First Homes Consultation Response
Released On 4th May 2020
The UK Government has recently sought views on their Consultation document on First Homes for local people. Our response to this consultation is set out below.
Thank you for the opportunity to comment on the proposals for the First Homes Scheme. There are two key aspects and some miscellaneous matters that we would like to comment on:
It is clear that the First Homes concept is that the dwelling remains discounted in perpetuity and we support this approach as a way of assisting people on lower incomes to purchase a home. It is significantly better than the Starter Homes approach which resulted in affordable purchase for the first purchaser only.
It is not clear whether the intention is for First Homes to be an affordable product under the definition of affordable housing in the NPPF. If not classified as an affordable home there is a danger First Homes will distort the market and/or that prices will be inflated and standards reduced.
The consultation does not assess the impact on the delivery of rented affordable housing or other low-cost home ownership tenures already within the NPPF definition, nor does it present evidence on which tenures are most needed to meet housing needs. It does not seem sensible to introduce new affordable housing tenures without considering how best to meet housing needs overall. We recommend that where housing needs are assessed through local studies (e.g. SHMAs), these should be used to determine the local proportion of First Homes and other affordable tenures so that there is a consistent and comprehensive approach.
It would be useful to have more detail on how the different intended recipients i.e. ‘local people’, first time buyers and key workers might be prioritised. Of the suggested delivery in para 58 (12,000 to 19,000), if these were directed to key workers first, then it may be that relatively few first time buyers are able to access First Homes.
The consultation does not suggest a mechanism for local authorities to determine whether 30% discount is sufficient or whether it may need to be a larger discount, or what standard of evidence they would be expected to provide to justify the discount. The consultation does not suggest a standard method of valuing these homes both on first and subsequent sales. Who will be responsible for this aspect?
We support the suggestion of price caps as it seems unlikely that discounts to the most expensive dwellings will be meeting significant amounts of housing needs. Price caps should be locally sensitive and could be tied to average house prices in local authority areas. We note that Zoopla’s map showing the average price of a first time purchase has at least 10 areas where the average price of a first time property exceeds the highest suggested cap of £600,000, but it also shows that there are a number of locations where the average price of a first time purchase is below £120,000 – suggesting that the scheme will not have any particular relevance in these low value areas. What proposals for First Homes are there for areas where affordability is less of an issue but infrastructure delivery is a priority?
The proposed changes to affordable housing delivery on exception sites to First Homes will reduce the delivery of affordable rented tenures as on these sites without consideration of the need for rented housing need.
It looks as if the consultation paper suggests that Housing Authorities and/or RPs will handle the original sales (establishing local connection, managing the renewal of restrictive covenants, managing the independent valuation process, assessing key workers, assessing income, prioritising need, administration) as well as other parts of the process administration. This implies (but does not state categorically) that these dwellings would be pre-sold to RPs by the developer. If this is the case then the provision of these dwellings would be less risky for developers and the viability impacts would be reduced by a lower developer return being required, and this would assist in the delivery of affordable houses and other planning obligations. If it is not the case, then the risk is increased and the impact on viability may be exacerbated. Overall, we would support allocation of First Homes through the established system of Local Authority housing lists.
We support the time limited restrictions as these will allow flexibility to adapt to local circumstances at that time and reduce risk of unsold dwellings.
It is not clear what safeguards may need to be imposed to ensure that the 30%+ discount is not accompanied by a reduction in build size or quality, and that it is genuinely a like-for-like dwelling with the rest of the market housing. It is recommended that some safeguards are included in the governing standards for the scheme.
We would support the inclusion of First Homes within the list of NPPF affordable tenures and their exemption from CIL. However, the proposals in Para 81 to pre-set the balance between First Homes, other affordable tenures and CIL/infrastructure provision do not recognise the need to react to locally specific requirements and therefore run the risk of delaying or reducing housing delivery. If there is to be a national statement (e.g. through NPPF or PPG amendments) then it may be of more use to be explicit about the need for land values to adjust in order to deliver the infrastructure and different forms of affordable housing.
Setting developer contributions - a nationally imposed proportion of dwellings on 10+ dwelling sites being delivered as affordable housing would be a powerful signal to the market about meeting housing need, and would result in appropriate adjustments in land value.
We would support this approach if it applies for all affordable tenures, and believe that the strength of this message would outweigh the lack of consideration of local housing needs it would imply. There would need to be some caution about the impacts on infrastructure provision and overall, it is likely that public sector support for infrastructure would have to be increased to avoid development being stalled. There is also the risk that some sites would become unviable where development values are low relative to existing use values.
However, if this fixed proportion approach is just applied to First Homes as the consultation suggests, then it will almost certainly displace the provision of other tenures and we would not support this because of the impact on meeting housing need. In this case we would recommend that if there is some national requirement that deals solely with First Homes then it is as a proportion of the affordable housing provision as this would continue to allow other tenures to be delivered (Para 54 option A).
The consultation states that the proposals may be delivered through legislative or non-legislative means. This does not provide much clarity about the strength of obligation on developers or Local Authorities to provide this tenure.
There is no discussion about transitional arrangements – where there is already an up to date adopted plan would any policy requirements for First Homes be expected to take precedence over the legal weight of a Local Plan? How would this then work where the plan policies have an overall target for affordable housing, but the tenures are specified elsewhere e.g. in an SPD? This sort of clarity is necessary to understand how the suggestions will work and will also have an impact on the speed at which this new tenure may be delivered.
It is not clear from the consultation that these proposals have been generated by planning authorities and therefore there may need to be some incentives for these organisations to implement this scheme. What will be the incentives, and what will be the sanctions if planning authorities choose not to require First Homes as part of housing delivery? It may be worth thinking about the success of the Starter Homes proposals in this matter.
The consultation is not clear about what obligations there will be for planning authorities to monitor and report delivery of First Homes.
Assessing local connection criteria alongside other eligibility criteria has the potential to be an administrative burden and delay sales. RPs often experience significant delays in this way with shared ownership where connections take time to verify or no one with a local connection comes forward and so clear guidance would be needed.
 Para 14,  Para 21,  Para 23,  Para 33,  Para 34,  Para 35,  Paras 38 and 39,  Paras 30 and 31