The new model of shared ownership and First Homes – changes to planning policy

Summary

The government has confirmed operational details for the new model of shared ownership and First Homes programme.

The changes to planning policy are quite substantial and deal with various issues, including:

• The definition of a First Home.
• Eligibility criteria for First Homes.
• Setting developer contributions for First Homes.
• The remaining 75% of affordable housing secured through developer contributions.
• Plans, development management and transitional arrangements.
• Level of discount.
• Exception sites.
• Delivering shared ownership homes.

This webpage summarises key information on First Homes and the new model of shared ownership, with a focus on these changes to planning policy. The Written Ministerial Statement (WMS) should be read alongside our summary for each policy area.

First Homes

First Homes are the government’s new preferred discount market tenure, and planning policy has been amended so that from 28 June 2021 they should be delivered at 25% of on-site developer contributions for affordable homes.

Government guidance confirms that a First Home must be discounted by a minimum of 30% against the market value, and, after the discount has been applied, the first sale of the home must be at a price no higher than £250,000 (£420,000 in Greater London). Local authorities can set a larger discount where high house prices demand it.

The discount remains with the property in perpetuity, and when it is first sold, a restriction is registered with HM Land Registry to ensure that it is passed on every time the property is sold.

Properties will only be able to be marketed as First Homes if the discount is applied and sold to those that meet a certain criteria for eligibility – first-time buyers, with a combined income not exceeding £80,000 (£90,000 in Greater London), and with a mortgage or home purchase plan to fund at least 50% of the purchase price. You can read the eligibility criteria in full on the government’s website.

Implications for planning

• It is expected that First Homes will account for the delivery of 25% of Section 106 developer contributions on-site and in the limited circumstances where an off-site contribution is made, 25% of payment should be used to secure First Homes elsewhere.
• On sites, after 25% First Homes are accounted for, it is expected the remaining 75% of developer contributions will be allocated to delivering social rent, followed by other affordable tenures in line with the proportions set out in Local Plans.
• In areas where local plans and neighbourhood plans have reached advanced stages of preparation, transitional arrangements will apply. This means those that have reached publication stage by 28 June 2021, and are subsequently submitted for examination by 28 December 2021, will not be required to meet the First Homes policy requirement.
• Areas that are not as advanced in development for their local plans will be required to take account of the First Homes policy requirements from 28 June 2021.
• In relation to existing planning applications, sites with full or outline planning permissions already in place or determined before 28 December 2021 will not be required to comply with First Homes policy. Further to this, applications for full or outline planning permission will not be required to comply with First Homes policy where there has been significant pre-application engagement and are determined before 28 March 2022.
• As set out in the Ministerial Statement, developments of 100% affordable housing are exempt from the First Homes requirement.

New model for shared ownership

The government recognise the role that shared ownership has to play in supporting people onto the housing ladder. After consultation they announced that a new model will extend the benefits of the product and will help potential homeowners overcome some of the financial barriers to getting on the ladder. 

All new shared ownership properties delivered via developer contributions through Section 106 will be required to be based on the new model, as will homes delivered via the Affordable Homes Programme. This expectation will come into effect on 28 June 2021.

Policy details from the technical consultation on the new shared ownership model, which ran at the end of 2020, will also take effect from 28 June 2021. The new model allows people to buy an initial stake in a shared ownership property at 10% rather than the existing minimum of 25%, and these new shared owners will also benefit from a 15-year period when they can staircase at 1% increments per year with reduced fees.

Owners wishing to staircase in higher tranches will be able to do so with the minimum additional share purchase reduced to 5%. However, doing so will incur the same range of fees as currently, such as legal and mortgage costs and valuation fees as appropriate.

New shared ownership properties will now come with a 10-year repairs and maintenance period during which landlords will assist owners with the costs up to £500 a year, rolled over for one year. Only after 10 years will the shared owner take on full responsibility for any repairs and maintenance costs.

Shared ownership properties delivered under the new model will also have 990-year leases as standard.

Implications for planning

• Much like First Homes, the requirement for the new shared ownership model will not apply to sites with full or outline planning permissions already determined or in place before 28 December 2021 or 28 March 2022 if there has been significant pre-application engagement.
• There is flexibility in the system to allow local authorities to permit developers to introduce the new shared ownership model earlier if they wish to do so.
• The local and neighbourhood plan transitional arrangements set out above for First Homes also apply to the new requirement for the new shared ownership model.