In a Written Ministerial Statement on the 24th May, the Housing Minister Chris Pincher set out planning policy changes in relation to First Homes, including revisions to Planning Practice Guidance (PPG).
First Homes are a form of discounted market housing for first-time buyers to be delivered by developer contributions and through ‘exception sites’.
What is a First Home?
To qualify, homes will need to be delivered at a minimum 30% discount and the first sale must be no higher than £250,000 (£420,000 in Greater London) that will remain in perpetuity – this will apply from the 28th June 2021, although transitional arrangements are included in the Statement.
Purchasers should be first time buyers with a combined income not exceeding £80,000 (£90,000 in Greater London) and have a mortgage in place to fund a minimum of 50% of the discounted purchase price. Individuals who can purchase a First Home without a mortgage will not be eligible.
Paragraph 64 of the National Planning Policy Framework requires that 10% of all homes on a site should be affordable home ownership products – First Homes are an affordable homes ownership product.
Changes to planning policy set out in the Statement require a minimum of 25% of all affordable homes secured through developer contributions to be First Homes. Local authorities should then prioritise securing their policy requirements for social rented properties once they have secured the First Homes requirement. Other tenure types should be secured in the relative proportions set out in the development plan.
Higher Discounts and Additional Eligibility Criteria
To qualify as a First Home the minimum discount is 30% below market value, local authorities and neighbourhood planning groups can at their discretion require a higher discount of 40 or 50%, where the need for a higher discount is evidenced. These higher minimum discounts should apply to the entire local plan or neighbourhood plan area. If the level of discount is subsequently revised through a revised plan this does not affect the resale discount of the previously sold First Home. Developers are able to offer higher discounts, but the local authority cannot require this.
Local authorities and neighbourhood planning groups can apply their own eligibility criteria in addition to the national criteria. This could include lower income caps, local connection test, or employment status. Local criteria will apply for 3 months from first marketing, if the property remains unreserved by an appropriate person in this time the eligibility criteria will revert to the national standards.
For Local Plans and Neighbourhood Plans submitted for examination before the 28th June, they will not be required to reflect the new policy requirements. Plans that have reached publication stage by that date will also not be required to meet the requirement if they are submitted for Examination before 28th December 2021, but an early update of the plan may be required.
Under these transitional arrangements, the First Homes requirement will not need to be applied when considering planning applications until the local plan policy is updated. For other authorities, they should make clear how existing policies should be interpreted in the light of First Homes requirements. This may be via an interim policy statement or updating local plan policies. This is left to the discretion of individual authorities based upon their own circumstances.
The requirement will also not apply to sites with full or outline planning permission in place or where a right of appeal against non-determination has arisen, before 28th December 2021, or 28th March 2022 if there has been significant pre-application engagement. Local authorities should allow developers to add First Homes to the tenure mix of they wish to.
The Government is also seeking to deliver First Homes through the exception site route. The entry-level exception site policy is being replaced with a ‘First Homes Exceptions Sites’ policy. Local authorities should support the development of exception sites suitable for first time buyers, unless the need for such homes is already being met within the local authority’s area.
Exception sites should be on land not already allocated and should comprise First Homes, be adjacent to existing settlements and proportionate in size to them and not compromise the protection given to areas or assets of particular importance as defined in the NPPF. A small proportion of market or other affordable homes may be allowed.
In designated rural areas, rural exception sites will remain the sole exception site which can come forward.
A new model for Shared Ownership Homes
The Statement also introduces a new model for Shared Ownership that also comes into force in the 28th June and is subject to similar transitional arrangements. The new model lowers the minimum share for initial shared ownership purchases to 10% from 25%. All new leases will be issued with a minimum 990 year lease length to provide long term security for shared owners.
The introduction of a First Homes policy reflects the Government’s commitment to ensure that there is an adequate supply and variety of options to help people onto the housing ladder.
The approach provides a further option for developers to provide discounted market housing on sites, and may be an attractive option, although the approach seeks to maintain the scale of social rent provision in line with local plan policies. The inclusion of higher discounts and locally determined eligibility criteria could have negative impacts upon site viability in lower value areas.
Transitional arrangements mean that plans in preparation that have progressed to Regulation 19 stage will not have to meet the requirement and similarly applications currently in the system. In other circumstances the requirement will apply and we are aware of local authorities having to amend emerging plan policies to take the provisions on board.
The approach to First Homes Exceptions sites may provide opportunities for provision of affordable market housing on unallocated sites. The revisions to the PPG do not specify what is a ‘proportionate’ site, advising applicants to engage a relevant built environment specialist to provide advice and engaging with local authorities to discuss proposals. For the previous policy on entry-level exception sites, the NPPF set a threshold of no larger than 1 hectare or exceeding 5% of the size of the settlement. Local authorities may look to use this as a benchmark of discussions on this issue.