First Homes exception sites and their tests
First Homes exception sites deliver discounted market sale housing on unallocated land. The location tests, the discount and cap arithmetic, eligibility and the obligation that makes it work.
A First Homes exception site is an unallocated site brought forward specifically to deliver First Homes, which are discounted market sale dwellings sold at a minimum discount to open market value and kept at that discount in perpetuity. The policy arrived through a written ministerial statement in May 2021 and sits in national guidance rather than in primary legislation. It replaced the earlier entry-level exception site policy. As at the date of writing, the discount and price cap figures below are those set when the policy was introduced, and the affordable housing framework has been revised more than once since, so verify the current figures on gov.uk before relying on them.
What a First Homes exception site is
An exception site is land that would not normally be released for housing, permitted as an exception because of the affordable housing it delivers. The First Homes version applies that principle to discounted market sale rather than to rented or shared ownership housing.
Three features define it.
The site is not allocated for housing in the development plan. If it were allocated, ordinary policy would apply and the exception would be unnecessary.
The scheme consists of First Homes, with a small proportion of other affordable tenures permitted where there is evidence of local need for them.
The discount is permanent. Each resale is at the same percentage discount to the prevailing market value, secured by a planning obligation and a restriction on the title, so the subsidy stays with the home rather than being captured by the first buyer.
Where such a site can come forward
The guidance sets out limits on location, and they matter more than the numbers.
- The site should be adjacent or close to an existing settlement, and proportionate in size to it.
- It should not be in a designated rural area within the meaning of section 157 of the Housing Act 1985, where the traditional rural exception site route continues to apply instead.
- Green Belt policy is unaffected, so an exception site in the Green Belt remains subject to the ordinary Green Belt tests.
- Development in National Parks and National Landscapes remains subject to the policies protecting those areas.
Proportionality is the test that produces most refusals. A 40 dwelling exception site adjoining a hamlet of 30 houses is not proportionate, however good the tenure mix.
The other early question is whether the authority has its own policy. Some have adopted local exception site policies with their own thresholds and criteria, and where they have, the local policy is the starting point under the plan-led system.
The discount and the price cap
Two controls operate together, and both have to be satisfied on the first sale.
| Control | Position when the policy was introduced |
|---|---|
| Minimum discount | 30 per cent below open market value, with authorities able to require 40 or 50 per cent where justified by local evidence |
| Price cap after discount | £250,000 outside Greater London, £420,000 within Greater London |
The cap bites hardest in high value areas outside London. In a district where a modest three bedroom house has an open market value comfortably above £357,000, a 30 per cent discount leaves the price above the cap, so the deliverable product becomes smaller units or a deeper discount. That shapes the mix before anything else does.
Work the arithmetic backwards from the cap at appraisal stage. Establish the open market value of each house type, apply the required discount, and check the result against the cap. Then check whether the resulting scheme still stacks against a realistic land value for an unallocated site, which is the point at which the reasoning about benchmark land value becomes central rather than academic.
Who is eligible to buy
Eligibility is defined nationally and the authority may add local criteria for a limited marketing period.
The national criteria set when the policy was introduced required the purchaser to be a first-time buyer, to have a household income below a stated annual cap in the tax year before purchase, and to fund at least half the discounted purchase price by mortgage or home purchase plan. The income cap was set at £80,000 outside Greater London and £90,000 within it.
Authorities may apply local connection criteria, and priority for people serving in the armed forces and for workers in occupations the authority identifies as essential, during an initial marketing period. After that period the national criteria alone apply.
For a developer the practical consequence is sales risk. A restricted buyer pool with an income ceiling and a mortgage requirement takes longer to convert than open market sales, and the marketing period before national criteria apply has to be programmed rather than assumed away.
How much of the site must be First Homes
On an exception site, the expectation is that the scheme is made up of First Homes, with a small proportion of other affordable homes where local need for those tenures is evidenced.
That is different from the position on an ordinary site delivering affordable housing through developer contributions, where a defined proportion of the affordable homes should be First Homes, taken from the top of the affordable provision rather than added to it.
Setting out the arithmetic clearly in the Affordable Housing Statement saves a round of correspondence. State the total units, the First Homes count, the discount applied, the resulting sale prices, the cap test for each house type, and any other affordable units with the evidence of need for them.
Where the numbers do not work, a Viability Assessment prepared to the national guidance is the route, though an exception site whose viability depends on reducing the affordable element has largely lost its justification. That tension is worth confronting in the submission rather than leaving it to the officer.
How this differs from a rural exception site
The two are frequently confused and they do different jobs.
A rural exception site delivers affordable housing, usually rented or shared ownership, for people with a local connection, in a designated rural area, on land that would not otherwise be released. It responds to an evidenced local need and the homes remain affordable in perpetuity for that community.
A First Homes exception site delivers discounted market sale housing for first-time buyers, outside designated rural areas, with national eligibility criteria that take over after the initial marketing period.
The distinction matters for a parish considering a site. A community wanting to house families who cannot afford to rent locally is describing a rural exception site. A community wanting to help local first-time buyers onto the ladder is describing a First Homes site. They are not interchangeable and the land value expectations differ.
Securing the controls in an obligation
The obligation is doing unusual work here, because it has to bind future resales indefinitely.
- A definition of First Home consistent with the national guidance, drafted so it does not break if the guidance changes.
- The percentage discount, fixed, applied to open market value at each sale.
- A valuation mechanism for establishing open market value at resale, with a named valuer or an appointment route.
- Eligibility criteria and the process for verifying them, usually through the authority or a nominated agent.
- A mortgagee exclusion clause, without which lenders will not lend against the units.
- A restriction registered against the title of each plot.
The mortgagee clause is the one that holds up completions. Agree its wording with a lender's solicitor early, because a clause the authority is comfortable with and no lender will accept delivers nothing.
As an illustrative example, a site of 12 dwellings adjoining a village, unallocated, proposes 10 First Homes at a 30 per cent discount and two affordable rented homes supported by a housing needs survey. Two of the First Homes house types price above the cap after discount, so the mix is adjusted towards two and three bedroom units. The obligation fixes the discount, the valuation route and the mortgagee protection. The Planning Statement then has to justify the site as an exception, which is the argument the whole application turns on.
To see which supporting documents a scheme of this kind is likely to need, enter your postcode on PlanScope.
This is general guidance, not legal advice, so check the position with your local planning authority or a qualified professional 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 is a First Homes exception site?
An unallocated site permitted as an exception to normal policy because it delivers First Homes, which are discounted market sale dwellings kept at the same percentage discount on every resale. A small proportion of other affordable tenures is allowed where local need for them is evidenced. The policy replaced the earlier entry-level exception site route.
What discount and price cap apply?
When the policy was introduced the minimum discount was 30 per cent below open market value, with authorities able to require 40 or 50 per cent where local evidence justified it, and the first sale price after discount was capped at £250,000 outside Greater London and £420,000 within it. Verify the current figures before relying on them.
Who can buy a First Home?
The national criteria set at introduction required a first-time buyer with household income below an annual cap in the tax year before purchase, funding at least half the discounted price by mortgage or home purchase plan. Authorities may apply local connection and essential worker priority during an initial marketing period, after which national criteria alone apply.
Can a First Homes exception site be in a designated rural area?
No. In designated rural areas within the meaning of section 157 of the Housing Act 1985, the traditional rural exception site route continues to apply instead. Green Belt policy and the policies protecting National Parks and National Landscapes are also unaffected, so those tests still have to be met.
How is a First Homes exception site different from a rural exception site?
A rural exception site delivers affordable housing, usually rented or shared ownership, for people with a local connection in a designated rural area. A First Homes exception site delivers discounted market sale housing for first-time buyers outside those areas, under national eligibility criteria that take over after the initial marketing period.
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.