Will First Homes 30% discount scheme be enough? Just one in 10 Londoners can afford a home under new Government initiative for 2021

The Government’s latest affordable housing initiative will be beyond budget for many of the key workers it is meant to help.
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Anna White22 July 2020

Only 10 per cent of full-time working Londoners can afford to buy a home using the Government’s new affordable housing scheme, designed to help Covid-19 heroes.

First Homes is the latest high-profile initiative, conceived to get key workers such as nurses, firefighters and teachers on to the property ladder in their local area. It will be piloted next year, offering a 30 per cent discount on certain new-build homes which would then be passed on to future buyers.

The 1,500-home trial was announced this month as part of the Government’s £12 billion post-pandemic affordable homes package. It is considered to be the replacement for Help to Buy when it ends in 2023.

A Housing Ministry spokesman said: “We recognise the significant contribution made by key workers during the coronavirus pandemic. The Government’s First Homes scheme will cut the costs of some new homes by a third for first-time buyers, with councils able to prioritise frontline workers.”

Bronze, Wandsworth: flats and duplexes are priced from £445,000. One-bedroom flats are available with Help to Buy

How does First Homes work ⁠— and who will actually benefit?

But analysis exclusive to Homes & Property reveals a little over 200,000 individuals in London, working full-time, could afford the average first-time house price of £479,000, even after applying for the 30 per cent discount.

Buyers wishing to use the First Homes scheme would need a salary of £71,000-plus after the third off, research by property group JLL shows. This only accounts for 10 per cent of the full-time workforce.

This calculation includes the aspiring buyer’s five per cent deposit and is based on a mortgage being secured at 4.5 times annual salary. In contrast, about 14 per cent of London’s full-time employees could afford an average-priced home in the capital using Help to Buy.

Outside London it is a different story. About 40 per cent of the UK’s full-time employees could afford to buy an average-priced home of £233,000 using First Homes, compared with 30 per cent who can use Help to Buy.

JLL analyst Veronica Spanos McGill is calling for the Government to increase the size of the discount in London to allow for the much higher house prices.

Another criticism levelled at the First Homes scheme is its impact on other affordable housing products such as shared ownership, intermediate rent and social rent.

Upton Gardens, East Ham: the redeveloped West Ham Utd FC ground, by Barratt London, has homes from £474,000

How the scheme will be funded

First Homes will be funded out of a developer’s section 106 social contribution. This is when a housebuilder, in return for profiting from building and selling private homes in an area, must give back to the community.

A section 106 contribution can range, for example, from social housing to a new library and is negotiated with a council. The more First Homes are built, the less social housing, or accommodation for the homeless, could be delivered.

First Homes is a “comfort blanket to help the lucky few”, says Polly Neate, chief executive of homelessness and housing charity Shelter. “It will provide nothing for those at the sharp end of the housing crisis,” she warns.

The Tories have pledged 19,000 new homes under the First Homes umbrella available by the mid-2020s. And JLL’s Spanos McGill points to one positive. “The discount on a First Homes house remains in perpetuity. This means it will stay as an affordable home for generations to come, unlike Help to Buy which does not benefit a future buyer.”