Simon Randall CBE is a former Bromley councillor and has been advising local authorities on procurement matters for many years.
Before the July 2024 General Election, the then Labour Party spokesperson – in supporting the right-to-buy – considered that “home ownership was the bedrock of emotional security”.
Following a paper that put home ownership as one of Labour’s key policies, The Times commented that the Party was “stealing the Tory Party’s clothes to become the party of home ownership”. However their actions since the election have confirmed that the emphasis in their housing plans is for affordable rented housing and significantly reducing the attraction of right-to-buy.
Michael Gove introduced the First Homes scheme in England involving a discount for new homes of at least 30 per cent for first-time buyers on the basis that the property would only be available to similar buyers thereafter. A modest target of 1,500 homes was set for this new initiative.
During the extensive discussions about the new planning regime, the new government was lukewarm about this scheme and suggested in the recently revised National Planning Policy Framework that it was up to individual local authorities to decide if they include such homes in their supported developments.
However, the position has changed as the government has now set a target of 11,000 First Homes, which, although less than 1 per cent of the planned 1.5 million homes, has involved a number of developers promoting the scheme where the discount is financed by both government and the housebuilder, the latter through a reduction in the land value.
Home ownership has dropped as a proportion of homes from 69.5 per cent in 2001 to 63.8 per cent in 2021 and most people aspire to become homeowners including 60 per cent of young adults; the percentage of such purchasers in 1997 was 55 per cent reducing to 35 per cent in 2017. According to the Office of National Statistics, the number of adult children living with their parents had increased by 14.7 per cent between 2011 and 2021. Whilst the current scheme provides the basic rules to ensure that the homes are bought by first-time buyers and that future sales will reflect the same buyer with local authorities promoting such schemes adopting their own criteria.
The way forward is for a revised First Homes scheme (Low cost home ownership or “LCHO”), which takes place on local authority owned land, sold at a low value to the buyer, subject to obtaining the relevant consent from government to sell at less than open market value and with no hope value, and the local authority enters into a building contract for the new homes with a housebuilder who would receive a reasonable profit.
This follows the arrangements made fifty years ago by London Borough of Bromley when it sold plots from a former allotment site and Wates built the homes and sold the houses after checking the eligibility of the buyer.
The prospective buyers on a new scheme could be key workers, existing tenants of the local authority or a local housing association – thus releasing a vacant social rented property – and a member of the armed forces and their family and possibly local people who are on the local waiting list.
Whilst the current First Homes scheme has restrictions as to the income of the new buyers to £80,000 or £90,000 in London and the purchase price (after the discount) must not be more than £250,000 or £420,000 in London, the percentage of the initial discount on the market value will be reflected in all future sales. By way of example, if the initial market value of the home was £200,000 and the discount was 40 per cent, the price would be £120,000. When the initial purchaser decides to sell the market value rises to £260,000, the actual sale price would be £154,000. These arrangements will be reflected both in the conditions attaching to the planning consent and the legal documentation.
If a number of Conservative-controlled local authorities – and there are many innovative authorities with housing powers – joined forces to promote such a scheme on their land with either a local housebuilder or a national company operating in a number of venues, the Party could promote such action which would, like the Bromley scheme, be popular with local residents and challenge the lack of interest shown by the government with less cost to the public purse. In particular, young adults in rural areas are continuing to move to the big cities both for alternative employment and accommodation such that a rural LCHO scheme would be an important incentive to remain.
Unlike Labour-controlled local authorities, Conservative authorities set out their proposals and action them. As the Party of aspiration, actively promoting LCHOs along the lines of the Bromley scheme would achieve the following:
- The land owned by a local authority, other public body or a landowner could be transferred assuming no hope value as reflected in the Levelling-up and Regeneration Act 2023.
- The LCHO schemes could be implemented on smaller sites, including exception sites in rural areas, and provide a steady flow of business for small to medium-sized builders.
- The current Lifetime ISA should be an important entry point for applications and could be expanded.
- Any planned LCHO scheme could be operated by a consortium of local authorities with available land or a joint venture with one or more landowners as part of a larger scheme which they are promoting.
- Unlike shared ownership or equity schemes which have practical sale restrictions, the LCHO sale process involves 100 per cent ownership of the property and an easy sale process with a significant number of potential buyers.
Although provision of low cost homes was not suggested in William Hague’s ten-step plan in The Times to rescue the Conservative Party, it is continually mentioned as an important aspiration by young people for whom an LCHO scheme would illustrate to them that the Party is committed to enabling home ownership to become commonplace for young adults, couples and other first time buyers. Indeed, such a policy would assume greater significance if the voting age was reduced. The Party could regain its title as the Party of home ownership for all generations.
