Recommendation 2

The Department’s reliance on developer contributions to fund First Homes is a complex mechanism lacking transparency and risks less money being available to local authorities for housing and infrastructure. First Homes differ from Starter Homes as they will be sold at a higher discount, only to local first-time buyers, and with a discount that will be passed on to future buyers when First Homes are resold. First Homes will also be delivered through the existing planning system so are not dependent on new legislation. The discount will be funded through developer contributions. Local authorities will be expected to ensure 25% of affordable homes built by developers contribute to the First Homes initiative. We have previously criticised the system of developer contributions for its complexity, and lack of transparency over how much developers actually contribute. The Department does not have a timetable or target for delivering First Homes but is planning a pilot to build 1,500 First Homes ‘within the next couple of years’, which it wants to learn from before further planning of the new scheme. However, the Department could not say when First Homes would become more widely available and blamed its lack of clear timetable or targets on the uncertainty of the housing market. Recommendation: As part of the First Homes pilot, the Department should model the effect of funding First Homes from developer contributions on local authorities’ ability to fund local infrastructure and other housing needs, such as social housing, and what the opportunity cost is of using developer contributions in this way. It should also set out clearly how the secondary resale market will work. 6 Starter Homes