The demand for affordable housing in London has never been more intense. Rising prices, a shortage of available homes and fierce competition among buyers have made it increasingly difficult for first time purchasers to enter the market. In response, the government introduced the First Homes scheme, a relatively new initiative designed to make homeownership more accessible. While the scheme is available across England, London developers face unique challenges and opportunities when delivering First Homes.
At Blackstone Solicitors, we advise clients across England and Wales on property law, planning matters and development agreements. This article explores how the First Homes scheme works, how it affects developers in London and the legal considerations that arise for both developers and buyers.
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Understanding the First Homes Scheme
What the scheme aims to achieve
The First Homes scheme is a government backed initiative that offers newly built homes to first time buyers at a significant discount. The idea is simple. By reducing the price of certain homes, more people can get onto the property ladder and move away from long term renting. In practice, the scheme also seeks to create sustainable communities by encouraging local people to remain in their area.
Key features of First Homes
The scheme comes with specific criteria. The discount must be at least 30 percent but local authorities have the discretion to increase this to 40 percent or even 50 percent in areas where affordability is a particularly serious problem. The discounted price must be no more than a set cap. Buyers must be first time purchasers and their household income must fall below a specified threshold. The home must also remain discounted on all future sales, ensuring long term affordability.
These requirements shape the way developers plan and deliver new housing. They influence the design of developments, financial viability assessments and discussions with planning authorities.
Why the Scheme Matters in London
High property prices and shrinking affordability
London has some of the highest property prices in the country. Even small flats often exceed the budgets of many residents. The First Homes scheme offers a route into the market that would otherwise be closed to a large proportion of local buyers.
For developers, this presents both an opportunity and a challenge. The scheme can make developments more attractive to planning authorities, yet it also affects profit margins. Balancing these factors is a central part of the planning process in the capital.
Local authorities and higher discount expectations
London boroughs often take a robust approach to affordability requirements. Many have strong policies on affordable housing and are keen to ensure that new developments deliver meaningful benefits to the community. As a result, developers may find that local authorities expect higher First Homes discounts than the national minimum.
This can create tension during negotiations. Developers need accurate legal and financial advice to assess viability and ensure that any commitments made during the planning stage remain commercially realistic.
How London Developers Fit the First Homes Scheme into Planning
First Homes as part of the affordable housing mix
Affordable housing contributions have long been a significant aspect of planning agreements in London. Traditionally, this has involved shared ownership, social rent and intermediate rent units. The introduction of First Homes reshapes this landscape by requiring local authorities to prioritise these discounted sale homes over other affordable tenures.
This means that developers must now consider First Homes early in their planning strategy. They need to understand how many units must be allocated to the scheme and how this will affect the remaining mix of tenures. Negotiations with boroughs can become more complex as parties seek to balance local housing needs with scheme requirements.
Section 106 agreements and legal obligations
The delivery of First Homes is usually secured through a Section 106 agreement. This document sets out the legal obligations that a developer must fulfil as part of the planning permission. It will specify the number of First Homes units, the discount level and the criteria for eligible buyers.
Because the requirements are detailed and long lasting, it is essential for developers to obtain legal advice before signing any agreement. Mistakes can restrict the future sale of units, lead to enforcement action or jeopardise the financial viability of the project.
Viability assessments and financial planning
London developers often need to submit viability assessments to demonstrate that their proposals meet planning policies while remaining financially deliverable. The First Homes scheme adds another layer of complexity to this process. Discounted sale units can reduce profit margins and affect the overall balance of tenures. Developers therefore need to model pricing carefully and ensure that the scheme does not undermine the economic stability of a development.
Practical Considerations for Developers in London
Design and layout of First Homes units
The scheme requires First Homes to be comparable in size and quality to other units in the development. They must not be confined to less desirable areas of the site or have significantly lower specifications. This ensures fairness but also affects how developers plan layouts and construct buildings.
Meeting these standards can sometimes alter design strategies and increase construction costs. Developers should factor these conditions into early design discussions to avoid delays later in the project.
Marketing obligations and buyer eligibility checks
One of the more unusual aspects of the First Homes scheme is the requirement for developers to ensure that buyers meet eligibility criteria. Local authorities typically oversee this process but developers may also need to cooperate with monitoring and marketing procedures.
This includes limiting marketing periods to eligible buyers and providing information to councils. Developers must be aware of these duties to avoid breaching planning conditions.
Future restrictions on resale
Because First Homes must remain discounted on all subsequent sales, the initial sale is only the beginning of a long term legal structure. Developers need to ensure that restrictive covenants, title documentation and agreements with local authorities are drafted clearly and accurately. Any ambiguity can cause problems for future owners and may lead to disputes.
Benefits of the First Homes Scheme for Developers
Enhanced planning prospects
Many London boroughs are under pressure to deliver affordable housing, and First Homes help fulfil this requirement. By offering a proportion of First Homes, developers may find that their proposals are more likely to be accepted by planning officers and committees.
Appeal to local buyers
First Homes can create goodwill among communities by giving local residents a realistic chance to buy a home in their own area. This can support broader regeneration goals and encourage local authorities to respond positively to new applications.
Clear government policy direction
Although planning policies can be unpredictable, the government’s commitment to First Homes provides developers with a level of stability. The scheme is now firmly embedded in national planning policy and forms part of a long term strategy to support homeownership.
Challenges Faced by Developers in London
Balancing affordability with profitability
The key difficulty is delivering meaningful discounts while maintaining financial viability. Land prices in London are high and construction costs continue to rise. Developers must review cash flow models, funding arrangements and long term projections carefully to avoid over committing.
Navigating differing borough policies
London is not uniform. Different boroughs interpret the First Homes scheme in distinct ways. Some may push for higher discounts. Others may insist on a particular proportion of units. Understanding these local differences is essential for successful planning.
Complex legal documentation
Section 106 agreements, restrictive covenants and long term obligations require precise drafting. Errors can limit the saleability of units, lead to legal challenges or breach planning conditions. Professional advice is crucial.
How Blackstone Solicitors Can Support Developers and Buyers
Expert advice on planning and development agreements
Our team advises developers across England and Wales on planning obligations, Section 106 agreements and affordable housing requirements. We help you assess how First Homes will affect your development and negotiate terms that reflect both legal obligations and commercial realities.
Guidance for first time buyers entering the scheme
Buyers also face challenges when purchasing a First Home. We assist with eligibility checks, mortgage requirements, resale restrictions and the conveyancing process. Our aim is to make the experience clear and manageable.
Risk management throughout the development
We review documentation, identify potential issues early and ensure that all legal requirements are met. Our focus is on safeguarding your position while keeping the project moving.
Conclusion
The First Homes scheme is reshaping how affordable housing is delivered across England, but its impact is especially pronounced in London. Developers must navigate high land values, strict planning policies and long term legal obligations when incorporating First Homes into their schemes. At the same time, the initiative offers significant opportunities to support local communities, secure planning consent and contribute to wider regeneration goals.
Blackstone Solicitors provides clear, practical and commercially minded advice to developers and buyers engaged with the First Homes scheme. From drafting Section 106 agreements to guiding first time purchasers, our team ensures that every client receives tailored support shaped around their needs.
If you would like expert assistance with any aspect of the First Homes scheme or residential development in London, we are ready to help.
How we can help
We have a proven track-record of helping clients purchase a new home. We are a multidisciplinary firm and have all the expertise inhouse to satisfy the most exacting requirements of our clients. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
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How to Contact Our Residential Property Solicitors
It is important for you to be well informed about the issues and possible implications of buying a residential property. However, expert legal support is crucial in terms of ensuring a positive outcome to your purchase.
To speak to a member of our New Enquiries Team today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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