First Homes Scheme

The First Homes Scheme will launch in full later this month as a vital part of the constant drive to make homeownership accessible to young people. This is Money reported earlier this year that the average age of first-time buyers is now 31 with most people renting or living with family before they can afford to buy. The existing Help to Buy Equity Loan Scheme was revised earlier this year however it is set to end in 2023 with the First Homes Scheme appearing to be its successor.

As with Help to Buy, the First Homes Scheme provides a financial incentive to buyers and is available to first time buyers earning below £80k (£90k in London) only. This in-turn incentivises the building of new-build homes to ensure supply keeps up with demand, resulting in more homes being built across the UK. However, the schemes are different. The First Homes Scheme adopts a much more radical approach with the fundamental difference being properties built under the scheme will be ring fenced by the Local Authority, via a restrictive covenant, to be sold to first time buyers only for a below market value price. This will be applicable when the properties are first purchased and for all subsequent purchases for the duration of the scheme.

Properties will be sold at a minimum of 30% below market value with local authorities having the power to extend this discount up to 50% where they see fit to do so. When a new-build developer applies for planning permission, the designated properties to be sold under the scheme will be allocated. It is expected 25% of houses built on designated developments will need to be allocated to some form of ‘Affordable Housing’ whether that be shared ownership or first home scheme properties.

Once the property has been lived in and the homeowner looks to move, they will have to look to sell to someone who is eligible for the First Homes Scheme. If, after 6 months, they have failed to sell the property then they can apply to the Local Authority to remove the restriction against the property. This would then mean the property would be sold at full market value. The percentage discount applied when the owners bought the property would then have to be repaid to the local authority to compensate the loss of a first home scheme property in the area.

To give an example, on a qualifying property with a full market value of £250,000, a first-time buyer would be able to purchase this for anywhere from £125k with a 50% discount up to £175k with a 30% discount.

Mortgages should be available on 95% of the discounted purchase price meaning just a 5% deposit on the discounted price will be required. This is even better than Help to Buy where a 5% deposit is required also but on the full market value of the property. It also makes mortgage affordability easier which is a big plus for single income or low-income households.

The following is a comparison example between the Help to Buy Equity Loan Scheme and the First Homes Scheme using the minimum 30% discount, again based on a purchase price of £250,000.


Help to Buy Equity Loan Scheme

First Home Scheme

Full Market Value



Purchase Price



Minimum Deposit

£12,500 (5%)

£8,750 (5%)

Equity Loan

£37,500 (20%)



£200,000 (75%)

£166,250 (95%)

Now you may be wondering who is paying for this 30 or so percent and whether it’s something you have to pay back when you sell, as is the case with Help to Buy. This is not the case with the First Homes Scheme and it is simply the developer who makes less profit on houses sold under the scheme. Naturally, you may then be thinking well why would they agree to this? The answer is, they don’t have a choice and it is effectively a tax being imposed on them. Developers will still need to apply to local authorities for planning permission and in order to get the go ahead, they will be required to build homes to be sold under the First Homes Scheme as well. What we may see is developers applying to build in areas where the local authority has the smallest discount to maximise their profit but there will be so many other unrelated factors that affect these decisions.