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Flagship housing schemes have been popular among UK governments of the last decade. First, we had the Coalition’s Help to Buy scheme
, David Cameron and George Osborne’s baby, which came in various iterations including Shared Ownership, an ISA for first-time buyers and equity loan and mortgage guarantee schemes.
Then we had the promise of starter homes in the 2015 Conservative manifesto – but this scheme has turned out be an embarrassment for the government, never getting off the ground as none of the 200,000 affordable new homes promised were ever built
In addition, we’ve seen the introduction of the Lifetime ISA (or LISA
), which has had mixed success since it launched in June 2017 to help people buy their first home or save for later life.
Now the Boris Johnson government – fresh from its emphatic election win, which gave it an 80-seat majority in the House of Commons and the kind of power and authority not seen since the Thatcher days – seems intent on introducing its own flagship housing scheme, named simply: First Homes.
But what exactly does it involve?
30% discount on first homes… but only for some
When announcing the scheme, Housing Secretary Robert Jenrick said a new generation of homeowners will be able to take their first step on to the housing ladder thanks to the First Homes initiative cutting the cost of some new homes by a third.
The scheme will reduce deposit and mortgage requirements for local first-time buyers in England, applying to a proportion of new homes. The government is now consulting on how this will be delivered.
The plan is for the First Homes to see a discount locked into the property to ensure more first-time buyers benefit in years to come. It’s hoped that local people unable to afford a home will be able to purchase in their area, rather than be forced to look elsewhere thanks to rapidly rising prices.
Veterans will be prioritised as part of the Armed Forces Covenant, while councils will also be able to use the scheme for key workers in their area – for example police officers, nurses, prison officers and teachers.
“First Homes will be life-changing for people all over the country looking to buy their first home,” Jenrick said. “I know that many who are seeking to buy their own home in their local areas have been forced out due to rising prices. A proportion of new homes will be made available at a 30% market discount rate – turning the dial on the dream of home ownership.”
He added: “The discount will be passed on with the sale of the property to future first-time buyers, helping thousands more people in years to come and ensuring local communities can stick together.”
At present, the average price of a newly-built home in England is £314,000, but under the First Homes scheme, a property sold with 30% off this price would deliver a £94,000 saving and ‘allow first-time buyers to get on the ladder faster by taking more than £18,000 off a 20% deposit’.
The government pointed to Cornwall, where the average newly-built home costs £246,000, and said a 30% discount there would deliver a saving worth over £73,000. It also insisted areas with particular affordability pressures will see even larger savings with a 30% discount.
Forming part of the government’s housebuilding pledge
The government has committed to delivering more than one million new homes over the next five years to ‘further improve the affordability of housing’. It has also previously stated its wish to build 300,000 new homes a year by the mid-2020s.
It says the proposals for the First Homes scheme could see tens of thousands of homes being built and will also include measures to help release more land.
In 2018/19, 240,000 new homes were delivered – while this was more new homes than at any point in the last 30 years, it’s still well below the planned 300,000 target.
First-time buyers, though, are at an 11-year annual high – recently reaching 357,090, up 84% since 2010. The latest English Housing Survey also shows the percentage of 25 to 34-year-olds owning their own home has increased from 36% to 41% over the last five years.
Paula Higgins, chief executive of the Homeowners Alliance, said that first-time buyers will welcome the opportunity to buy a good-quality home at a discount in their local area.
“We look forward to contributing to the consultation and working with the government to ensure that the scheme does what it says on the tin - more high-quality and affordable local homes for current and future first-time buyers,” she added.
The government says the scheme will apply the discount in perpetuity, so when the home is sold in years to come the new local buyer will be able to buy it at a discount as well.
The government also insists these latest proposals build on other measures it’s introduced to make it easier for people across the country to take their first step on the property ladder, including the consultation on a new national model for shared ownership – allowing people to staircase in 1% rather than 10% increments – and the extension of the Help to Buy: equity loan scheme to 2023.
What are the pros and cons?
It’s only an idea at present, and the government has now launched a consultation
on the design of the First Homes scheme which doesn’t close until April 3 2020.
The consultation is asking for views on First Homes for local people, ‘considering both the design of this policy and options for its implementation’. It will cover a number of areas, including what First Homes are and who should be eligible for them, how the scheme should work in practice, how to deliver more of these homes through developer contributions, and the requirement for delivering these homes through planning or legislation.
With the design and finer details of the scheme still unclear, we won’t know for a while yet what it will actually include – and there is always the chance it could go the way of the Starter Homes scheme, which never saw the light of day as it was continually kicked down the road by the Cameron, May and then Johnson government.
What’s more, it’s not entirely clear how many first-time buyers will actually benefit from this scheme given it’s predominantly targeted at veterans and frontline workers.
The wording stating that the discount will apply to a proportion of new homes may not fill struggling first-time buyers with too much hope.
On the upside, the scheme attempts to tackle a long-standing problem – that of young people having to move away from the areas in which they’ve grown up or studied to find more affordable accommodation elsewhere. This is especially an issue in major southern cities such as London, Oxford and Cambridge.
And the fact that the discount lasts in perpetuity so long as it’s sold to a first-time buyer from the same locality or a key worker is a promising sign for future generations of first-time buyers.
The government has also talked about consulting on a price cap on properties available through the scheme, which could help to keep the homes truly affordable.
Additionally, the discount is set to be paid for through ‘the contributions that housing developers routinely provide through the planning system’. As these contributions are an established mechanism for making sure that new developments deliver benefits for local communities, it means that the First Homes scheme is unlikely to result in extra building costs.
Lastly, targeting homes at key workers – who are often forced out of the cities and towns they work in because of a lack of affordable homes, even though they are vital to the smooth running of those towns and cities – is a positive step in the right direction.
On the downside, some claim that the scheme raises more questions than answers. In this feature on Estate Agent Today
, property journalist Graham Norwood argues that the scheme has considerable question marks against it.
“If the private developers fund 30% discounts without additional expenditure, this means current Section 106 planning gain spending ends with the money diverted instead into First Homes. So what happens to S106, which in the past has funded schools, environmental improvements and road safety measures as well as affordable homes?” Norwood asks.
“What will prevent First Homes properties looking very obviously like cheaper homes? Is this ideological pursuit of owner-occupation at the cost of improving the rental sector?” he continues.
He also raises concerns about a new postcode lottery, the First Homes scheme being a rebadged version of the disastrous Starter Homes policy, and asks what guarantees are in place to ensure developers’ assessments of market value, and thus of 30% discounts, are accurate and fair?
While the scheme sounds good in theory, it’s how it will work in practice that will be the acid test. With the end date for the consultation still some way off, and the government likely to spend a couple of months analysing feedback and coming to its conclusions, it could be a while before Johnson’s flagship housing policy has more meat on its bones.