First Homes scheme: what you need to know
The First Homes scheme is a government initiative designed to help first time buyers and key workers get onto the property ladder by offering new build homes at a discount to their open market value. If you have seen it advertised by a developer or heard it mentioned and wondered whether it applies to you, this article explains how it works, who is eligible, and what the catch is.
What is the First Homes scheme?
Under the First Homes scheme, eligible buyers can purchase a new build home at a discount of at least 30% below its open market value. In some areas, local councils have set the discount higher, at 40% or 50%, to reflect local affordability pressures.
The discount is permanent. When you come to sell the property in the future, you must sell it at the same percentage discount below market value. The reduced price passes on to the next buyer, keeping the property affordable for future first time buyers and key workers in the same area.
This is the key distinction between First Homes and some other schemes: the benefit does not disappear after a few years. It stays with the property for good.
Who is eligible?
To buy through the First Homes scheme, you must meet the following criteria.
- You must be a first time buyer. The scheme is not available to anyone who has previously owned a residential property, either in the UK or abroad.
- Your annual household income must not exceed £80,000, or £90,000 in Greater London.
- You must intend to use the property as your primary residence. The scheme is not available for buy to let investment.
- You must obtain a mortgage for at least 50% of the discounted purchase price. The scheme is not available to cash buyers.
In addition to these national criteria, local councils are permitted to add their own conditions. Many prioritise local residents, people who work in the area, or key workers in sectors such as healthcare, education, and emergency services. If you are applying in a specific area, it is worth checking what local criteria apply.
How the discount works in practice
To understand what the scheme actually offers, it helps to see a concrete example.
A property has an open market value of £300,000. Under the First Homes scheme with a 30% discount, it is sold to an eligible buyer for £210,000.
The buyer needs a deposit, typically at least 5% of the discounted price, which is £10,500. They then need a mortgage of at least 50% of the discounted price (£105,000), with the remainder made up by further deposit or savings.
When that buyer comes to sell, the property must be sold at a 30% discount to whatever the open market value is at that time. If the property has risen to £400,000 on the open market, the seller must offer it at £280,000.
This means that the seller benefits from capital growth, their £280,000 sale is more than the £210,000 they paid, but they do not capture the full open market value. A portion of the growth is effectively passed on to the next buyer.
Where are First Homes properties available?
First Homes are being delivered through new build developments across England. Developers are required to allocate a proportion of new homes on qualifying sites to the scheme, so availability is tied to where new developments are being built.
Properties are listed by developers and housing associations. If you are looking in a specific area, checking with local estate agents and the Homes England website will give you a picture of what is currently available.
The scheme is currently available in England only. Separate schemes operate in Scotland, Wales, and Northern Ireland.
What is the catch?
The First Homes scheme is a genuine benefit for buyers who qualify, but it is not without its complexities.
The resale restriction is the most significant consideration. When you sell, you must sell at the discounted price to another eligible buyer. This means your pool of potential buyers is smaller than it would be for a standard property, which could make selling slower or more difficult, particularly if the local economy or the housing market changes in ways that affect how many eligible buyers are actively looking.
The scheme is only available on new build properties. New builds come with their own set of considerations: premium pricing relative to existing stock, potential snagging issues in the early months, service charges and ground rent on leasehold properties, and the risk that the development is not yet complete when you want to move in.
Mortgage availability can also be more limited. Not all lenders are comfortable with the restrictions on First Homes properties, and the pool of available mortgage products may be narrower than for a standard purchase. A whole of market mortgage adviser can tell you which lenders are currently active in this space.
Is it worth it?
For eligible buyers, a 30% reduction in purchase price is substantial: it can bring homeownership within reach for buyers who would otherwise need significantly more deposit or a much higher income.
The resale restriction is a real limitation, but if you are buying a home to live in for many years, the resale mechanics are a future concern, not an immediate one. And if property values rise while you own it, you will still benefit, just not at the full market value.
For buyers who want maximum flexibility (the ability to sell at full market value, let the property, or make alterations without restriction) a standard purchase is simpler.
The short version
The First Homes scheme offers eligible first time buyers and key workers new build homes at a minimum 30% discount to market value. The discount is permanent and passes on when you sell.
You must be a first time buyer, earn below the income threshold, intend to live in the property, and take a mortgage of at least 50% of the discounted price. Local authorities can add their own eligibility conditions.
The main trade-off is the resale restriction: when you sell, you must do so at the discounted price to another eligible buyer. This limits your pool of future buyers but does not prevent you from benefiting from property value growth during the time you own the home.
If you think you may be eligible and want to understand how the scheme affects your mortgage options and overall costs, speaking to an adviser is the best starting point.
This article is for informational purposes only and does not constitute financial advice. Government schemes and their criteria can change, so always verify current eligibility requirements before making decisions. Speak to a qualified mortgage adviser before making decisions about borrowing.