Guidance

First Homes

Provides further detail on First Homes and their implementation.

Applies to England

First Homes definition and eligibility requirements

What is a First Home?

First Homes are a specific kind of discounted market sale housing and should be considered to meet the definition of ‘affordable housing’ for planning purposes. Specifically, First Homes are discounted market sale units which:

a) must be discounted by a minimum of 30% against the market value;

b) are sold to a person or persons meeting the First Homes eligibility criteria (see below);

c) on their first sale, will have a restriction registered on the title at HM Land Registry to ensure this discount (as a percentage of current market value) and certain other restrictions are passed on at each subsequent title transfer; and,

d) after the discount has been applied, the first sale must be at a price no higher than £250,000 (or £420,000 in Greater London).

First Homes are the government’s preferred discounted market tenure and should account for at least 25% of all affordable housing units delivered by developers through planning obligations.

Paragraph: 001 Reference ID: 70-001-20210524

First Homes qualifying criteria

What are the First Homes criteria?

The First Homes criteria are the minimum requirements a housing unit must meet in order to qualify as a First Home. Affordable Housing Update Written Ministerial Statement published on 24 May 2021, the national standards for a First Home are that:

a) a First Home must be discounted by a minimum of 30% against the market value;

b) after the discount has been applied, the first sale must be at a price no higher than £250,000 (or £420,000 in Greater London); and,

c) the home is sold to a person who meets the First Homes eligibility criteria, as set out in first 2 paragraphs under First Homes eligibility criteria.

In addition, to qualify as a First Home, there should be a section 106 agreement securing the necessary restrictions on the use and sale of the property, and a legal restriction on the title of the property to ensure that these restrictions are applied to the property at each future sale, as described in What is the legal mechanism to ensure that the discount is passed on to all future purchasers?. The price cap of £250,000 (or £420,000 in Greater London), however, applies only to the first sale and not to any subsequent sales of any given First Home.

Homes meeting the above minimum criteria can be sold as First Homes and should be considered to meet the definition of ‘affordable housing’ for planning purposes. A developer should be able to show that the homes they intend to sell as First Homes will meet the above criteria.

Paragraph: 002 Reference ID: 70-002-20210524

What is the legal mechanism to ensure that the discount is passed on to all future purchasers?

The landowner should enter into a planning obligation under section 106 of the Town and Country Planning Act 1990 enforceable by the local planning authority that:

(a) secures the delivery of the First Homes; and,

(b) ensures that a legal restriction is registered onto a First Home’s title on its first sale.

In most cases, these planning obligations should be entered into in the usual way prior to the grant of planning permission. The government will publish template planning obligations for this purpose, which the local planning authority can use as a basis for agreements prepared locally.

When a First Home is sold by the developer to the first owner, a restriction is to be entered onto the title register identifying the unit as a First Home. This restriction should ensure that the title cannot be transferred to another owner unless the relevant local authority certifies to HM Land Registry that the First Homes criteria and eligibility criteria have been met, including the discounted sale price.

To ensure consistency, and clarity regarding the status of First Homes, it is strongly recommended that the following model title restriction is used, which is a variation on a standard Form L restriction which has been prepared with HM Land Registry for this purpose. This model title restriction is part of the government’s published template planning obligations:

No disposition of the registered estate (other than a charge) by the proprietor of the registered estate or by the proprietor of any registered charge, not being a charge registered before the entry of this restriction, is to be registered without a certificate signed by [Local Authority] of [address] or their conveyancer that the provisions of clause XX (the First Homes provision) of the Transfer dated [Date] referred to in the Charges Register have been complied with or that they do not apply to the disposition

In circumstances where this restriction needs to be removed, such as an invocation of the Mortgagee Protection Clause, the Local Authority will be required to apply to enable the removal of the restriction.

Paragraph: 003 Reference ID: 70-003-20210524

Can the required minimum discount be changed?

In order to qualify as a First Home, a property must be sold at least 30% below the open market value. Therefore, the required minimum discount cannot be below 30%.

However, the First Homes Written Ministerial Statement does give local authorities and neighbourhood planning groups the discretion to require a higher minimum discount of either 40% or 50% if they can demonstrate a need for this. As part of their plan-making process, local planning authorities should undertake a housing need assessment to take into account the need for a range of housing types and tenures, including various affordable housing tenures (such as First Homes). Specific demographic data is available on open data communities which can be used to inform this process. The assessment will enable an evidence-based planning judgement to be made about the need for a higher minimum discount level in the area, and how it can meet the needs of different demographic and social groups.

In such circumstances, the minimum discount level should be fixed at either 40% or 50% below market value and should not be set at any other value. In each case, these percentages represent the minimum discount required for a home to qualify as a First Home. Developers who are able to offer higher discounts within their contributions should be free to do so but the local authority cannot require this. In such cases, whatever discount (as a percentage of market value) is given at the first disposal should be the same at each subsequent sale. These minimum discounts should apply to the entire local plan area (except if Neighbourhood Plans are in place in certain areas) and should not be changed on a site-by-site basis.

If local authorities or neighbourhood planning groups choose to revise their required minimum discounts in any future alterations to their plans, this should not affect the minimum discounts required for previously sold First Homes when they come to be resold, as these will be bound by the section 106 agreements entered into at the time of their first sale.

Paragraph: 004 Reference ID: 70-004-20210524

Can the price cap be changed?

In order to qualify as a First Home, the initial sale of the home cannot be at a price greater than £250,000 (or £420,000 in Greater London) after the discount has been applied. Therefore, local authorities cannot set price caps higher than these national caps.

However, the First Homes Written Ministerial Statement of 24 May 2021 does give local authorities and neighbourhood planning groups the discretion to set lower price caps if they can demonstrate a need for this. Any local price caps should be determined through the plan-making process with regard to local income levels, related to local house prices and mortgage requirements.

Local price caps should not be set arbitrarily and should only be used if evidence demonstrates a need for intermediate housing at particular price points. Whilst the national standard price caps will be high for many local areas across England, homes built as First Homes will need to be of appropriate size and price for first-time buyers in any area. The national price caps should not be used as justification for delivering more expensive properties than are necessary or required in any area.

Paragraph: 005 Reference ID: 70-005-20210524

How should Open Market Value be established, and how is it ensured that the discount is genuine and not delivered through lower standards?

First Homes should be physically indistinguishable from the equivalent market homes in terms of quality and size. Developers should obtain a valuation from a registered valuer acting in an independent capacity, and that valuation should be in accordance with the Royal Institution of Chartered Surveyors red-book valuation guidance for new-build homes. When the home is resold in future, the seller should secure a valuation in the same way in accordance with RICS’s guidance.

When a mortgage or home purchase plan offer is being considered, the lender will also value the property in the usual way. The sale price of the property should not change unless this valuation is lower than the agreed sale price. In this case, the lender’s valuation (after the discount has been applied) should act as a price cap for the sale of the property.

Paragraph: 006 Reference ID: 70-006-20210524

First Homes eligibility criteria

Who is eligible to purchase a First Home?

A purchaser (or, if a joint purchase, all the purchasers) of a First Home should be a first-time buyer as defined in paragraph 6 of schedule 6ZA of the Finance Act 2003 for the purposes of Stamp Duty Relief for first-time buyers.

Purchasers of First Homes, whether individuals, couples or group purchasers, should have a combined annual household income not exceeding £80,000 (or £90,000 in Greater London) in the tax year immediately preceding the year of purchase.

A purchaser of a First Home should have a mortgage or home purchase plan (if required to comply with Islamic law) to fund a minimum of 50% of the discounted purchase price.

These national standard criteria should also apply at all future sales of a First Home.

Paragraph: 007 Reference ID: 70-007-20210524

Can authorities apply their own eligibility criteria?

As part of the section 106 agreements, local authorities or neighbourhood planning groups can apply eligibility criteria in addition to the national criteria described above. This may involve lower income caps (if this can be justified with reference to local average first-time buyer incomes), a local connection test, or criteria based on employment status. First Homes are designed to allow people to get on the housing ladder in their local area, and in particular to ensure that key workers providing essential services are able to buy homes in the areas where they work. Authorities can therefore prioritise key workers for First Homes, and are encouraged to do so, especially if they have an identified local need for certain professions. The definition of a key worker should be determined locally and could be any person who works in any profession that is considered essential for the functioning of a local area.

Local connections may include (but are not limited to) current residency, employment requirements, family connections or special circumstances, such as caring responsibilities. Authorities should consider the application of these discretions carefully and ensure they do not limit the eligible consumer base to the point that homes become difficult to sell.

Any locally set income caps should be considered with reference to mortgage requirements and loan-to-income ratios for appropriate homes for the area’s identified target market for First Homes. Income caps should not be set at a level which would prevent a borrower from obtaining a 95% loan-to-value mortgage for the discounted price of suitable properties.

Any local eligibility criteria will apply for a maximum of 3 months from when a home is first marketed. If a suitable buyer has not reserved a home after 3 months, the eligibility criteria (including income caps) will revert to the national criteria set out above, to widen the consumer base.

In recognition of the unique circumstances of the Armed Forces, local connection criteria should be disapplied for all active members of the Armed Forces, divorced/separated spouses or civil partners of current members of the Armed Forces, spouses or civil partners of a deceased member of the armed forces (if their death was wholly or partly caused by their service) and veterans within 5 years of leaving the armed forces.

Paragraph: 008 Reference ID: 70-008-20210524

What appropriate methods can local authorities use to set out their local requirements for First Homes, including both local First Homes criteria and local First Homes eligibility criteria?

Local planning authorities are encouraged to ensure that First Homes work well in their area, which may include requiring a higher minimum discount, lower price or income caps, or local connection/key worker requirements. Local planning authorities are also encouraged to make the development requirements for First Homes clear for their area. The most appropriate method or tool to do this will depend on individual circumstances for each local planning authority. These might include (but may not be limited to): publication of an interim policy statement, or updating relevant local plan policies. Local planning authorities should assess their own circumstances when considering the most appropriate way to achieve this in their context.

Paragraph: 009 Reference ID: 70-009-20210524

Disapplying the First Homes criteria and eligibility criteria

What is the Mortgagee Exclusion Clause?

Mortgagee Exclusion Clause should be present in all planning obligations which secure the delivery of First Homes, to ensure appropriate protection for lenders and encourage competitive lending rates. In its template planning obligations (when published), the government will set out an exemplar Mortgagee Exclusion Clause and, in the interest of consistency, it is strongly recommended that local authorities use this example.

The Mortgagee Exclusion Clause ensures that a regulated financial institution which has provided the finance necessary to support the purchase of a First Home (the Mortgagee) is not bound by the requirement to sell the home under the First Homes criteria to a person meeting the First Homes eligibility criteria in the event that they are enforcing their security against the property. The Mortgagee Exclusion Clause should provide that, in the event of the Mortgagee enforcing their security against the property, the property can be sold to anyone on the open market at open market value and the property will cease to be a First Home.

The Mortgagee Exclusion Clause should require that, once the Mortgagee has recovered the funds due to them under the security documentation, any remaining proceeds from the sale should be used to reimburse the local authority for the loss of the First Home from their area. This reimbursement should be up to (but should not exceed) the value of the discount, as a percentage of the sale price and net of any additional Stamp Duty liability that may be incurred from the sale by the seller. If the remaining proceeds from the sale of the property are not sufficient to cover the total percentage value of the discount, then all of the remaining proceeds should be transferred to the relevant authority. Further detail on how this should be calculated, including worked examples and further detail on when additional Stamp Duty liability may be incurred, will be published and appended to this Guidance in due course.

Once the Mortgagee has recovered their investment and the local authority has received the full amount owned to them as a percentage of the sale value of the home, any remaining profits from the sale should be returned to the home owner from whom the Mortgagee took possession.

Paragraph: 010 Reference ID: 70-010-20210524

Aside from the Mortgagee Exclusion Clause, can a property identified as a First Home ever be sold without the First Homes restrictions?

It is important that agreements to secure First Homes do not prevent homes from being sold for a long period and there may be circumstances where a suitable buyer for a First Home cannot be found, even when the local restrictions have been removed. Therefore, a local authority may include provisions in a section 106 agreement which allow a developer or First Home owner to sell a First Home on the open market and remove the title restriction, as long as certain conditions are met.

If such provisions are included, it should be expected that the seller (either the developer or a future First Home owner) compensates the relevant Authority for the loss of the affordable housing unit. As with the Mortgagee Exclusion Clause, this compensation should be the value of the discount the First Home was to be sold for, as a percentage of the final sale price (or, as much as possible of that value once the value of all lending against the property has been cleared) and net of any additional Stamp Duty liability incurred.

There should also be a requirement, within the agreement, that the home is marketed for at least 6 months in total and that all reasonable steps have been taken to sell the property (including, where appropriate, reducing the asking price).

Paragraph: 011 Reference ID: 70-011-20210524

Plan- and Decision-Making

Setting developer contributions for First Homes

How should developer contributions be secured for First Homes?

A minimum of 25% of all affordable housing units secured through developer contributions should be First Homes. It is expected that First Homes (and the mechanism securing the discount in perpetuity) will be secured through section 106 planning obligations.

In accordance with paragraph 62 of the National Planning Policy Framework, affordable housing is expected to be delivered on-site unless off-site provision or a financial contribution in lieu can be robustly justified, and the agreed approach contributes to the objective of creating mixed and balanced communities.

Where cash contributions for affordable housing are secured instead of on-site units, a minimum of 25% of these contributions should be used to secure First Homes. This could be achieved, for example, by acquiring additional First Homes from market development, paying the developer a sum to offset the discount from market price, and securing the tenure through section 106 planning obligations.

Where a mixture of cash contributions towards affordable housing and on-site units are secured, 25% of the overall value of affordable housing contributions should be applied to First Homes.

Paragraph: 012 Reference ID: 70-012-20210524

How can the 25% First Homes requirement be addressed in plans?

Plans should set out the contributions expected from development. This should include setting out the levels and types of affordable housing provision required. Subject to the transitional arrangements set out in paragraph 018, this should include policies for First Homes.

Policies for First Homes should reflect the requirement that a minimum of 25% of all affordable housing units secured through developer contributions should be First Homes.

Paragraph: 013 Reference ID: 70-013-20210524

What makes a policy compliant planning application for First Homes?

A policy compliant planning application should seek to capture the same amount of value as would be captured under the local authority’s up-to-date published policy.

For example, a local policy may require 20% affordable housing on site, half of which is shared ownership, and half of which is social rent. The plan viability assessment should set out assumptions on the amount of value captured – for example, a social rent home may be discounted by 50% from market value, and a shared ownership home may be discounted by 20%. This allows the total value captured under the policy to be calculated. This value can then be reallocated to a different affordable housing mix under the new policy.

In addition to capturing the same amount of value towards affordable housing as the existing policy, where onsite affordable housing is required, a policy compliant application will have a minimum of 25% of affordable housing units on-site as First Homes.

Paragraph: 014 Reference ID: 70-014-20210524

How should the remaining 75% of affordable housing be secured through developer contributions?

Once a minimum of 25% of First Homes has been accounted for, social rent should be delivered in the same percentage as set out in the local plan. The remainder of the affordable housing tenures should be delivered in line with the proportions set out in the local plan policy.

For example, if a local plan policy requires an affordable housing mix of 20% shared ownership units, 40% affordable rent units and 40% social rent units, a planning application compliant with national policy would deliver an affordable housing tenure mix of 25% First Homes and 40% social rent. The remainder (35%) would be split in line with the ratio set out in the local plan policy, which is 40% affordable rent to 20% shared ownership, or 2:1. 35% split in this way results in 12% shared ownership; and 23% affordable rent.

In another example, if a local plan policy requires 80% of units to be shared ownership and 20% to be social rent, a policy compliant application would deliver 25% First Homes units, 20% social rent and 55% shared ownership.

If a local authority has an up-to-date policy on cash contributions in lieu of onsite contributions, then a planning application compliant with national policy will align with this approach.

Paragraph: 015 Reference ID: 70-015-20210524

Can the Community Infrastructure Levy be collected on First Homes development?

The Community Infrastructure Levy (CIL) Regulations 2010 (as amended) make provisions for charging authorities to give relief or grant exemptions from the levy. These regulations allow developers of First Homes to obtain an exemption from the requirement to pay CIL.

Mandatory social housing relief can apply in respect of dwellings where the first and subsequent sales are for no more than 70% of their market value. To be eligible, a planning obligation must be entered into prior to the first sale of the dwelling designed to ensure that any subsequent sale of the dwelling is for no more than 70% of its market value. This relief will therefore be available for First Homes. Regulations 49-54 of the Community Infrastructure Levy Regulations (as amended) defines where social housing relief applies.

See related CIL guidance – Relief and Exemptions.

Paragraph: 016 Reference ID: 70-016-20210524

First Homes in Plan Making and Decision Making

How can neighbourhood plans support the provision of affordable homes for sale, including First Homes?

Neighbourhood planning groups can support the provision of all forms of affordable housing for sale, including First Homes, by including relevant policies and identifying suitable sites within neighbourhood plans for these homes.

In addition to this neighbourhood planning groups can also put in place neighbourhood development orders, able to grant planning permission directly for schemes that can incorporate affordable homes for sale, including First Homes.

Depending on the content of relevant strategic policies in the local plan or spatial development strategy, neighbourhood plans may be able to vary the types of affordable housing that will be expected, or to allocate additional sites that will provide affordable housing, where this will better meet the needs of the neighbourhood area. Neighbourhood plans can also develop policies that make use of the flexibilities afforded to them under First Homes policy.

Paragraph: 017 Reference ID: 70-017-20210524

Is there a transition period for plan-making?

As set out in the First Homes Written Ministerial Statement of 24 May 2021, local plans and neighbourhood plans that have reached advanced stages of preparation will benefit from transitional arrangements. Local plans and neighbourhood plans submitted for examination* before 28 June 2021, or that have reached publication stage** by 28 June 2021 and subsequently submitted for examination* by 28 December 2021, will not be required to reflect the First Homes policy requirement.

For areas that do not meet the criteria for transitional arrangements, new development plans, including local plans and neighbourhood plans, should take account of the new First Homes requirements from 28 June 2021.

*‘submitted for examination meaning: Regulation 15 of the Neighbourhood Planning (General) Regulations 2012 for Neighbourhood Plans, and Regulation 22 of Town and Country Planning (Local Planning) (England) Regulations 2012 for Local Plans.

** ‘reached publication stage’ meaning: Regulation 14 of the Neighbourhood Planning (General) Regulations 2012 for Neighbourhood Plans, and Regulation 19 of the Town and Country Planning (Local Planning) (England) Regulations 2012 for Local Plans.

Paragraph: 018 Reference ID: 70-018-20210524

Do local planning authorities have to apply the First Homes policy requirements when determining planning applications where local or neighbourhood plans have been adopted/made under the plan-making transitional arrangements?

As set out in the Written Ministerial Statement, where local and neighbourhood plans are adopted under the aforementioned transitional arrangements, the First Homes requirements will also not need to be applied when considering planning applications in the plan area until such time as the requirements are introduced through a subsequent update.

Planning Inspectors should consider through the examination whether a requirement for an early update of the local plan might be appropriate.

Paragraph: 019 Reference ID: 70-019-20210524

Is there a transition period for decision making?

The new First Homes policy requirement does not apply for the following:

  • sites with full or outline planning permissions already in place or determined (or where a right to appeal against non-determination has arisen) before 28 December 2021
  • applications for full or outline planning permission where there has been significant pre-application engagement which are determined before 28 March 2022; and
  • sites where local and neighbourhood plans are adopted/made under the transitional arrangements, as detailed in paragraphs 18 and 19. These transitional arrangements will also apply to permissions and applications for entry-level exception sites.

If an applicant wishes to amend a planning application to include First Homes which is already submitted and likely to be granted before these dates, the local planning authority should be flexible in accepting First Homes as an alternative type of tenure.

Local authorities should have flexibility to accept alternative tenure mixes for planning applications that are determined within the timescales identified above, although they should consider whether First Homes could be easily substituted for another tenure, either at 25% or a lower proportion.

Paragraph: 020 Reference ID: 70-020-20210524

What constitutes ‘significant pre-application’ engagement?

For the purposes of the First Homes policy, significant pre-application engagement means any substantive discussions between the local planning authority and the applicant relating to the proposed quantity or tenure mix of the affordable housing contribution associated with that application.

Paragraph: 021 Reference ID: 70-021-20210524

Does the First Homes requirement apply to variations or amendments to existing planning permissions?

The policy does not apply to applications made under section 73 of the Town and Country Planning Act 1990 to amend or vary an existing planning permission unless the amendment or variation in question relates to the proposed quantity or tenure mix of affordable housing for that development.

Paragraph: 022 Reference ID: 70-022-20210524

How does the requirement for 25% First Homes interact with the requirement in the National Planning Policy Framework that where major development is proposed, at least 10% of homes should be available for affordable home ownership?

The 25% expected First Homes contribution for any affordable product can make up or contribute to the 10% of the overall number of homes expected to be an affordable home ownership product on major developments as set out in the NPPF.

This will vary depending on local circumstances, notably what the development plan may set out in terms of proportions of different affordable home tenures. For example, a development of 100 homes in a local authority with a policy for 40% affordable housing contribution on major sites would therefore be expected to provide 40 affordable homes to comply with local policy, of these: 25% of these affordable homes would be expected to be First Homes, (10 homes). This would also meet the expectation set out in the NPPF – as 10% of the total number of homes would be an affordable home ownership product.

If a planning application for a major housing site in which 25% of the affordable homes are First Homes does not deliver enough First Homes to meet the 10% affordable home ownership expectation in the NPPF, additional affordable home ownership homes may be provided on top of the First Homes provision, in order to meet this expectation.

For example, a development of 80 homes in a local authority with a policy for 30% affordable housing would be expected to provide 24 affordable homes to comply with local plan policy. 25% of these affordable homes would be expected to be First Homes, which would equate to 6 First Homes (7.5% of the total number of homes provided). The expectation that at least 10% of homes on this site to be available for affordable home ownership would equate to 8 homes so an additional 2 affordable home ownership products would be expected.

Paragraph: 023 Reference ID: 70-023-20210524

Exception sites

First Homes exception sites

What is a First Homes exception site?

A First Homes exception site is an exception site (that is, a housing development that comes forward outside of local or neighbourhood plan allocations to deliver affordable housing) that delivers primarily First Homes as set out in the First Homes Written Ministerial Statement.

Paragraph: 024 Reference ID: 70-024-20210524

Where can First Home exception sites come forward?

First Homes exception sites can come forward on unallocated land outside of a development plan. They cannot come forward in areas designated as Green Belt, within the Broads Authority, or in designated rural areas as defined in Annex 2 of the National Planning Policy Framework. In these areas rural exception sites are the sole permissible type of exception site.

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What evidence can be used to in demonstrating that a proposed First Homes exception site is proportionate in size to the existing settlement?

For decision making, what constitutes a proportionate development will vary depending on local circumstances. As part of their process for preparing planning applications, applicants should consider engaging a relevant built environment professional to provide advice on the scale of their proposal and also consider proactively engaging with local authorities where possible to discuss their proposals.

For plan making, local authorities and neighbourhood planning qualifying bodies are encouraged to set policies which specify their approach to determining the proportionality of First Homes exception site proposals, and the sorts of evidence that they might need in order to properly assess this.

Paragraph: 026 Reference ID: 70-026-20210524

Can First Homes exception sites deliver market housing?

First Homes exception sites can deliver a small proportion of market housing, provided that it can be demonstrated that this is necessary in order to ensure the overall viability of the site. Local authorities and neighbourhood planning groups can set policies that specify in further detail the proportions of market housing would be considered acceptable, and under what circumstances.

Paragraph: 027 Reference ID: 70-027-20210524

What sort of evidence can be provided in order to justify the inclusion of a small proportion of market housing on First Homes exception sites?

Applications for First Homes exception sites that propose the inclusion of a small proportion of market housing will be expected to provide evidence that the site would be unviable without such housing being included, for instance in situations where the development faces significant and unexpected delivery costs. Evidence would typically be in the form of a detailed viability assessment prepared in line with Planning Practice Guidance on Viability in Decision Taking.

Paragraph: 028 Reference ID: 70-028-20210524

Under what circumstances can other types of affordable housing come forward on First Homes exception sites?

Where local evidence suggests that a significant local need exists for one or more other forms of affordable housing on a proposed First Homes exception site, applicants may alter the proportions of affordable housing to include small quantities of other affordable housing products. Applicants will be expected to provide evidence of this need in the form of a Local Housing Needs Assessment, local authority Housing Register, or other sufficiently rigorous local evidence.

Paragraph: 029 Reference ID: 70-029-20210524

Published 24 May 2021