Buried in amongst the Queens Speech announcement was the heralding in of First Homes. My recent passle highlighted some key features but one thing to come out of this seems to be that the much vaunted Starter Homes have shuffled of this mortal coil. Which is sad really because I thought there were some really heavy hints in the last rejig of the CIL Regs about what a Starter Home would be - passle here.
Cynicism aside about the broken link (it still won't open in Chrome) I have now properly gotten to grips with what a First Home might be and the rest of this blog compares them to what Starter Homes might have been.
If you weren't too sure what Starter Homes were rattling on with - this Briefing Paper is excellent.
The First Homes consultation closes on 3 April 2020.
BLUF - given the various references to the Military Covenant throughout I will channel JSP101 and give my bottom line up front. Whilst the Commons Briefing paper highlights that a 20% discount will not enable those unable to purchase to get on the ladder in most of the areas it is targeted at. Will a 30% discount do any better? Even if it will where is that money coming from? Developers do not possess an bottomless pot of gold and if the government prerogative is for First Homes to purchase then some element of the discounted rental products will have to give as a result. I am also extremely concerned that retaining the discount in perpetuity is not going to meet the goal of getting more young purchasers on the housing ladder but under First Homes this be a different ladder to those buying market housing - best of luck switching ladders, particularly if you need to change locations.
Price - Starter Homes were homes to be sold at at least a 20% discount. First Homes are to be sold at a 30% discount off market price. Local Authorities should have the discretion to set higher discounts on properties on a site-by-site basis, and the Government expects them to seriously consider this when determining local discounts.
Minimum Provision - the March 2016 Starter Homes Regulations - Technical Consultation looked to set a minimum statutory requirement that at least 20% of all homes delivered on a residential development site (larger than 10 units) should be starter homes. The NPPF (para 64) confirms that at least 10% of the homes to be available should be Starter Homes. The First Homes Consultations does not set a minimum requirement at present – that is out to consultation. Two options are given – it is as a statutory minimum percentage of s.106 affordable housing or of all units on the site.
Qualifying First Time Buyer - tarter homes would be sold to a qualifying first-time buyer (subject to an age restriction but to include military veterans regardless of age). An age cap was included but no local connection test. It was intentionally aimed at younger First Time buyers. First Homes envisage local people should get first refusal on First Homes sold through this scheme. The definition of ‘local people’ will be at the discretion of the Local Authority and can be based on either residency or work location, as appropriate. However serving members and recent veterans (not defined) of the Armed Forces will be taken to have met the local eligibility criteria for any local area under any circumstances.
Assessment - Starter Homes were going to have commissioned a network of agents to ensure that potential buyers meet the necessary criteria. First Homes do not yet consider the objectivity of meeting the criteria but do find a job for RICS by requiring an independent valuation of homes sold under the scheme to ensure purchasers receive a genuine discount to comparable homes on the open market both on the initial sale and on all subsequent resales.
Income levels - Starter Homes were going to set income caps in the legislation. The CIL Regs consultation document even suggested some. The Government is considering setting a First Homes household income cap for these homes to provide a clear signal on eligibility. Where there are more households interested in purchasing these homes than there are homes available within a particular area the consultation considers that it will often be appropriate for Local Authorities to consider applicants’ income and assets in more detail, to target these homes at those most in need of support.
In perpetuity? *Be warned this is a major change!* Starter Homes was a one time only developer commitment to sell at the statutory discount. Subsequent sales would be made at full market value with no restrictions (although the seller would need to pay some money back, depending on how long they have lived in the property). In large a large side step First Homes discounts will last in perpetuity so that future home buyers can access the discounts and the homes can deliver long-term community benefit. In my view the draftsman may have misunderstood the consequences of this good intention. If a homeowner requires a 3 bedroom house and bought one at a discount and then has to sell it at a discount, the money they receive when selling it will lead to them having to downsize to move. They are not getting on the market housing ladder they are being introduced to a sub-class of housing and it will be just as difficult to convert to market housing as it was getting on the ladder in the first place.
Legal Charges - With Starter Homes the short term protection to stop the home being sold on immediately was to be protected by a legal charge in favour of the Council who if the sale took place within the first 5 years would be entitled to recoup some or all of the uplift depending on when the sale takes place. With First Homes being discounted in perpetuity this will be achieved by placing restrictive covenants on these homes, which will require that the property is sold at the original percentage discount in each subsequent resale. The covenant could benefit either the LPA or be outsourced to the private sector, Community Land Trust, or a Housing Association.
Model s.106 documents (including the charge) would come form the government for both products. The consultation recognises the importance of allowing local discretion in the s.106 model but will standardise a mortgagee protection clause.
Maximum Value - Starter Homes were to be subject to a maximum overall value of £450k inside London and £250k outside London. The consultation of First Homes is open on this point (potentially accepting the issue I have raised elsewhere that not all of the Regions are the same). They are clear that 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. Options include adopting the existing Help to Buy Equity Loan scheme cap (£600k); or setting regionally varied price caps (however there would still be places within regions which would be more expensive than surrounding areas); or setting price caps at a more targeted geographical level, such as by county or metropolitan area, would help solve the problem of outliers within regions.
CIL - both forms of housing would be exempt from the Levy.
Re-letting - I did previously take issue with a point of silence in what we did know about Starter Homes in what happens if you live in a Starter Home initially but move out and turn it into a rental property. If you then sell it on and your move out date was in the first 5 years (even if the sale date was not) you will likely owe some money under the charge but at present there does not seem to be a mechanism for this to be "clawed back" until the point of sale.
Purchasers of First Homes will be restricted to using them as their ‘sole or primary residence’. This is an established legal test and is used for determining council tax liability. The consultation recognises that there are occasions when people need to spend some time away from their home; perhaps due to work commitments such as a short posting to another location, or to care for family members. In such circumstances it would not be sensible to prevent people from letting out their home. Therefore, the consultation includes an allowance for owners of First Homes 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. Lettings periods in excess of two years will be at the discretion of the relevant Local Authority and examples given are for moving into long term care etc.
A serving member of the Armed Forces placed on an assignment more than 50 miles from their home will be able to let out all or part of their property for the duration of that assignment. Again I query the inclusion of 50 miles having commuted similar distances and been in the Army. It is not a comfortable length of commute on a regular basis.
If these proposals go ahead, we will need to see a significant increase in government funding for affordable housing, to prevent the loss of future affordable homes.