In July 2021, the Greater London Authority (GLA) published its First Homes Practice Note to guide Local Planning Authorities in London on the assessment of the new tenure in housing and mixed use schemes.

To recap, First Homes are a type of discounted market sale housing introduced by the Government by a Written Ministerial Statement (WMS) on 24 May 2021. To meet the definition of First Homes, dwellings must:

• Have a minimum discount of 30% to market value;
• Secured in perpetuity through a legal agreement;
• Have a price that does not exceed £420,000 in London (£250,000 outside of London)
• Be sold to first time buyers; and
• Ensure a minimum of 50% of the purchase price must be met through obtaining a mortgage. 

The practice note on First Homes, released by the GLA in July, advises how Local Authorities should approach the issue – whilst also giving indications on how the GLA will assess future schemes in relation to this matter.

Having read the note and discussed it with officers at the GLA and within Boroughs on current schemes in the planning system, we believe the practice note treads a cautious line, recognising its existence but also warning of the pitfalls of including First Homes. The practice note states:

“First Homes is a material consideration for decision makers to take into account alongside policies of the Development Plan…” and “It does not alter the position of the Development Plan as the starting point for decision-taking”.

The practice note reads more positively than the Mayor’s previous consultation response to First Homes, but is not enthusiastic. 

Plan Making

The Written Ministerial Statement outlines that that local plans and neighbourhood plans that have reached advanced stages of preparation will benefit from transitional arrangements. Local plans and neighbourhood plans submitted for examination before 28 June 2021, or that have reached publication stage by 28 June 2021 and subsequently submitted for examination by 28 December 2021, will not be required to reflect the First Homes policy requirement. There are a number of London Boroughs that have plans in examination, including Brent; Lambeth; Islington; and Southwark and therefore there is no requirement for them to include a policy on First Homes.

Decision Making

The Practice Note is very clear that in determining the weight to be given to Development Plan policies (including those of the London Plan), First Homes and other material considerations, decision makers should consider:  

• Affordable housing needs at a local and strategic level;
• The delivery of affordable housing by tenure against local and strategic targets;
• The deliverability and affordability of First Homes in a local and strategic context;
• The discount to market value required to enable First Homes to be provided at or below the £420,000 cap and the relevance of this to scheme deliverability and the provision of other affordable housing tenures; and
• All other relevant national and Mayoral requirements, including eligibility criteria. 

Reading into this further, it is unsurprising that the Mayor is concerned about First Homes from an affordability perspective. Research by the GLA has shown that based on the average price of a new build home in London, an income of at least £76,000 would be required based on a 30 per cent discount basis. For comparison, the median income for households accessing shared ownership (based on 2018 figures) was £46,820.

Therefore, the GLA see the starting place for decision making being the delivery of affordable tenures in line with local and strategic targets and First Homes should only be considered if there is no adverse impact on the deliverability or affordability of established tenures.

Our View

Will First Homes be as unsuccessful as Starter Homes? (reminder: In April 2015, the Conservative Party manifesto committed to “200,000 Starter Homes, which will be sold at a 20% discount and will be built exclusively for first-time buyers under the age of 40” – and delivered precisely zero).

Given the current direction of the Conservative Government housing and planning policy, we think it stands a chance of being successful.

Firstly, it seems as part of proposed planning reforms, First Homes will need to be a minimum of a material consideration and potentially a policy requirement in the coming years and Local Plans will be required to be assessed within housing and viability evidence bases. 

On the other hand, we see both house builder and register provider models needing to significantly change to accommodate First Homes, and the appetite for that may be limited.

Due to affordability issues within London and the political dimensions of London Boroughs, we see out of London developments being able to deliver First Homes more successfully. This isn’t to say that First Homes will not be a feature within London, but we only see it being realistic in specific areas which have a balance between lower values and higher incomes.

Summary

To summarise, even before any First Homes are delivered, the jury is very much out about whether they will be supported locally and regionally as an appropriate tenure. Even though the WMS has only just introduced First Homes, in our London based schemes, Councils and the GLA are not requesting them and applicants are not proposing them, signalling that all sides are still getting to grips with the short and long term implications of the new tenure.