First Homes – our consultation response

The government has been consulting on the introduction of First Homes – new properties to be sold for a discount of at least 30% below market value, mostly to first time buyers. The consultation proposes that the discount is largely funded through developer contributions secured by local planning authorities via Section 106 – the mechanism currently providing half of housing associations’ new affordable homes.

We have consulted with a wide range of our members and partners to form a sector-wide response to this consultation. In it, we support the goal of increasing home ownership and believe that First Homes could make an important contribution to this aim. However, we believe there are three related issues with the current proposals:

1. Affordability and local housing need. We note that in many areas First Homes are unlikely to be affordable to most buyers without a very significant, and therefore expensive, discount. Our response highlights how, in most local authority areas, even a 50% discount would not bring median-priced new homes within reach of median income households.
2. Impact on affordable housing supply. If the discount is funded via Section 106 contributions as proposed, the policy will significantly reduce the supply of social and affordable homes to rent in areas of high need. Our response calculates that if 40% of homes delivered through Section 106 were displaced by First Homes, it would cost approximately £1bn in additional social housing grant per year to replace them.
3. Impact on overall housing supply. Our response outlines how a high number of First Homes in place of other affordable tenures will slow down overall absorption rates and increase cashflow uncertainty. This is particularly likely to be the case at present given the significant uncertainty around the housing market and construction caused by the coronavirus crisis, making it more likely that the introduction of First Homes as proposed would further dampen housebuilding.

Our response outlines our preferred approach to implementation that would overcome these issues. This involves:

• Introducing First Homes into the planning system but with local planning authorities retaining the power to decide which affordable tenures – including First Homes – best meet the needs of their local communities.
• Piloting First Homes to give an opportunity to properly evaluate demand, and the impact on affordable housing supply and overall delivery.

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We will be speaking to officials and ministers across government about our response, and will keep members up to date as the First Home policy develops.