First Homes: the discount, the cap and the eligibility rules

A First Home is a discounted market sale unit sold to a first-time buyer at a minimum 30 per cent discount from market value, with the discount secured in perpetuity so that it passes to every subsequent purchaser. It counts as affordable housing for planning purposes. The first sale price after the discount is capped at £250,000, or £420,000 in Greater London, and national policy expects a share of the affordable housing secured through developer contributions to be delivered in this tenure.

The product was introduced by a written ministerial statement in May 2021 with an accompanying chapter of the Planning Practice Guidance. Affordable housing policy has moved since, so treat this as an explainer of the published framework and verify the current position against the National Planning Policy Framework edition published on 17 August 2026 and the current guidance before you rely on it for a scheme.

What a First Home is in planning terms

Three features define it. The home is sold, not rented. The discount is a minimum of 30 per cent off open market value, assessed by an independent valuation. And the discount is held in perpetuity by a legal restriction, so the next buyer also purchases at a discount from the then market value.

That perpetual restriction is what allows it to count as affordable housing rather than as a one-off subsidy to a single household. It is also why the drafting of the section 106 agreement and the title restriction matters more here than the headline discount does.

Local planning authorities can require a deeper discount of 40 or 50 per cent where they have evidence of local need and affordability that supports it. Those requirements are set through the local plan, so read the adopted policy rather than assuming the national minimum applies.

The discount and the price cap

The cap applies to the first sale price after the discount has been taken off, not to the market value. So a home with a market value of £360,000 sold at a 30 per cent discount reaches £252,000, which is above the £250,000 cap outside London, and the discount would need to be deeper to comply.

That arithmetic is the reason the product works unevenly across the country. In lower value areas the cap is irrelevant and the 30 per cent discount does the work. In higher value areas outside London the cap bites hard and the effective discount required can be well above the minimum, which changes the viability position for the whole scheme.

Run the numbers early and by unit type. A scheme where the First Homes have to be the smallest units to stay under the cap is a scheme with a different mix from the one the design team drew.

Eligibility and local connection

The published eligibility criteria are specific. The purchaser must be a first-time buyer as defined for the purposes of stamp duty land tax relief. Household income in the tax year before purchase must not exceed £80,000, or £90,000 in Greater London. And the purchaser must fund at least half of the discounted purchase price with a mortgage or home purchase plan, which is there to stop cash buyers taking the units.

Local authorities may add local connection criteria, applied for an initial marketing period, covering things like living or working in the area or serving in the armed forces. After that period the criteria fall away and the home can be sold to any eligible buyer.

The practical consequence for a developer is a longer sales period on the first tranche and a need to agree the marketing protocol with the council in advance. Build the cascade into the agreement: if no eligible local buyer comes forward within the agreed period, the criteria relax in defined steps.

How the requirement sits within affordable housing provision

National guidance expects a proportion of the affordable homes secured through developer contributions to be First Homes, with the remainder of the affordable provision split between other tenures according to local plan policy. The exact proportion and the treatment of the balance are the points most often argued at application stage.

Two tensions recur. Councils with acute social rented need resist substituting rented homes for discounted sale, because a First Home helps a household that could nearly afford to buy anyway. And registered providers price the remaining units differently once the mix changes, which feeds back into viability.

Set the position out clearly in the Affordable Housing Statement: the total affordable requirement, the split by tenure, the First Homes proportion, the discount applied, the cap check for each unit type, and the marketing and cascade arrangements. Where the numbers do not work, the argument belongs in a Viability Assessment rather than in the affordable housing statement.

Securing it through a section 106 agreement

The agreement has to do more work than a conventional affordable housing schedule. It needs to define the discount and the valuation method, specify the cap and how it is indexed, bind successors in title, set the eligibility criteria and the verification process, deal with the marketing period and the cascade, and provide for mortgagee protection so that lenders will actually lend against the unit.

Mortgagee protection is the clause to get right. If a lender cannot realise its security, it will not offer a mortgage, and a First Home nobody can buy is worse than no First Home at all. Standard forms of wording exist and lenders are familiar with them.

A separate restriction is entered on the title at the Land Registry, which is how the discount survives resale. Buyers and their conveyancers will see it in the searches, and it is worth explaining it plainly in the sales material.

Practical issues on small sites

Below the affordable housing threshold there is no contribution, so there are no First Homes. Just above it, the arithmetic gets awkward: a requirement expressed as a percentage of a small number of units produces fractions, and the council will want either rounding up or a commuted sum.

On sites of two or three affordable units, a single First Home can consume the whole requirement and displace the rented provision entirely. Some authorities accept that. Others have policies that protect a minimum rented proportion, which effectively excludes First Homes from small schemes.

There is also a straightforward market question that developers should ask before designing around the product. In an area where the cap forces a 45 per cent discount, is the reduction in receipts better or worse than a commuted payment or an affordable rented unit transferred to a registered provider? Sometimes it is better. Often it is not, and it is worth testing rather than assuming.

Policy in this area continues to move, and the planning law timeline is the place to follow changes to affordable housing requirements. When you quote national policy in the submission, check the reference against the current edition, as our note on citing the NPPF after the move to policy codes explains.

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.