First Homes - Local Eligibility Criteria June 2023
3. Income Cap
3.1. The Council has considered whether a lower income cap should be applied in South Staffordshire, having regard to local evidence of house prices and incomes of those looking to purchase their first home. The national eligibility criteria include an £80,000 household income cap.
3.2. South Staffordshire's Housing Market Assessment Update 2022 indicates the following average prices of First Homes in the district, based on average newbuild prices with a 30% discount (Table 3.11, p.43):
Bedrooms
Average price
1 bedroom
£91,000
2 bedroom
£143,500
3 bedroom
£203,000
4 bedroom
£308,000
3.3. Paragraph 3.20 of the Assessment sets out a methodology for calculating the income required to access certain property tenures. For those that require a purchase, property prices are divided by 3.5 to reflect the annual minimum income required to be granted a mortgage on the property. The same methodology has been applied to the average First Homes prices above, to provide a guide as to what level of income would be required to purchase them:
Bedrooms
Household income required to purchase First Home
1 bedroom
£26,000
2 bedroom
£41,000
3 bedroom
£58,000
4 bedroom
£71,428
3.4. The Council considers it unlikely that First Homes with 4+ bedrooms will be delivered in the district, from an affordability perspective and the type of household this tenure is aimed at. The majority of need for this tenure is overwhelmingly for 1-3 bedroom homes.
3.5. It is therefore considered that any income cap should only need to be sufficient to cover the required income for purchasing a First Home with up to 3 bedrooms i.e. in this case, £58,000. The Council has therefore chosen to apply a local £60,000 income cap for the initial 3 month marketing period.
3.6. As a sense check, the average incomes of those that would otherwise be renting in the private sector i.e. the likely purchasers of First Homes have also been considered. Table 3.12 (p.44) of the Assessment indicates these to be between £22,700 and £42,400, depending on the size of property required. This indicates that the reduced income cap of £60,000 would not preclude this type of household from purchasing a First Home.
3.7. As per the PPG, this local income cap will apply for three months from the date the property is first marketed; after which point the national income cap will apply only. The local income cap will be reviewed on an annual basis to ensure it remains appropriate for South Staffordshire.
