Government confirms price caps and discount levels for First Homes
Consultation response outlines details of new scheme aimed at first time buyers and key workers
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Residential property can be marketed and sold at a higher discount in more expensive parts of the country under the new First Homes scheme, the government has confirmed.
The plan aims to lower deposit and mortgage requirements for local first time-buyers by at least 30%, and the government confirmed in its consultation response that it will stretch this to 40% or 50% for more costly regions.
It has set two regional price caps which will apply after the discount has been applied to all initial sales of First Homes. These will be set at £250,000 across England and £420,000 in London.
The government also confirmed a minimum of 25% of all affordable housing units secured through developer contributions under section 106 should be First Homes. It will consult further on the technical details of this part of the policy as part of its wider overhaul of the planning system.
Purchasers of First Homes will also be subject to income caps. The government will set two regional household income caps of £80,000 across England and £90,000 in London. However, it said there may be local circumstances where lower caps are necessary; for example, where planning authorities are looking to support key workers.
Developers will have to provide evidence they have been actively marketing First Homes to local people first. But to prevent properties remaining unsold if qualifying local buyers cannot be found, specific local connections restrictions will only apply for a period of three months from when the property goes on sale.
After this, the restrictions will fall away, and the property will become available to all first-time buyers across England at a 30% discount.
Background
The scheme was introduced by housing secretary Robert Jenrick in February this year, and a 1,500-home pilot of the scheme is included in the government’s Affordable Homes Programme.
First Homes will only cover new builds. It will save buyers an average of £94,000 on a purchase where the 30% discount applies, and the discount will be carried on when it is later sold to another buyer.
The update on First Homes comes as the Help to Buy scheme, which has helped thousands onto the housing ladder since 2013 is due to be phased out.
Help to Buy lends buyers up to 20% of the purchase price of their home (or 40% in London) interest-free for five years.
Last month, the government extended the scheme to mitigate construction delays due to the pandemic. Previously, new homes would have needed to have been finished being built by the end of December – but this deadline was moved to 28 February 2021.
In total, 248,075 properties were bought through Help to Buy since its launch in April 2013 up until 30 September 2019. The majority of these deals were made by first time buyers, who accounted for 201,784 (81%) of total purchases.
The government’s new Help to Buy scheme, which will replace the current scheme, will come into place from 1 April 2021 and run until March 2023.