First Homes Scheme UK: Eligibility, How to Apply, and What the Covenant Means

First Homes is a government-backed scheme that lets eligible first-time buyers purchase a new-build home at a discount of between 30% and 50% off the open market value. Launched in June 2021 by DLUHC (the Department for Levelling Up, Housing and Communities, now MHCLG), it is designed to help buyers who are priced out of their local area — particularly key workers and those with a local connection. Unlike Help to Buy, First Homes has no equity loan to repay and no interest charges. But there is a legally binding covenant that travels with the property forever. Understanding that covenant is essential before you commit.

What Is the First Homes Scheme?

First Homes are new-build properties sold at a minimum 30% discount to open market value, with the discount secured by a legal restriction on the title. The national minimum is 30%, but local planning authorities (LPAs) can — and many do — mandate a 40% or 50% discount in areas where affordability pressures are highest. Developers provide First Homes properties as part of their affordable housing obligations under Section 106 planning agreements.

The price cap before the discount is applied is £420,000 in London and £250,000 elsewhere in England. This means:

• Outside London: open market value must be £250,000 or less (after the discount is applied, the purchase price is at most £175,000 at 30% off).
• In London: open market value up to £420,000, discounted to £294,000 at 30% off.

First Homes is an England-only scheme. Scotland, Wales, and Northern Ireland have separate affordable housing programmes.

Who Is Eligible?

Essential Criteria

To buy a First Home, you must meet all of the following:

1. First-time buyer: You (and anyone you are buying with) must never have owned a home — or had any interest in a residential property — anywhere in the world.
2. Household income: Total household income must be £80,000 or less (or £90,000 or less in Greater London). Income is assessed at the time of application. Local councils can set a lower income cap if they choose.
3. Mortgage requirement: You must take a mortgage for at least 50% of the discounted purchase price. The scheme is not open to cash buyers, which prevents investors from accessing subsidised stock.
4. Local connection (where applied): Many LPAs apply a local connection criterion, requiring buyers to have lived or worked in the area for a specified period (commonly 12 months). Some schemes prioritise key workers (NHS, education, emergency services) in the first instance. This requirement is discretionary — not every development applies it.

Who Is Excluded

• Anyone who currently owns or has previously owned a residential property.
• Buyers who plan to rent out the property rather than live in it as their primary residence.
• Companies, investors, and buy-to-let purchasers.
• Buyers who cannot obtain a mortgage for at least 50% of the price.

How to Find First Homes Developments

First Homes are not listed in one central register. You will need to search actively:

• Developer websites: Large housebuilders (Barratt, Persimmon, Taylor Wimpey, Bellway) often list First Homes alongside their other affordable tenures. Look for the "affordable homes" or "Help to Buy and schemes" section on development pages.
• Planning portal: Large developments are approved via local planning authority planning portals. Search for Section 106 agreements that specify First Homes provision.
• Housing association and shared ownership providers: Some housing associations manage First Homes alongside shared ownership stock.
• Help to Buy agents: Even though Help to Buy equity loan has closed, the regional Help to Buy agents appointed by MHCLG still provide information on affordable new-build schemes including First Homes.
• Local authority housing teams: If a specific area has local connection or key worker priority, the LPA housing team can confirm which live developments carry First Homes obligations and how the allocation process works.

The Legal Covenant: How the Discount Works Forever

This is the most important aspect of First Homes that buyers underestimate. When you purchase a First Home, a legal restriction is registered on the title at HM Land Registry. The restriction requires that when you sell, the same percentage discount from open market value must be passed on to the next buyer — who must also meet the First Homes eligibility criteria.

How This Works in Practice

The discount is a percentage of market value, not a fixed cash amount. So the discount grows in line with property values.

Worked Example: £200,000 First Home with 30% Discount

You buy a First Home at £200,000. At the time of purchase, the open market value is assessed at £285,714 (£285,714 × 70% = £200,000).

Five years later, the open market value has risen to £320,000. When you sell:

• Open market value: £320,000
• Discount applied (30%): £96,000
• Maximum resale price: £224,000

Your equity gain is £24,000 (£224,000 minus your original £200,000 purchase price), less selling costs. You do not benefit from the full £35,000 of capital growth — the 30% stays with the property to fund the next eligible buyer's discount.

If the open market value has fallen to £260,000, your maximum resale price would be £182,000 — £18,000 less than you paid. First Homes buyers can lose money in a falling market because the covenant restricts the sale price regardless of the direction of travel.

Solicitor's Role in Covenant Compliance

Your solicitor must:

• Verify the restriction at Land Registry before exchange.
• Confirm any resale price calculation with the developer or LPA.
• Ensure the buyer of your First Home meets all eligibility criteria before completion.
• Register the restriction correctly on behalf of the new buyer.

If you attempt to sell without complying with the covenant, Land Registry will not register the transfer. The restriction is not something that can be waived by agreement — it is a permanent legal obligation on the land.

How to Apply: Step by Step

1. Check eligibility: Use MHCLG's eligibility criteria checklist — income cap, first-time buyer status, local connection if required.
2. Find a development: Use the routes above to locate a live First Homes development in your area.
3. Reserve with the developer: Pay a reservation fee (typically £500–£1,000, often refundable up to exchange).
4. Instruct a solicitor early: Conveyancing on First Homes is more complex than standard new-build because of the covenant. Instruct a solicitor experienced in affordable housing.
5. Apply for a mortgage: You need a minimum 50% LTV mortgage. Most major lenders accept First Homes (Halifax, Nationwide, Lloyds, Barclays, NatWest). The lender will want to see the MHCLG-compliant valuation.
6. Exchange and complete: The developer will have a long-stop date for exchange (commonly 28 or 56 days from reservation). Allow time for mortgage survey and searches.

Stamp Duty on First Homes

First Homes buyers are first-time buyers, so the first-time buyer SDLT relief applies to the discounted purchase price:

• No SDLT on the first £425,000 (relief applies up to properties costing £625,000).
• Most First Homes outside London will attract zero SDLT.

Pros and Cons of the First Homes Scheme

Pros

• Genuine discount: 30–50% off market value makes home ownership achievable in areas otherwise out of reach.
• No equity loan: Unlike the closed Help to Buy equity loan, there is nothing to repay and no interest to service.
• SDLT relief available: As a first-time buyer, you benefit from reduced stamp duty on the discounted price.
• Mortgage deposit smaller: A 10% deposit on a 30%-discounted property is far less than 10% on the full market value.

Cons

• Limited supply: First Homes represent a small fraction of the new-build market. Competition for available properties can be fierce.
• Covenant complexity: The permanent resale restriction adds conveyancing cost and time, and restricts your future sale to other eligible buyers — a smaller pool than the open market.
• LTV complications: Some lenders assess LTV against the market value rather than the discounted purchase price, which can affect how much you can borrow. Seek specialist mortgage advice.
• Falling market risk: The covenant does not protect against capital loss — if values fall, your resale price falls by the same percentage.
• New-build only: The scheme does not apply to second-hand properties, limiting buyer choice to what developers offer.

Is First Homes Right for You?

First Homes suits buyers who: are priced out of buying locally; meet the income cap; are comfortable with a new-build; and plan to live in the property for several years (allowing transaction costs and any market movement to work in their favour). If you want maximum flexibility to sell to any buyer at any price in future, the permanent covenant will feel restrictive. For buyers who genuinely cannot access the market otherwise, it is one of the most direct subsidies currently available in England.

Also considering shared ownership? Read our shared ownership explained guide to compare. For budgeting your new-build purchase, see our stamp duty first-time buyers guide. And if you are also researching stamp duty costs for your purchase, our complete stamp duty UK guide covers all current rates and reliefs.