First Homes Scheme Poses Affordable Homes Risk, Housing Association Warns

First Homes Scheme Poses Affordable Homes Risk, Housing Association Warns

The government’s First Homes policy could lead to thousands fewer affordable homes if Section 106 proposals are actioned, according to the G15 housing association.

The First Homes scheme will aim to deliver affordable homes for first-time buyers across England, providing applicants with 30% off new build homes, which could provide a saving of £94,000 (based on new build properties in England costing £314,000 on average). 

The 30% deposit applies across the deposit and mortgage requirements, but according to the National Housing Federation and the Local Government Association, even a 50% discount would not be affordable to median-income households. 

The government is prioritising access for military veterans and key workers including nurses, police officers and firefighters. But the scheme has previously been criticised by organisations including Shelter, which claimed around 96% of average earners in England will still be unable to afford a home.

Now, G15, which represents London’s largest housing associations, says the proposal to pay for these discounts through Section 106 planning contributions would deliver 3,629 fewer affordable homes. 

“The prospect of removing approximately 50% of the current supply route to the market by using Section 106 to deliver First Homes is of great concern,” said G15.

A consultation on the scheme finished three weeks ago to seek the views of local people about how the scheme should work and how it should be rolled out. 

The government has since invited views on the policy, prompting G15 to publish its response, addressing Section 106, Covid-19, and issuing a series of counterproposals. 

Section 106 Concerns

Earlier this year the government proposed that the First Homes discounts would be paid for by Section 106 planning contributions from developers. 

Section 106 is a planning obligation paid to local authorities by developers and housebuilders prior to a home being built, which is then used to build affordable housing and local infrastructure projects.

Section 106 delivered 49% of all new affordable housing in England in 2018/19, and G15 has analysed how deductions would impact upon affordable housing. 

If 40% of Section 106 was reserved for First Homes – the lowest proposal in the government’s consultation – G15 expects 1,814 affordable homes to be lost. This is based on the reduction in conventional affordable housing in and around London. An 80% reservation of Section 106 contributions reservation would lead to 3,629 fewer homes, G15 predicts.

“If some or all s106 homes are replaced with First Homes, we foresee increased difficulty with delivering the 300,000 homes a year that we and the government accept England needs to deliver in order to reduce the housing shortage,” said G15.

Alternative Solutions

The G15 says First Homes should instead be provided on small sites so as not to displace affordable housing. 

Just 30% of London’s new build homes are built on sites smaller than 0.25 hectares, often due to fixed construction costs and building limitations. But if small sites were made more viable, G15 says this could provide a solution. 

“By moving away from delivery via s106 in London, and instead delivering First Homes on small sites with planning advantages, we will not see problems to overall supply but may instead see additional homes.”

G16 proposes that the government considers implementing the scheme on small sites, and those sites with at least 40% of their homes as First Homes would be afforded advantages in planning, including:

  • Permission in principle 
  • Fast tracked planning 
  • A Community Infrastructure Levy (CIL) exemption.

“This way First Homes could be delivered in a way that not only does not significantly encroach on other types of affordable housing but may deliver additional affordability and additional homes overall,” G15 said.

Economic Uncertainty

The Covid-19 pandemic has affected the economy sharply already, but is unknown how much damage could still be done, and this, G15 says, is reason enough to reconsider the implementation of the scheme.

“It is also worth mentioning that at this time of great economic uncertainty, people are much less likely to want to purchase a home as a significant commitment, considering that lots of people might end up on low/no/uncertain incomes following the Covid-19 pandemic. 

“This might not be the right time to introduce significant disruption into the housing market and increase the proportion of homes which are for sale, thus increasing risk. Therefore, we believe that the government should take some time to assess market responses and maybe pilot some of the approaches to check they work first.”

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