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SPECIAL REPORT: FIRST HOMES SCHEME
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Guidance for LPAs How will the First Homes scheme impact local authorities? Sarah Waite, Partner, Suzanne Smith, Partner and Jennifer Eng, Senior Solicitor, from law firm Capsticks, examine the scheme and set out the issues local planning authorities (‘LPA’) need to be aware of in administering it.
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he First Homes scheme came into effect on 28th June 2021 and is the Government’s new preferred tenure ahead of social rent. The scheme requires a minimum of 25% of all affordable housing units to be First Homes. First Homes are a type of discounted housing, which can only be sold to persons meeting specific eligibility criteria. They must be discounted by a minimum of 30% against market value, with a maximum cap on the first sale after the discount is applied of £250,000 (or £420,000 in Greater London). The discount can be increased to 40% or 50% by the LPA, or also impose lower caps if it can be justified. In addition, First Homes must have a legal restriction entered on their respective titles so as to ensure the discount is maintained at all onward sales. The obligations will be secured within a Section 106 Agreement.
Template planning obligations The Government has published template planning obligations which local authorities can use as a basis for any agreements prepared locally. The template includes model wording for both the restriction to be entered on the First Home’s title and for a mortgagee exclusion clause, which allows lenders to waive the discount on market value upon onward sale. The Government has strongly encouraged LPAs to use the model wording within the template planning obligations to attain consistency in the implementation of First Homes. The content of these obligations will therefore be fundamental in the operation and application of the scheme going forwards.
How will the scheme work? The scheme will be administered and controlled by the LPA, a restriction on title to be entered onto the registered title of
the relevant First Home. This means that a future purchaser will need to obtain a certificate from the LPA in order to proceed with the purchase and to ensure that the discount is maintained in perpetuity (subject to the mortgagee exclusion clause). In order to give the relevant authority to proceed with the transaction, the LPA will assess the valuation of the First Homes to ensure that the correct level of discount is being secured. It is anticipated that this will be a concern to LPAs in respect of the level of expertise and the already limited resource in order to assess applications to provide the relevant authority. Currently, there is no formal policy position as to whether the LPA will be able to seek additional contributions from the developer in respect of this, but it is anticipated that an administration fee of £150 – £200 will be recommended per First Home. Homes England is expected to publish further guidance and materials
