First Homes Scheme in London: How to Buy a New Build with a 30% to 50% Discount
The First Homes Scheme is a UK government initiative that allows first-time buyers and key workers to purchase selected new build homes at a 30% to 50% discount against open market value. In Greater London, the discounted purchase price is capped at £420,000, with a maximum household income limit of £90,000. The discount stays tied to the property's title deeds in perpetuity, ensuring future eligible buyers benefit as well.
Buying a first property in the capital is a major financial commitment. With the average cost of London homes sitting far above the national benchmark, this government policy provides a straightforward route to full homeownership without entering into a shared equity loan or paying rent on an unowned share.
How the First Homes Scheme Works in London
Under national planning rules, local councils require residential developers to allocate at least 25% of all developer-contributed affordable housing (via Section 106 planning agreements) specifically to First Homes.
The standard baseline discount is 30% below market value. Individual London boroughs, including Newham, Greenwich, and Havering, have discretionary powers to increase this discount to 40% or 50% where local house prices require deeper subsidisation.
Crucially, you own 100% of the property title from day one. You do not pay rent on the discounted portion, and there are no monthly equity loan interest fees. When you eventually decide to sell, the identical percentage discount is passed on to the next qualifying buyer based on an independent RICS valuation at that time.
London vs National Thresholds
| Criteria | Greater London | Rest of England |
|---|---|---|
| Price Cap (After Discount) | £420,000 | £250,000 |
| Maximum Household Income | £90,000 per year | £80,000 per year |
| Minimum Discount | 30% (up to 50% locally) | 30% (up to 50% locally) |
| Minimum Mortgage Required | 50% of discounted price | 50% of discounted price |
| Typical Deposit | 5% to 10% of discounted price | 5% to 10% of discounted price |
Who Qualifies for First Homes in London?
Eligibility is split into national statutory requirements and local borough priorities:
- First-time buyer requirement: Every named purchaser on the application must be a genuine first-time buyer who has never previously owned, co-owned, or inherited a residential property anywhere in the world.
- Mortgage requirement: You must fund at least 50% of the discounted purchase price through a commercial mortgage or regulated home purchase plan. Cash purchases are not permitted.
- Principal residence: The property must be your sole and primary residence. Subletting the whole property is prohibited by covenant, although taking in a lodger under the Rent a Room Scheme is permitted.
For the initial three months of marketing on any new development, local authorities can restrict eligibility to local residents, key workers (NHS staff, teachers, police, emergency services), or people working in that borough. If homes remain unreserved after three months, these local restrictions drop away and the plots open to all qualifying London first-time buyers.
Comparing First Homes, Shared Ownership, and 5% Deposits
| Scheme | Ownership Title | Monthly Outgoings | London Price Limit |
|---|---|---|---|
| First Homes | 100% full title | Mortgage + Service charge | Capped at £420,000 |
| Shared Ownership | 10% to 75% equity share | Mortgage + Subsidised rent + Service charge | No statutory cap |
| Standard 5% Deposit | 100% full title | Mortgage (on 95% value) + Service charge | Set by lender limits |
How to Apply: Step by Step
1. Financial pre-approval: Obtain an Agreement in Principle (AIP) from a mortgage lender, ensuring your total household income is below £90,000 and your deposit covers 5% to 10% of the discounted purchase figure.
2. Select a participating development: Search new homes in London and filter for developments up to £500k or view dedicated First Homes scheme developments across active regeneration zones.
3. Reservation and council approval: Complete the First Homes application form with the housebuilder. The developer forwards this to the local authority, which issues an official Authority to Proceed (ATP) once eligibility is confirmed.
4. Legal conveyancing and exchange: Instruct a conveyancer experienced in Section 106 covenant agreements. Your solicitor reviews the title clauses and secures the council's Authority to Exchange (ATE) before exchanging contracts.
5. Completion: Upon practical completion of the building, mortgage funds are released and you collect the keys to your new home.
Selling a First Home
When you decide to sell your property in the future, the sales process follows standard market practices with two governing stipulations:
First, an independent surveyor chartered by RICS must conduct a formal valuation to set the current open market price. Second, you must advertise the property at the exact same percentage discount (e.g. 30% or 40% below the new RICS value) exclusively to qualifying first-time buyers for the first six months.
If no eligible buyer is found after six months of active marketing, you may apply to the council to sell on the open market, remitting the original discount value back to the local authority's affordable housing fund.
Where to Find First Homes in London
First Homes allocations are concentrated in outer London growth corridors where major regeneration projects are active:
- East London: Significant plot allocations in masterplans such as Beam Park in Havering and International Way in Stratford, offering high connectivity into central transport hubs.
- South East London: Riverside developments near Saxon Wharf in Greenwich, benefiting from direct Elizabeth Line and DLR services.
- North London: Eco-focused communities including Montmorency Park in Barnet, providing high EPC energy ratings and lower utility costs.
Frequently Asked Questions
FAQ
The maximum purchase price for a First Home in Greater London is £420,000 after the 30% to 50% discount has been deducted from the market valuation.
No. The scheme is restricted to owner-occupiers as their principal residence. Letting the property is prohibited without formal council dispensation.
Stamp Duty Land Tax (SDLT) is calculated on the actual discounted price you pay, rather than the full market value. First-time buyers also benefit from standard First-Time Buyer Relief on qualifying purchases.
No. The English First Homes scheme charges no equity interest or government fees. You only pay your mortgage, council tax, and standard building service charges.
