With all sights trained on the forthcoming budget, the housing secretary, Robert Jenrick, surprised us with the publication of the consultation on the government’s proposed First Homes scheme last week.
The announcement gives us a little more detail on the plan, which was first announced in the Queen’s speech. Here is what we know so far.
New-build homes — 19,000 of them by the mid-2020s was mentioned as a target originally, although that figure has disappeared from the consultation documents — are to be sold at a discount of 30% on the market rate to local first-time buyers, armed forces veterans and key workers such as nurses, police officers, prison officers, teachers and firefighters.
The discount will be “locked into the property”, so that when the home is resold it will go to another eligible buyer with a 30% discount. So, for example, a home valued at £300,000 will cost £210,000 with the 30% discount applied. If the owner later resells the home when its market value has risen to £350,000, it will be allocated to another local first-time buyer or key worker by the local council and sold with a 30% discount at £245,000.
Obviously there is a fear that this initiative will go the way of the inept Starter Homes Initiative, which according to the National Audit Office failed to deliver a single extra home.
Another first-time buyer initiative, the Help to Buy equity loan, which runs until 2023, has also proved controversial. It has undoubtedly helped people onto the property ladder, by offering the option of buying with a 5% deposit, 75% mortgage and 20% government loan. However, buyers in some areas have paid a hefty premium to housebuilders, who have seen their profits climb.
There are also fears that this initiative will detract from much-needed efforts to boost social housing. Polly Neate, chief executive of the housing charity Shelter, said: “When will this government realise that we need real investment in new low-cost social homes, not another initiative that simply shuffles the deckchairs on the Titanic?”
The Local Government Association has taken a similar stance, calling for “discretion on the number of First Homes required in new developments”. It says it would rather see more council housing built and for the Right to Buy scheme to be reformed to allow them to set discounts locally. This is worrying, because the government is depending on local authorities to deliver the scheme.
Nonetheless, there are those who are positive. Marc Vlessing, chief executive of Pocket Living, a developer that operates in a similar way to the proposed First Home scheme, says it “could be truly exciting”. Pocket Living sells homes to local first- timers on modest salaries at a 20% discount on market rates, and, just as proposed by the government, the eligibility and discount stays with the property.
It is his experience in doing this that gives Vlessing concerns. He worries that local authorities do not have “the manpower or bandwidth” to manage the eligibility, and make sure that the homes are resold with the discount to the right people and “not some commuter from the shires looking for a midweek pad”. Ensuring these homes are sold at a discount in perpetuity requires effort.
He is keen, too, that small companies are encouraged to deliver the homes on small patches of land — which will be vital if it is to work in inner-city areas — rather than restricting the scheme to large developments and wrapping it into section 106 allocations.
Finally, Vlessing says that First Homes need to be built in addition to the current new-build, rental and social housing targets: “We need to boost, not choke, supply.” I think we can all agree on that.
HOW TO MAKE IT HAPPEN
Buying, renting or investing in property? Looking to understand how to afford your next home, escape abroad or build a new income and live mortgage-free?
You’ll find it all at Times Money Mentor: