First-time buyers could benefit from discounts of £100,000 when buying their first homes under a new scheme proposed by the government.
The housing secretary says the First Homes scheme would see tens of thousands of new homes sold at a significant discount to local key workers and first-time buyers.
The plans haven’t proved popular with organisations in the housing sector, however.
Here, Which? explains everything we currently know about the scheme, and outline the big questions facing the government.
Government pledges 30% discounts on new homes
The government says its new First Homes scheme will cut the cost of some new-build homes by a third.
The scheme, which was originally proposed in the Conservative Party manifesto, would allow first-time buyers to purchase a property in their local area for an average of nearly £100,000 below market value.
First Homes would oversee the building of ‘tens of thousands’ of new homes, with veterans and key workers (such as nurses, police officers and firefighters) given priority.
Housing secretary Robert Jenrick MP described the plans as ‘life-changing for people all over the country looking to buy their first home’.
The government has launched a consultation into the plans, which will run until 3 April.
What are ‘First Homes’?
First Homes will be purpose-built flats and houses on developments across England, which will be sold at a discount of ‘at least 30%’.
The homes will be sold to ‘local people who want to stay in the community where they live or work, but are struggling to buy a home at market prices’.
This discount means that a first-time buyer could theoretically buy a £300,000 home for £210,000.
Beyond ‘tens of thousands’, the government hasn’t yet put a number on how many of these homes it hopes to build, who will build them, or outlined any areas where the scheme could be trialled.
What will happen to the discount?
Properties built for the scheme will retain their discount when they’re sold.
This means if you buy a home at a 30% discount and want to sell up, you’ll have the property independently valued and then sell it at a 30% discount to another First Homes purchaser.
The requirement to sell the property on at a discount raises questions about how the first set of buyers will then be able to purchase a home on the open market and progress up the property ladder.
First Homes: the big questions
Sector expresses concerns over the new scheme
The proposals have been met with concern in the property sector.
The housing charity Shelter says that rather than providing a route to building affordable homes, the policy ‘simply puts at risk the social homes currently being built’, and has accused the government of launching ‘another initiative which simply shuffles the deck chairs on the Titanic’.
The National Housing Federation, meanwhile, says the proposals ‘could make it more difficult for housing associations and councils to provide homes for lower-income families’.
First Homes and the Starter Homes Initiative
The proposals bear a resemblance to the Starter Homes Initiative, which was announced back in 2014 by then-Chancellor George Osborne.
That proposal involved building 200,000 new homes on brownfield land and selling them to first-time buyers aged under 40 at a discount of at least 20%.
In 2017, 30 local authorities signed up to pilot the scheme, and in July 2018 the government said that ‘work is getting underway’ preparing land for development.
At the time of writing, none of the 200,000 homes have been built, and it remains to be seen if the new First Homes scheme will run alongside or replace Starter Homes.
How can first-time buyers get on to the property ladder
Although the consultation is now underway, it’ll be a number of months before we hear any developments around First Homes.
If you’re thinking of buying your first property this year, there are a number of options already available to you.
Low-deposit mortgages are currently priced very attractively, so if you’ve saved up a deposit of 5% or 10%, it might be easier than you think to get a good deal.
If your parents can help out, lenders are increasingly offering innovative guarantor mortgages, which could help you buy a home without needing a deposit.
Finally, it’s worth considering the government’s other schemes, Help to Buy and shared ownership. But do your research as both could be more expensive than you first think.
