02 Feb 2022

First Homes - what will it mean for rural areas?

First Homes was heralded as a mechanism to increase affordable housing, but it is having the reverse effect in rural areas. This is the headline conclusion of research undertaken by the Rural Services Network (RSN) and informs four recommendations to Government. Rural housing expert and author of the RSN network First Homes report, Jo Lavis, explains more.

In November 2021, six months since the introduction of First Homes, the RSN undertook a survey of its members to gain a better understanding of how the policy was playing out. Twenty-seven of its member local authorities from across the country responded which revealed four principal findings.

First Homes will not be an affordable option in many rural communities or meet local housing need

Meeting the NPPG prescription that there can only be a single level of discount for First Homes across a council area places planning authorities in a quandary. Setting a low discount that makes delivery of First Homes viable in their lower value areas may not be sufficient to make the First Home affordable in their higher value rural communities.

66% (18) respondents stated that the chosen discount would result in First Homes not being affordable in parts of their area.

52% (14) respondents stated that it would be helpful if they could apply different discount rates to make First Homes an affordable option in all parts of their area, reflecting the different value housing markets in their area.

Respondents also noted that the needs of the local population will not be met as the unaffordability of First Homes will mean that they will not be sold to those with a local connection within the 3 months before the local connection criteria fall away.

There will be a reduction in the supply of affordable rented housing, which evidence shows to be the tenure most needed in rural communities

Inevitably, stipulating that 25% of the affordable housing contribution on S106 sites should be First Homes will reduce supply of other tenures. This was confirmed by the survey with the vast majority of respondents now being able to evidence that this was the case.  62% also reported that the greatest reduction will be in shared ownership housing. In itself this may not be problematic if First Homes provides a more affordable product.  However, 52% of respondents noted that their housing association partners had stated this will affect their ability to cross-subsidise affordable rented housing, thus potentially further reducing its supply.

Early warning of the negative impact of First Homes Exception Sites on supply of Rural Exception sites

Most respondents operate in Designated Rural Areas where First Homes Exception Site policy does not apply.  In those where it does most felt it was too early to judge the impact.  However, in the small number of cases where First Home Exception Sites have been pursued, they have both replaced rural exception sites and attracted a higher land price than would conventionally be paid for a rural exception site.

In the light of these findings the research recommends:

  • Changes to NPPG and/or NPPF that give local planning authorities the discretion to:
    • Set variable discounts so First Homes are affordable in all parts of their areas
    • Set % First Homes contributions based on the evidence of need in the different parts of the Local Plan area
    • Adopt different price caps so First Homes are affordable and of a size and type appropriate to First Time buyers.
  • Allow Homes England grant subsidy where it is evident that First Homes has squeezed out the cross- subsidy that otherwise would have been provided by Shared Ownership housing
  • Government fulfils its commitment to monitor the impact of First Homes Exception Sites on the supply of Rural Exception Sites and the extent to which tenure of FHES meets locally evidenced need
  • As a matter of urgency Government issues the S106 and other template documentation that it has committed to providing.