First homes: how will it work?

The government is tinkering with the housing market. Again!  Desperate to come up with initiatives to help new buyers in more expensive areas, it plans to subsidise batches of homes in new developments so they can be sold by the builders at a 30% discount.  The scheme will be called First Homes. So what do we know about it so far?

Well, unlike other recent news from the Treasury about a potential “mansion tax”, this isn’t a leak that journalists would call kite-flying – i.e. a possible policy that’s put out in the media to see what the public thinks of it. It looks like First Homes is very likely to happen, though it has currently been put out to consultation. That process closes on 3 April.

All we know so far is that military veterans and key workers such as nurses, police officers and firefighters will get priority access to the scheme – though it’s not clear how applicants will be vetted.

Unlike the right-to-buy scheme, anyone who bags a discounted home under this scheme will not be able to sell it at full market value in the future and trouser all the profit.

And unlike the Help to Buy shared equity scheme, nobody will have to be repaid when the house comes to be sold. That’s a big positive. Instead, the 30% discount will be locked in permanently and the property sold at a 30% discount to its then valuation.

Deja vu?

First Homes

However, First Homes (unsurprisingly!) has been greeted with a healthy dose of scepticism from commentators. Some believe it could very well go the same way as Starter Homes: not a single new home was built under that policy, according to the National Audit Office. There is hope that stricter rules this time will prevent the same problems, but there is another unintended consequence to consider.

Could First Homes end up pushing other types of affordable housing for young people, such as controlled rents and shared ownership, out of developers’ plans? Commentators worry that the government is effectively switching its young housing subsidy from the private rented and shared ownership sector to the new-build buying market.

And let’s face it – developers haven’t covered themselves in glory when it comes to providing the affordable homes that Britain’s young people really need. Flaws in previous housing policies have been ruthlessly exploited by Britain’s big house builders to ensure they can sell the crappiest houses at the highest market prices. It’s clear this policy is going to require VERY close scrutiny and oversight from the government to ensure this doesn’t happen again.

Furthermore, First Homes don’t address the housing market’s addiction to Help to Buy, the controversial equity loan scheme will is supposed to disappear in 2023 but could continue into the future if housebuilders get their way. Which, let’s face it, they usually do.

The government has promised to deliver more than one million new homes over five years to make housing more affordable. Unfortunately, we’ve heard these kind of ambitious pledges before – what’s really needed is a wholesale reform of planning regulations and a blueprint for a housing market post-Help to Buy. Otherwise, young would-be buyers can expect more of the same for many more years to come.

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