Boris Johnson to offer first-time home buyers big discounts to help more people onto housing ladder

Boris Johnson could offer first-time home buyers massive discounts to stop them being priced out of their local areas – but experts immediately questioned how it would work. 

The PM has committed to making it easier for people to ‘achieve the dream of home ownership’ as he unveiled a package of measures in the Queen’s Speech. 

The centre piece is a proposal to make homes available at a discount for local or key worker first-time buyers but the announcement was met with a string of questions over how it would be paid for while Labour said it should be taken with a ‘big pinch of salt’.  

The so-called First Homes initiative would provide a discount of at least 30-per cent for eligible applicants – potentially saving them tens of thousands of pounds.

Housing Secretary Robert Jenrick suggested contributions made to local authorities by developers when they seek planning permission for projects would be used to fund the proposal.

But experts questioned whether that would generate enough cash to pay for it amid further uncertainty over how many homes the policy would apply to and over precisely who would be eligible. 

Ministers did not provide any of the answers to those questions, merely saying they will consult on the details in the near future.

Boris Johnson used the Queen’s Speech today to try to entice younger voters away from the Labour Party with an offer of extra housing help

However, homes sold under the initiative would remain discounted in perpetuity so that future first-time buyers can also benefit. 

Industry insiders suggest the discounts could be applied to developments that are put together by the government or local councils, rather than private homes. 

The government has also recommitted to its Affordable Homes Programme to build hundreds of thousands of new properties while also launching a reformed Shared Ownership scheme which will be easier to understand than the current one.

A Housing Department spokesman said: ‘Councils will be able to use housing developers’ contributions to discount homes by 30 per cent for people who cannot otherwise afford to buy in their area. 

‘The Affordable Homes Programme will also be renewed, building more homes for rent and delivering a new shared ownership offer.’ 

What are developer contributions and could they fund the cheaper homes policy?

When developers apply for planning permission, the local authority can impose planning obligations on them. 

These obligations are legally enforceable and are usually designed to mitigate the impact of proposed development on the surrounding community. 

For example, developers can be required to agree to paying for infrastructure improvements that will be necessary as a result of building more houses. 

That could mean a new school, a new road and so on. 

The suggestion with the government’s discount policy is that developers could be asked to agree to chip into a council fund which would then be used to make homes cheaper for eligible people.  

Housing Secretary Robert Jenrick hinted at the changes earlier this year when he said: ‘I want young people… to be able to stay in their communities.

‘It’s not right that people on low incomes risk being forced out.’ 

The Queen’s Speech enshrines a commitment to build at least one million more homes over the course of the four and a half year parliament.

Meanwhile, the Tories are also trying to win over people living in rented accommodation with a Renters’ Reform Bill designed to ‘deliver a fairer and more effective rental market’. 

The legislation will abolish ‘no fault’ evictions, give landlords more rights to take possession of their property when there is a ‘legitimate need’ for them to do so and introduce a new ‘lifetime deposit’ so that tenants don’t need to save for a new deposit every time they move house. 

Mr Jenrick said in a statement today that the measures brought forward by the government in the Queen’s Speech ‘will empower both home-buyers and renters’.

It is unclear exactly how the discount scheme for first-time buyers will work, how many homes it would apply to, or who precisely will be eligible for it - with ministers merely saying they will consult on the details in the near future

It is unclear exactly how the discount scheme for first-time buyers will work, how many homes it would apply to, or who precisely will be eligible for it – with ministers merely saying they will consult on the details in the near future

Robert Jenrick, the Housing Secretary pictured in Downing Street on December 17, said the government's proposals will 'help first-time buyers get a foot on the property market'

Robert Jenrick, the Housing Secretary pictured in Downing Street on December 17, said the government’s proposals will ‘help first-time buyers get a foot on the property market’

How would selling homes to local first-time buyers at a 30 per cent discount work? 

The plan to offer local first-time buyers homes at a discount of at least 30 per cent has left property experts scratching their heads, writes Simon Lambert.

While the property industry cautiously welcomed Boris Johnson’s proposal to offer cheap first homes to local people, questions have been raised over how this could actually work.

The proposal could involve replacing the existing Help to Buy scheme, but experts have asked how developers would be convinced to sell homes with 30 per cent off the market price, who would pay for the subsidy, and who counts as a local buyer?

Buying agent and property commentator Henry Pryor, said: ‘Stop trying to have too many bright ideas and just knuckle down and help local authorities to build some more social housing for those unable to afford to buy or rent a home at open market prices.’ 

What is the first-time buyer discount plan?

The government used the Queen’s Speech to reaffirm a manifesto promise of a new scheme to help people onto the housing ladder.

It says this would involve a discount of at least 30 per cent for local first-time buyers. 

It comes as the Help to Buy scheme, which has helped thousands onto the housing ladder since 2013, by lending them up to 20 per cent of the purchase price interest-free for five years, is due to be phased out in coming years.  

How could this work?

Neither the manifesto, nor the document published today, specifically detailed how such a scheme could work.

It’s not clear which type of housing would get the 30 per cent discounts and whether it would be it council homes, housing association properties, or privately owned homes. 

Developers would need to be convinced to somehow sell first-time buyers new build properties at almost a third off the market price. Some form of subsidy would therefore be needed to encourage this.  

However, using developer contributions that are agreed when planning permission is granted would be unlikely to fully fund the discount, so more money would be needed. 

One possibility would be redirecting Help to Buy funding, with the cash that would have gone on interest-free loans to buyers instead bridging the gap between the discounted sale price and the market value.

An attempt could be made to lock that discount in, by ensuring the property could only be sold on in future to eligible local first-time buyers.

Who counts as a local? 

It’s unclear who would count as a local for the policy. Would it be someone who grew up in the area, someone who has lived there for a set period of time, or someone who works there?

There is also a desire to target key workers, for example those working for the NHS and emergency services, but some form of qualifying criteria would also need to be developed here.

Have we heard this idea before?

A similar idea – Starter Homes – was also raised five years ago, but those promised discounted first-time buyer homes never materialised.

‘The legislation that we will bring forward will provide a better deal for renters through our lifetime deposit scheme while also protecting them from no fault evictions,’ he said. 

‘We will also help first-time buyers get a foot on the property market with 30 per cent discounts for local people and key workers.’

The extra help for first-time buyers and for people who rent will be seen as a direct attempt by the Tories to win over younger voters on the housing issue which is likely to emerge as one of the biggest political topics after Brexit and in the run up to the next election. 

The Federation of Master Builders said that the Tories’ housebuilding plans would only succeed if the government’s proposed points-based immigration system, due to be introduced in 2021, allows companies to hire bricklayers and carpenters from abroad. 

Brian Berry, chief executive of the FMB, said: ‘A skilled construction workforce will be critical to delivering on the government’s plans for infrastructure and housing set out in today’s Queen’s Speech. 

‘Over half of small builders are struggling to recruit a bricklayer or carpenter, yet it could prove very difficult to fill these roles from outside the UK under the proposed points-based immigration system.’

Mark Hayward, Chief Executive, NAEA Propertymark, said: ‘The market remains tricky for first time buyers and we support initiatives that makes it easier for them to get onto the housing ladder and remain in the community they grew up in. 

‘The way this will be implemented is important to consider in order to avoid any unintended consequences; however, extending home ownership to a greater number of people in principle should be welcomed.’ 

Jeremy Leaf, a north London estate agent and a former RICS residential chairman, said the ‘first dibs to local people’ policy for first-time buyers was ‘laudable’ but questioned how it will work. 

‘It sounds a bit like a shared ownership-type arrangement so it is not clear whether the discount will be portable if buyers change up or even if buyers trade down,’ he said.

‘Questions that need answering include: as people move, will it be portable and how will developers be persuaded to sell at a discount? Will it be via housing associations or local authorities? Who will pay for the subsidy? 

‘And who is a local person – do they have to live in the area, work in the area, and will they be obliged to leave if they move out of the area or no longer work in it?’  

The Tories’ housing plans will be subject to intense scrutiny after it emerged in November that a government scheme to build 200,000 new homes for first-time buyers had fallen flat. 

Ministers in the coalition government announced proposals in 2014 to build so-called Starter Homes which would be sold at a 20 per cent discount. 

But the legislation never got off the ground and none of the homes were ever built.

Labour’s shadow housing secretary John Healey said: ‘First-time buyers will take Tory promises on housing with a big pinch of salt.

‘Conservative ministers pledged cut-price homes before, in 2015 when they promised to build 200,000 homes for first-time buyers, but last month the National Audit Office confirmed they haven’t built a single one, despite wasting four years and spending millions of pounds.’ 

He added: ‘It will take a Labour Government to fix our housing crisis.’