Planning law - First Homes and exception sites
What are First Homes?
First Homes are a new type of tenure of affordable housing, introduced by a new national policy in June 2021. The policy requires at least 25% of affordable housing to be secured as First Homes. This is a key difference compared to discount market sales which are not a mandatory part of the affordable housing mix. First Homes are discounted by a minimum of 30% of the market value and are to be sold in perpetuity with the same discount. This is done by registering a restriction on the title at HM Land Registry, to ensure the discount is passed down when the home is sold in the future. In order for a home to comply it must be no higher than £250,000 (or £420,000 in Greater London) after the discount has applied.
Though this seems appealing to most first time buyers, even with a 30% reduction the majority of properties within Greater London will still exceed the maximum figure of £420,000 and will not qualify as a first home. Therefore local authorities have been given the option to consider an even bigger reduction in the market value to allow a property to qualify as a first home.
In addition, Local Authorities will also still require the remainder of the 75% of the affordable housing to be secured via other tenures of affordable housing including social rent. No doubt the absolute requirement to sell 25% at First Homes discounts will impact viability (discounted market units could be sold at a 20% reduction) and could lead to a squeeze on the overall amount of affordable housing achieved on a site if viability evidence is used to justify a lower than policy compliant amount.
Who is eligible?
Those who meet the following three criteria:
- First-time buyers
- Individual or couples with a combine income not exceeding £80,000 (£90,000 in London)
- Purchasers with a mortgage or home purchase plan for at least 50% of the discounted purchase price
Local Authorities can have their own criteria such a local connection and key workers but if the home is not sold within three months, they must sell the home in accordance with the national criteria.
How to deliver/secure a First Home?
Under the policy there are two ways in which First Homes can be delivered.
Firstly, enter into a s106 agreement seeking First Homes, as per the normal way of seeking affordable housing. The s106 will have an obligation requiring at least 25% of affordable housing as First Homes and an obligation preventing the sale of the property on the open market unless six months have passed and all reasonable steps have been taken to sell the property using the national criteria and at the discounted rate. As with other forms of affordable housing secured in a s106 agreement, if First Homes can’t be sold as such and end up being sold as market units, then a contribution in lieu will need to be paid which is equal to the difference in value between the two tenures. While most local authorities, agree to provide for this eventuality regarding all other forms of affordable housing, this is not always the case, so this clear policy guidance is helpful. As with discount market sales, these homes will be sold direct by the developer (unlike shared ownership that is sold by an affordable housing provider).
Mortgagees will also be covered by an exclusion clause allowing them to sell the property on the open market in the event they become a mortgagee in possession. Though, once the mortgagee’s funds are recovered they must reimburse the local authority for the value of the discount for the loss of a First Home. Any funds remaining are to be paid to the home owner.
Homeowners could also request the removal of such a covenant on their property though compensation will be payable to the Council for the loss of a First Home.
The second way, is through building First Homes on exception sites. As part of the policy, the Government encourages First Homes to be built on exception sites. Exception sites are unallocated sites which are outside a local or neighbourhood plan but do not include Green Belt land or Designated Rural Land.
Exception Sites are intended to replace the current entry-level sites under para 72 of the NPPF (which is yet to be amended to replace entry level sites with exception sites). The other major change the new policy brings is the removal of the size requirement in which the exception site needs to sit adjacent too. The current policy requires for entry level sites to be adjacent to existing settlements and be proportionate in size but be no more than 1ha or 5% of the adjacent site.
The removal of the size requirement is welcomed, as it will increase the number of sites that are suitable. There may still be issues over the viability of sites to deliver only First Homes; market housing can only be included in the First Homes Exception Sites if evidence is provided to show the site would be unviable if market housing is not included. Local planning authorities will be keen to ensure that developers do not exploit this policy exception on unallocated sites and use it as a back door for market housing on a site by using viability evidence.
When will First Homes be required as part of the affordable housing mix?
For applications that are determined from 28 Dec 2021 (save that where there has been significant pre application discussions this is pushed back to 28 March 2022). (s73 applications will not be caught either.)
Will First Homes take off?
First Homes can be argued to be a radical proposal from the Government as part of their shake up of the planning system and to give first time buyers and opportunity to get on the housing ladder. Though, it is difficult to determine in the current climate whether or not First Homes will take off with property developers and local authorities, given the lack of local policies and no further change to the NPPF on replacing entry level sites with exception sites. First Homes maybe the new help-to buy or they may be a failure such as the “Starter Homes” programme.
Get in touch
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