First Homes and the section 106 drafting that secures it

A First Home is a discounted market sale unit sold at a discount of at least 30 per cent against its open market value, to a buyer who meets national eligibility criteria, with the discount secured in perpetuity so that it passes to every subsequent purchaser. First Homes section 106 drafting has to deliver that last part, and it is the part that goes wrong. A discount that binds the first buyer and evaporates on resale is not a First Home, it is a one-off subsidy to one household.

Three mechanisms do the work together: the obligation itself, a restriction on the title at the Land Registry, and a mortgagee protection clause that lenders will accept without hollowing out the restriction.

What a First Home is

The national policy position sets out the core requirements. The discount is a minimum of 30 per cent against market value, and an authority can require a higher minimum, typically 40 or 50 per cent, where its evidence supports it.

After the discount has been applied, the first sale price is capped at a national figure, with a higher cap in Greater London. Those figures are set in guidance and have been revised, so take them from the current published guidance rather than from a precedent agreement.

First Homes are expected to make up a proportion of the affordable housing secured through planning obligations, with the balance delivered as other tenures. Check the adopted local plan position alongside the national requirement, because the two do not always align and the authority's policy will usually be the starting point for negotiation.

The discount is permanent. There is no staircasing and no mechanism for buying out the restriction.

Eligibility and local connection

Buyers must be first-time buyers, using the definition applied for stamp duty relief, and must have household income below a national threshold in the tax year before purchase, again with a higher figure in Greater London. They must fund at least half the discounted purchase price with a mortgage or home purchase plan, which is deliberate: the policy is aimed at people who need a mortgage, not at cash buyers.

Authorities may apply additional local criteria, such as a local connection or key worker status, for an initial marketing period. After that period the local criteria fall away and the unit is marketed against the national criteria only.

Draft the marketing and nomination process carefully. It should say who markets the unit, at what price, for how long under local criteria, how eligibility is verified, who issues the certificate of compliance and what happens if no eligible buyer comes forward. A clause that says the unit shall be sold to an eligible person, and stops there, will produce a dispute on the first plot.

Securing the discount in perpetuity

The obligation should define market value by reference to a valuation prepared by an independent valuer to the recognised professional standard, at a defined date, with a process for the authority to agree or dispute it within a stated period.

Then it should require that the property is sold at the discounted price calculated as a fixed percentage of that market value, and that every subsequent disposal applies the same percentage discount to the then market value. Expressing the discount as a percentage rather than a cash sum is what makes it survive market movement.

A certificate of compliance process is the operational core. The seller applies to the authority with the valuation, the buyer's eligibility evidence and the proposed price. The authority issues a certificate. The Land Registry restriction is drafted so that no disposition can be registered without that certificate.

Set a response deadline on the authority, with a deemed approval if it does not respond. Conveyancing chains collapse while councils take six weeks to answer an email, and a deemed approval clause protects both sides.

Restrictions on title and mortgagee protection

The title restriction is what makes the obligation effective against successors in practical terms, because a buyer's conveyancer will see it.

Lenders will not lend against a title restriction that could prevent them realising their security. The standard answer is a mortgagee protection provision allowing a lender enforcing its security to sell free of the restriction, after a defined period of marketing at the discounted price to eligible buyers, with the authority given a prior opportunity to nominate a purchaser or to acquire the unit itself.

Two drafting points decide whether that clause is acceptable to both sides. The marketing period needs to be long enough to be meaningful and short enough that a lender will accept it. And the trigger should be enforcement of the security, not any disposal by the borrower, because a wider trigger removes the restriction in ordinary circumstances.

Test the wording with a lender before it is engrossed. A restriction that no high street lender will accept makes the units unsaleable, and the developer discovers that at the point of first completion rather than at the point of agreement.

Interaction with other affordable tenures

First Homes are discounted market sale. They deliver home ownership, not rented accommodation, and they do not meet the needs of households who cannot afford a mortgage at the discounted price.

Where a council's evidence shows an acute need for social rent, the tension is real and it plays out in negotiation over tenure mix. Set out the position honestly in the Affordable Housing Statement, with the local needs evidence, the national requirement and the tenure split proposed.

Where the mix is driven by what the scheme can carry, the argument moves into a Viability Assessment and into the review mechanisms that sit alongside it, as described in overage clauses and review mechanisms in a section 106.

On smaller schemes the threshold question comes first, and it is set out in affordable housing and the small sites national threshold.

Practical drafting points

Six things I would check in any draft before signing.

1. The discount is expressed as a percentage of market value at each disposal, not as a cash sum fixed at the outset.
2. Market value is defined by reference to an independent valuation to the recognised professional standard, with a named dispute route.
3. The certificate of compliance process has a deadline on the authority and a deemed approval.
4. The mortgagee protection clause is triggered only by enforcement of security, and a lender has confirmed it is acceptable.
5. The plots are identified by plot number and cross-referenced to an approved plan, with a mechanism for substitution if the layout changes.
6. The levy position is checked, because whether relief is available depends on the definitions in the levy regulations and on the authority's own discretionary relief policy.

The sixth catches people out. Assuming that every affordable tenure attracts relief is an expensive assumption, and the calculation should be done before the obligation is agreed rather than after the liability notice arrives.

One honest uncertainty. National policy on First Homes has been adjusted more than once since it was introduced, including the caps and the expected proportion of affordable housing. Verify the current position in the published guidance at the point of drafting, and put the date of your check in the file note.

Browse the 66 PlanScope report types to see what a residential application normally submits alongside the affordable housing case.

This is general guidance, not legal advice; 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.