How to find a cut-price affordable home

A little known planning condition that makes some new-build homes more affordable to buy is gaining traction.

Originally deployed in popular rural areas where incomes are low and property values are high, the open market discount scheme is being used by a growing number of local authorities.

The Section 106 agreement can stipulate that, in return for planning permission, a developer must set aside a proportion of reduced price affordable homes on a site. The level of discount off the full market value varies but is typically between 20 and 30 per cent.

The price reduction is available to those who are struggling to get onto the property ladder in an area where they live and work. Eligibility is assessed by the local authority, which also sets its own criteria.

For example, a £160,000 house with a 25 per cent discount would be offered at £120,000. Unlike shared ownership schemes, the buyer owns 100 per cent of the property. If they later sell the property on, the same discount must be applied again and the home must be sold to someone who meets the local authority criteria for affordable housing.

Most would agree that this approach to creating open market homes that are affordable in perpetuity is a great idea but there are hurdles for those who want to take advantage of it.

You have to turn to detective to hunt these deals down as, unlike the government-backed Help to Buy equity loan and shared ownership schemes, there is no go-to website directing you to property that is discounted for sale via a Section 106 agreement.

A search on property portals, such as Rightmove and OntheMarket, may prove fruitful. You can also check with your local authority planning and housing departments.

Few lenders are happy to give a mortgage on homes with a Section 106 condition attached so it pays to consult a good, independent mortgage adviser in order to track down a decent deal.

Another issue is that the criteria can sometimes prove prohibitive for those truly in need who have no help from the bank of mum and dad.

Selby Council has a Section 106 open market discount agreement on three houses at The Oaks, a Yorvik Homes site in High Eggborough. There is a 20 per cent discount on the two-bedroom semi-detached properties, which are available for £111,960 each.

However, Stephensons estate agency, which is marketing the homes, say few buyers are able to tick the boxes.

“The main criteria is that the buyer needs a 10 per cent deposit, the household salary has to be less than £18,000 and they have to have either lived or worked in the area for over 10 years,” says Stephenson's Tom Brooks.

“Finding a deposit of over £11,000 is a big sticking point and that is mainly down to the lenders who insist on it.”

Selby Council say that if no buyers are found, the live-work criteria becomes less stringent.

Up in Leyburn, a discounted for sale scheme on another site by Yorvik Homes has worked very well. Richmondshire Council set a Section 106 agreement for 12 of the 40 homes being built to be discounted by 30 per cent.

Katie Bavin, a 27-year-old support worker was able to buy her first home thanks to this affordable housing scheme. She says: “I thought I'd never get on the property ladder let alone live in a house like this.”

Katie had been renting and paying £500 a month for the let while trying to saving for a deposit for her own home. When she investigated the possibility of getting a mortgage, most lenders turned her down.

Katie got in touch with Property Link Homes, a mortgage broker based in Ripon, which worked closely with Richmondshire District Council to make the Leyburn scheme viable.

Property Link Homes helped Katie fill in the forms needed to verify her eligibility to buy and also helped her source a mortgage. Katie's house is worth £171,500 but she bought it at £120,050 with a 15 per cent deposit. Her monthly mortgage payments are £350 a month.

She says: “I wouldn't have been able to buy full price so this was a way round it and made it possible for me to live in a beautiful new house in a lovely area.”

Richmondshire District Council say that demand has exceeded supply for this form of ownership.

Councillor Ian Threlfall says: “It provides people with the opportunity to get on the property ladder, own the freehold and live in their local communities.”

Property Link Homes director Alison Sturgess says more councils are using the open market discount scheme as a planning condition but adds that awareness among buyers is still low and finding a lender can also be difficult.

“Our staff make the process straightforward, and we'll work alongside the council to get the deal through as quickly and easily as we can. These schemes are good for buyers, builders and the community.”