Updates on new shared ownership model and delivery of First Homes

The government has released the outcomes of two separate consultations, confirming important details of the new shared ownership model, and the delivery of First Homes via developer contributions.

You can read our responses, submitted on behalf of the social housing sector, as part of the shared ownership consultation and the First Homes consultation last year.

We welcome the news that the threshold for delivering affordable housing via developer contributions will remain unchanged. We argued strongly on behalf of our members that this would jeopardise affordable housing delivery in many parts of the country, particularly in rural areas, and undermine the development programmes of small and medium size housing associations in particular. We are pleased that the government has listened to these concerns and retained the current threshold.

New shared ownership model

The details of the new shared ownership model are broadly as proposed in the recent consultation. We are pleased that we were able to secure some important features of the model – in particular the £500 annual cap on repair costs and explicit recognition that the increased costs should be reflected in grant rates. We remain concerned, however, about the administrative burden the new model will place on providers, and the untested nature of the model. Its key features are:

• A reduction in the minimum first tranche share to 10%.
• The ability of shared owners to staircase by 1% annually for up to 15 years, at a value based on the original purchase price uprated by the local House Price Index (and a reduction in the minimum staircasing threshold from 10% to 5%).
• A ten-year ‘repair free period’ during which the landlord would fund repairs worth up to £500 per year, with a one-year rollover, with the shared owner responsible for undertaking repairs.
• A transition period for homes delivered under Section 106 agreements, for homes with outline or full planning permission.

We know that NHF members had a range of views on how the ‘repair free period’ should operate in practice, and that some members will be concerned about how to implement the resident-led approach set out by the government. We know members will think carefully about this, and we will look to support the sector by sharing best practice and approaches.

In addition, the government has announced that homes delivered under the new model will need to be issued with a minimum 990 year lease term. Additionally, there will be a statutory right to a lease extension for shared owners, by 990 years where the shared ownership landlord is also the freeholder. This will require legislation, and the government has committed to working with us and our housing association members on the details of this change.

The government has also confirmed that in the next few weeks they will release the new model lease, and the Written Ministerial Statement which will require the new shared ownership model to be delivered via Section 106.

First Homes consultation

The government has also confirmed how First Homes will be delivered via Section 106 developer contributions. It consulted on this last summer, after confirming the overall design of the First Homes model. The model will lower deposit and mortgage requirements – saving first-time buyers around £100,000 on the price of an average property. Today's response from the government confirms that:

• 25% of affordable homes delivered through Section 106 developer contributions will be required to be First Homes.
• For the remaining 75% of affordable homes, the local authority should prioritise meeting its policy requirements for social rent. Once this has been delivered, the remaining tenures (eg affordable rent, shared ownership) should be delivered in the proportions set out in the local plan.
• The current exemptions for delivery of affordable home ownership homes will also apply to First Homes – this includes 100% affordable developments.
• Transitional arrangements will mean that First Homes are not required on sites with full or outline planning permission already in place or determined within six months of the policy being implemented (or nine months if there’s been 'significant pre-application engagement'). Local or neighbourhood plans submitted for examination before implementation, or within six months, will not need to include First Homes.

We welcome the priority attached to delivery of social rent, but continue to note the impact that First Homes will have in reducing shared ownership delivery and were pleased to see this acknowledged in the government’s response, alongside a commitment to work with the sector to understand and seek to mitigate any impact.

In recent meetings with ministers and senior officials, we have consistently argued that housing associations remain ambitious partners to deliver much-needed affordable homes, while also highlighting the challenges you face in doing so. Today’s announcements provide some further clarity but we know they don’t fundamentally address the barriers many housing associations are grappling with. We will continue to work with members and with the government to understand and address these issues.

We will share a full member briefing on the changes. If you have any questions in the meantime please contact Head of Policy, Will Jeffwitz, using the details below.