he last 5 years and does so by exempting them from any local connection criteria.
Who are qualifying first time buyers?
The Government proposed to introduce a household income eligibility cap of £80,000 (£90,000 for London) for purchasers of Starter Homes. Purchasers of First Homes must be first-time buyers and must have a household income not exceeding £80,000 (or £90,000 in Greater London).
This to my mind still misses the massive regional pay disparities across the UK.*^ It makes a lot of sense therefore that Local authorities and neighbourhood planning groups can apply additional criteria, (such as a lower income cap, local connection or prioritisation for key workers) through the most appropriate method available to them (either in the local or neighbourhood plan, an emerging policy or, where appropriate, a Supplementary Planning Document).
LTV ratio.
Neither Starter Homes nor First Homes were designed for cash rich youngsters "flying the nest". Starter Homes were to require at least 25% of the property be mortgaged. First Homes up this to a need to use a mortgage or home purchase plan for at least 50% of the purchase price.
CIL
The Productivity Plan 2015 included a commitment to amend the CIL regulations to exempt starter homes. The CIL Amendment Regulations 2020 amends the CIL 2010 Regulations to include a mandatory exemption from the Community Infrastructure Levy (CIL) for First Homes which became law in November 2020. This stipulates that a First Home "must be sold for no more than 70 per cent of its market value, and that a section 106 planning obligation must be entered into to ensure that this will be the case on all future sales".
Comment
The LGA commented, headlines via the link, but in a nutshell, having the ability to set discounts locally rather than an arbitrary national discount is important to them. Personally I support this, my local government experience was in Lincolnshire and West Berkshire - 2 exceptionally different housing markets, where a 30% discount will have very different effects.
What strikes me however is the difference between Starter Homes and First Homes - not the level of the discount but the length of it. Starter Homes were discounted at first sale and then a claw back mechanism was to be used to ensure that purchaser stayed in place for a period of time before being able to sell at full market value. First Homes are a lifetime discount. The government may be helping people on to the housing ladder but in this case it will remain a different ladder; if they need to move for work or family reasons (or any other personal choice) they will have no choice but to down size for their second home to get onto the "free market" ladder.
* - perhaps I have missed the point here? Ordinarily a chargee is exempt from affordable housing obligations (after a 3 month attempt to sell to another Registered Provider) - this is to allow a Registered Provider to charge their estate. If a mortgagee is not bound an an individual house sale how enforceable is the future discount? Can a purchaser charge their home above the discount?
*& - special consideration is appropriate in some cases, especially for those who have given most such as the injured and the bereaved. and the Government expects them to seriously consider this when determining local discounts.
*^ - I would have loved a combined household of £79,999 when I bought my first house 12 years ago; that said my 3 bedroomed new build terraced house (with parking!) barely cost £110,000. There are also areas across the South East particularly where the cost of housing exceeds that in London but "London" wages are not necessarily available.
The Secretary of State for Housing, Communities and Local Government will lay a Written Ministerial Statement before Parliament, in due course, which will outline changes to national planning policy in order to ensure First Homes are built. These changes will take effect on a date to be specified.”
