The government’s proposed discounted homeownership scheme could hit the number of other sub-market tenures being delivered, sector figures have warned.
Last week, housing secretary Robert Jenrick unveiled a consultation on the design and delivery of the First Homes scheme, which will offer discounts of 30% to first-time buyers, in particular targeting key workers and armed forces veterans.
The discounts are likely to come in part through Section 106 contributions from developers. As part of its consultation, the government is asking whether a proportion of affordable homes currently delivered through Section 106 should be designated for First Homes.
The alternative would be that a proportion of all units on projects over a certain size are delivered as First Homes. In the consultation, the Ministry of Housing, Communities and Local Government said that this second option “would allow wider Section 106 affordable housing delivery to continue” but warned that it could have an impact on site viability and lead to delays.
According to the National Housing Federation, around half of all new affordable homes are delivered through developer contributions under Section 106. It said it was “concerned that diverting funding for First Homes will make it more difficult to provide homes for people on lower incomes”.
It also said that “a significant increase in government funding” would be needed if the proposals for First Homes were to go ahead.
Polly Neate, chief executive of Shelter, added: “The country desperately needs more low-cost homes which are genuinely affordable to those people who are struggling at the sharp end of the housing crisis.
“However, instead of offering a route to building additional low-cost homes, this policy simply puts at risk the social homes currently being built.”
However, in the consultation document released last week, the government said “it is not our expectation that our First Homes policy will have a negative impact on homebuilding rates”.
It added: “We are mindful of the trade-off between the level of ambition for First Homes, funded through developer contributions, and the supply of other affordable housing tenures.”
According to government figures, around 40% of affordable homes delivered through Section 106 in 2018/19 were for “affordable homeownership”, which typically meant shared ownership.
Including the 4,000 homes the government says it will deliver through “exception sites”, maintaining that 40% proportion of Section 106 units would result in 12,000 First Homes being built annually. However, the consultation is asking whether the target proportion of homeownership units delivered under Section 106 should be increased to 60% or 80%, meaning up to 19,000 First Homes could be delivered.
In a wide-ranging consultation document, ministers are also asking about the best means of delivering the scheme. It says the government is “minded to leave the details of administration to local authorities” as part of their affordable homes provision, but added these could be “outsourced” to housing associations.
The document confirmed that the discount on First Homes properties would be applied in perpetuity (although this could be waived in the event of a mortgage default). It also confirmed that homes delivered under the scheme would likely be exempt from the Community Infrastructure Levy.
Each month Social Housing focuses on a specific aspect of housing finance and collates and scrutinises the data for hundreds of housing organisations.
The reports below contain unparalleled commentary and analysis along with detailed sortable and searchable data tables.
Unit costs 2019 Our analysis of data from the English regulator has found that unit costs have risen among all types of housing association, with overall maintenance costs seeing the highest weighted average increase of nearly seven per cent
Impairment 2019 Housing associations’ impairments rise almost 40% in a year, driven by fire safety costs, contractor insolvencies and reduced land values
Global accounts 2018/19 Housing associations’ surplus for the year before tax decreased by five per cent to £3.76bn, driven by a 6.6 per cent drop in England
Affordable rent profile 2018/19 The level of affordable lettings dropped for the third year in a row
Staff pay Data from audited accounts of 206 housing associations shows that average staff pay in 2018/19 was £31,787 – a rise of 3.2 per cent over a 12-month period
Professionals’ league Our exclusive professionals’ league finds that activity continued apace in 2019, when housing associations increasingly looked to private placements
Sales proceeds Despite a 10 per cent rise in housing associations’ income from development sales in the last financial year, sales revenue is likely to remain flat over the coming years as a result of the property market downturn
Capital commitments The total capital commitments of 200 housing associations rose by 15 per cent in the past year, analysis by Social Housing has found
Reliance on sales surplus Social Housing finds that the total sales surplus of 150 English registered providers has dropped by nearly 10 per cent, as a result of lower market sales surplus
Stock dispersal How many council areas does your housing association operate in? How concentrated is its stock?
Accounts digest 2018/19 How does your housing association’s finances compare to others?
Housing Revenue Account part two How do councils compare in their 2018/19 Housing Revenue Account positions? Steve Partridge of Savills takes an in-depth look
Diversification of income We look at how housing associations are diversifying their income, and finds that they made 10.3 per cent more revenue from shared ownership and non-social housing activity
Impairment 2017/18 Social Housing takes a close look at the accounts of the 130 largest housing associations, and finds that impairments rose by nearly a third to £78.4m in 2018
Global accounts Social Housing’s analysis of the sector’s global accounts finds that housing associations’ pre-tax surplus fell last year – driven by drops in England, Scotland and Wales (August 2019)
Affordable rent profile We find that the number of affordable rent lettings recorded last year by housing associations in England has dropped for the second year in a row, suggesting that the sector is shifting away from the tenure
Capital commitments We scrutinise the capital commitments of the 208 largest housing associations in the UK (June 2019)
Housing Revenue Account part one Steve Partridge of Savills takes a look at the financial factors councils should consider in their Housing Revenue Account business planning (May 2019)
Reliance on sales surplus Our analysis reveals that profits form 42 per cent of 150 English housing associations’ total surplus (April 2019)
Sales proceeds We look at housing associations’ build-for-sale income and find a two per cent increase in 2017/18 (March 2019)
Shared ownership sales England, excluding London, has seen a four per cent rise in shared ownership sales – much lower than last year’s 16 per cent increase (February 2019)
Stock dispersal We show that housing associations’ general needs stock is becoming more concentrated within their local authority areas (January 2019)
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