First Homes and how they sit in the affordable mix
A First Home is sold at a minimum 30 per cent discount held in perpetuity. Here is how eligibility, caps, transfer values and section 106 drafting work in practice.
A First Home is a new dwelling sold to an eligible first-time buyer at a discount of at least 30 per cent to open market value, with that discount locked to the property in perpetuity by a planning obligation so every subsequent sale carries the same reduction. It counts as affordable housing, and it sits in the affordable home ownership part of the mix rather than the rented part. For a developer the question is usually how large a share of the affordable provision it can be, because the transfer value of a First Home is generally higher than that of an affordable rented unit, and the answer comes from the adopted local plan read against the current national guidance.
What a First Home is
The product was introduced by a written ministerial statement in May 2021 and the mechanics sit in the Planning Practice Guidance on First Homes. Four features define it.
The discount is a minimum of 30 per cent against market value, and a local planning authority can require a deeper discount where it can evidence the need. The discount applies in perpetuity, so the restriction binds successors rather than releasing on first resale. There is a cap on the price after the discount has been applied, set at a different level inside Greater London from outside it. And the buyer has to be an eligible first-time buyer within the income limits.
The figures in the guidance when the policy was introduced were a post-discount cap of £250,000 outside Greater London and £420,000 within it, with household income caps of £80,000 and £90,000 respectively, and a requirement that the purchaser fund at least half the price with a mortgage or home purchase plan. Those figures are subject to review, so verify them against the current guidance before they go into an appraisal or a section 106.
The discount and the resale restriction
The perpetuity point is what distinguishes First Homes from older discounted market sale products, and it is the feature that lenders scrutinise.
The obligation records the percentage discount rather than a fixed price, so on resale the property is valued at open market value at that time and the same percentage is deducted. The seller therefore takes the benefit of general market growth on the discounted value, but the discount itself never converts back into equity.
Mortgagee protection provisions matter here. Lenders need a route to recover their security if a borrower defaults, and the standard drafting allows a sale free of the restriction in defined circumstances after a marketing period, usually with the discount preserved for a period first. Get the lender-facing provisions reviewed by someone who has seen them tested, because a restriction that no mainstream lender will accept makes the units unsaleable and leaves the developer holding them.
The proportion within the affordable mix
This is the part of the policy that has moved. The 2021 statement set an expectation that First Homes should make up at least a quarter of the affordable housing secured through planning obligations, and successive editions of the National Planning Policy Framework have revised the national position on affordable tenure requirements, including the treatment of affordable home ownership. The Framework was reissued in December 2024 and again on 17 August 2026, the second of those reorganising it into policy-coded chapters, so check the current edition and the current Planning Practice Guidance rather than relying on the position as it stood when a scheme was first appraised.
In practice the binding answer for any given site comes from three documents read together.
- The adopted local plan policy on affordable housing tenure and its date.
- Any supplementary planning document or affordable housing statement the authority has published since.
- The current National Planning Policy Framework and Planning Practice Guidance position, with the edition stated.
Where the plan predates the First Homes policy and says nothing about it, the argument is about weight, and it is worth resolving at pre-application rather than in a committee report. The tenure position then goes into the Affordable Housing Statement submitted with the application.
Eligibility and local connection
| Criterion | Position in the guidance |
|---|---|
| First-time buyer status | Required, assessed on the statutory definition |
| Household income | Capped, with a higher cap inside Greater London |
| Price after discount | Capped, with a higher cap inside Greater London |
| Mortgage or home purchase plan | At least half the discounted purchase price |
| Local connection | The authority may apply criteria for a limited initial marketing period |
| Key worker priority | May be applied within the local connection criteria |
Local connection criteria are time limited. The authority can require them for an initial period from first marketing, after which the unit is offered more widely, and that period is short enough that the sales programme has to be planned around it. Where the criteria are drawn tightly on a rural site, expect slow absorption and build that into the cash flow.
Eligibility verification is usually delegated to the conveyancing process, with a declaration and evidence checked before completion. The obligation should say who checks it and what happens if a sale completes to an ineligible buyer.
Effect on scheme values and viability
First Homes generally show a higher transfer value than affordable rent or social rent units of the same size, because the buyer is paying 70 per cent of market value rather than a registered provider paying a capitalised rent. So a mix weighted towards First Homes improves the residual land value, all else equal.
That is why tenure is negotiated rather than assumed. Authorities argue, often with an evidence base behind them, that their acute need is for social and affordable rent and that home ownership products do not meet it. Developers point to the deliverability of the ownership product and to viability. Both positions are legitimate, and the resolution usually shows up in the Viability Assessment.
Model the First Homes units properly rather than applying a single percentage to the whole affordable element. Sales rates differ from open market units because the buyer pool is restricted, marketing costs are real, and the initial local connection period constrains the first phase of sales. A model that assumes the same absorption as open market stock overstates the benefit. Where the scheme carries a review mechanism, the assumptions about First Homes values feed directly into it, as covered in viability review mechanisms.
Securing it in the section 106
The drafting needs to cover the discount percentage and how market value is established on first and subsequent sales, the eligibility criteria and who verifies them, the local connection period and its expiry, the marketing obligations if a unit does not sell, the mortgagee protection provisions, and the trigger linking occupation of open market units to delivery of the First Homes.
Two clauses repay attention. The valuation mechanism should name who values, on what basis and how a dispute is resolved, because a disagreement about market value is a disagreement about the sale price. And the cascade, describing what happens if the units cannot be sold as First Homes within a stated period, should be drafted before it is needed rather than negotiated under pressure. Indexation of any associated contributions is a separate trap, dealt with in deferred contributions and indexation in section 106.
PlanScope drafts an Affordable Housing Statement structured to the sections authorities expect and flags the figures it cannot verify rather than inventing them, which matters for caps and income limits that change. It does not draft the deed. For specialist technical reports, qualified professional input may be required.
Enter the site postcode on PlanScope to see which documents a residential application is likely to need.
This is general guidance, not legal advice, so check the current guidance and take advice from a planning solicitor before relying on it. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.
Frequently asked questions
What discount applies to a First Home?
A minimum of 30 per cent against open market value, and a local planning authority can require a deeper discount where it can evidence the need. The discount applies in perpetuity and is recorded as a percentage, so on resale the property is valued at market value at that time and the same percentage is deducted.
Who is eligible to buy one?
A first-time buyer within the household income cap, purchasing below the price cap that applies after the discount, and funding at least half the price with a mortgage or home purchase plan. The caps differ inside and outside Greater London and are subject to review, so check the current Planning Practice Guidance figures.
What proportion of affordable housing should be First Homes?
The 2021 written ministerial statement set an expectation of at least a quarter of affordable homes secured through planning obligations, and successive editions of the National Planning Policy Framework have revised the national position on affordable tenure. Check the current edition, the current guidance and the adopted local plan together.
How do local connection criteria work?
An authority may apply local connection or key worker criteria for a limited initial marketing period from first release, after which units are offered more widely. The period is short, so the sales programme has to be planned around it, and tightly drawn criteria on a rural site slow absorption in the first phase.
What should the section 106 cover?
The discount percentage and how market value is established on first and subsequent sales, eligibility and who verifies it, the local connection period and its expiry, marketing obligations where a unit does not sell, mortgagee protection provisions, and the trigger linking open market occupation to delivery of the First Homes.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.