The UK government has outlined initial plans to provide first-time buyers with a 30-50% discount on new properties.
The First Homes Scheme will launch at the end of June 2021, just as the stamp duty holiday is scheduled to be tapered out, and will be open to first-time mortgage-borrowers who have a joint household income of less than £80,000, or £90,000 in London, and who could not otherwise afford to buy a home.
The offer will be available on homes worth no more than £250,000 after the discount has been applied, a figure which extends to £420,000 in London. The exact discount rate will be governed by local authorities.
Too good to be true?
As with all government initiatives, there are, of course, catches. First of all, Housing Minister, Christopher Pincher, has confirmed that the scheme will only be available to buyers with a mortgage of at least 50% of the property’s value. He said that this is a bid to deter property investors from taking advantage of the discount.
Elsewhere, critics of the scheme have warned it will result in further tightening the supply of social housing as well as rented homes. This is due to the fact that developers will be required to assign a quarter of its legal affordable housing quota over to the scheme, homes which could otherwise have been made available to rental tenants and those most in need instead of households with an £80,000 income.
In response, the government has said that it ”recognises the importance of social rent as part of the affordable housing tenure mix.
“A local authority should prioritise securing their policy requirements on social rent, once they have secured the 25% First Homes requirement.
“Where other affordable housing units can be secured, these tenure-types should be secured in the relative proportions set out in the development plan.”
More Homes Are Still Desperately Needed
It’s important to note that this will not result in a higher number of new homes being built, just that some of those already scheduled to be built will be made available at the discount rate. So, while some people will now be in a better position to afford to buy, house prices are going to continue to rise.
The First Homes Scheme is further proof that the UK government is determined to make homeownership a central priority in the post-Covid world. The economy has been decimated and housing is a great way of getting it back to strength. The government wants prices to be high, and developers want demand to outweigh supply. Until these two motivations are somehow taken away, home ownership will never be truly in reach for millions of UK citizens.
