Over the years there have been multiple schemes introduced by governments of all colours aimed at helping private renters become homeowners. First Homes represents the latest iteration.
Although First Homes officially launches this month, in reality, it is going to take several years before homes start being delivered in meaningful numbers. The headline 30% discount will be secured through a planning condition for future developments, which means construction of the homes themselves is only likely to begin in the next 18 or so months.
Government plans suggest that First Homes will comprise a quarter of the affordable housing element on every site (of nine or more homes). This means that if a housebuilder is delivering 100 homes, 40% of which are affordable, around 10 properties will be offered as First Homes. The rest of the affordable element is still likely to be delivered as a mix of shared ownership and affordable rent, as it is today.
However, the First Homes scheme isn’t going to work for every type of home, in every area. The price caps mean that the scheme is likely to be limited to flats in London and more expensive parts of Southern England - just as Help to Buy has been since the introduction of price caps. Unlike Help to Buy, however, First Homes are likely to be situated on their own part of a site, offered with a specification that is on par with shared ownership homes, and bought by those struggling to get onto the housing ladder.
While details of mortgage products are yet to be announced, it seems likely that buyers will be able to put down 5% deposits. Due to the discount, this means deposit requirements will sit around 30% below what would be needed to buy the same home using Help to Buy, but around three times larger than the requirement to buy using the minimum shared ownership stake.
The good news for would-be buyers is that the 30% discount offered to first-time buyers also knocks up to £20,000 off the required household income to buy in London and £12,000 outside the capital. This means that First Homes will become one of the cheapest paths to homeownership. Monthly repayments will be less than what it would cost if the same home was bought using either Help to Buy or Shared Ownership.
While this will undoubtedly help some lower-earning renters access homeownership, it is likely to be relatively small in scale. There have been around 50,000 homes bought using the Help to Buy scheme each year, similar to the number of affordable homes built. When the First Homes scheme is up and running it’s likely to account for just a quarter of these.