The Government has unveiled details of its latest housing scheme aimed at providing discounted new-build homes for local first-time buyers.
A consultation on the First Homes scheme is seeking views on a housing initiative that would offer properties that are discounted in perpetuity and prioritised for key workers such as armed forces veterans, nurses, police officers and firefighters.
Discounts will be achieved by placing restrictive covenants on the homes, which will require that the property is sold at the original percentage discount in each subsequent resale, the document says.
These covenants will be re-established with every new purchaser of the property
There is no mention of estate agency involvement and instead the 31-page document said the Government is “minded to leave administration to local authorities”.
Properties used in the scheme would need to be “independently valued”, the document said, and undertaken both on the initial sale and on all subsequent resales.
The Ministry of Housing, Communities and Local Government said a 30% discount off market price should be the minimum level but may need to be higher in areas where affordability is particularly challenging, such as London and the south-east.
It is also suggested that there is either a national or regional cap on the values of properties used under the scheme.
The document says: “The valuation should compare the discounted property price with the value the home would be worth on the open market without any restrictions.
“The Government is clear this scheme is not to be used to subsidise the purchase of exceptionally expensive property, and to ensure the scheme supports as many people as possible into home ownership, we are minded to introduce a cap on the value of properties available for this scheme before the discount is applied.”
Under the proposals, home owners would be free to renovate their properties but the document said they will need to “be aware that they may not realise the full value uplift of these improvements due to the need to sell the home at a discount”.
There would be a ban on using the purchase as an investment property and letting it out, but owners will be able to move out and let their property for a time-limited period, not exceeding two years, without having to seek permission from the local authority.
Views are also sought on how the scheme is funded. The Government suggests it could form part of developers’ section 106 affordable housing requirements, through relaxed planning laws or by a community infrastructure levy charged on developers.
The document recognises this could impact development of other forms of affordable housing.
Housing Secretary Robert Jenrick said: “First Homes will be life-changing for people all over the country looking to buy their first home.
“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.
“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.”
This consultation will last until April 3.
Commenting on the consultation, Richard Donnell, research and insight director at Zoopla, said: “The First Homes scheme is really a new type of affordable housing – although it is unclear if it will be classed as affordable housing in planning terms – in short, the ‘land value’ will pay/fund the discount rather than grant funding from Government or a Help to Buy equity loan.
“Builders will set the price of the homes at the first sale and there will be a surveyor valuation by the bank as a requirement of getting a mortgage. Lenders, and consumers, will be keen to ensure the 30% discount is real and sustainable at the first sale.
“For resales there will be an independent valuation on which the discount will be applied – this will probably need to be done by a registered valuer. It is not clear if multiple valuations are required or whether the valuation could be a market appraisal by an agent.
“The challenge with the scheme is the prospect of different discounts across the country within local authority areas and who sets these and how they may change over time.
“It seems reasonable to assume that if you buy a house at a 30% discount in 2020 that if the discount for the area changes to say 40% that this will not apply to the previous sales.
“Homes will need to be advertised with the relevant discount displayed so consumers understand what they are buying.
“Over time there will be a new sub-market for First Homes – this exists already in some markets where there has been a lot of shared ownership development and sellers are selling their part share in the property.”
Mark Hayward, chief executive of NAEA Propertymark, said: “We’re supportive of initiatives that will make it easier for first-time buyers to get on the housing ladder, given that the market remains fluid.
“However, it’s important that the Government ensures this is implemented correctly and with consideration for any potential knock-on effects.”
Great idea. Might the value be held down anyway due to the limited demand if the 2nd sale is limited to key workers?
Would you worry about your chance of reselling if you always had to find a buyer with a particular occupation?
Good to consider relaxing planning policies to get these built.
Bring it on.
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