Affordable housing: council cabinet sets First Homes criteria
Under a government scheme introduced last year, First Homes, at least 25% of all future new-built ‘affordable’ housing units are set to be offered at discounted prices to local first-time buyers and/or key workers.
Such ‘affordable’ units themselves represent a maximum of 25% of brownfield develop-ments and 40% of greenfield estates, and very often developers manage to find justifications to reduce this proportion, or avoid it altogether. Accordingly, there would be at most 6.25 ‘First Homes’ per 100 units of a future brownfield estate, 10 in a greenfield one. Moreover, the obligation to provide them will displace other forms of affordability, i.e. it will reduce the proportion of properties available for shared ownership and lettings at below-market rent which council planners have been seeking hitherto.
Nevertheless, the scheme purports to give local authorities some measure of control in bending the housing market in directions which they may regard as socially desirable. The definition of who is to be classed as ‘local’ or a ‘key worker’ is left to their discretion; they also have some leeway in setting levels of maximum household incomes, maximum prices and percentage discounts to be applied in their local area.
No debate
At their meeting on 31 January the cabinet of Hastings Borough Council adopted, without debate, a report put forward by Andrew Palmer, Assistant Director of Housing and Built Environment, which proposes to set the discount level throughout Hastings at 30%, a maximum price per unit (after discount) of £210,00, and the qualifying household income level at a maximum of £60,000 per year. To be classed as ‘local’, applicants will need to have lived three out of the last five years in the borough, or five years out of the last ten, or else have been employed here continuously for at least 16 hours per week over the last two years. The definition of ‘key worker’ is to be delegated to council officers.
CREDIT: Dave Young
But in researching current levels of local house prices and incomes for the purpose of assessing appropriate values and criteria to be applied to the First Homes scheme, Mr Palmer’s report comes up with some problematic data, including that:
• The average new-build house price in Hastings is circa £305,000
• Average household income in Hastings is approximately £28,000, which is 16.5% below the average for East Sussex
• Purchasing a new home at a discounted rate of £210,000 (open market value of £300,00) with an 80% mortgage would require a deposit of £42,000 and, under standard mortgage criteria, a minimum household income of £37,333 per year; a 95% mortgage would reduce the required deposit to £10,500, but raise the minimum income requirement to £44,333.
It thus seems that the majority of households in Hastings would not have sufficient income to obtain a mortgage for a First Homes property nor the capacity to save the necessary deposit and other costs associated with purchase. And the gap is set to increase as living costs rise – even more so if interest rates continue to be pushed upwards.
Viability
One might ask why, in these circumstances, the report does not recommend increasing the purchase discount on the full price to 40% or even 50%, as the scheme allows. The answer is provided: any higher level of discount “will only further impact development viability”, i.e. give further opportunity for the developer to argue that there should be a reduced level of ‘affordable’ homes over the development as a whole to keep it economically viable.
It is apparent from the whole report that the council’s housing office regards the First Homes scheme as something of a distraction from their own primary policy target of maximising ‘affordable’ homes. It explains that no assessment has been made as to whether the scheme should be adopted in Hastings or prioritised above other forms of affordable housing. “This is because the policy has been introduced at a national level and the council is required to implement it.”
One may infer from the cabinet’s unanimous agreement not to debate it that they hold a similar opinion.
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