Discounted Market Sale: The potential to support housebuilding and homeownership

Our analysis shows that Discounted Market Sale (DMS) – including First Homes - has the potential to make a major contribution to the rapid expansion of housebuilding desired by the Government. Embedding it as a key tenure to be delivered via Section 106 could quickly unlock private housebuilding and deliver much needed affordable home ownership (AHO).

Why now?

• Constrained financial capacity in the Housing Association sector means that there is less demand for Section 106 affordable rented homes. Three years since this reduction in appetite emerged, the pool of demand for Section 106 packages remains shallow and pricing has weakened further during 2026.
• This problem is proving a major obstacle for housebuilding in England, preventing developers – particularly Small and Medium-sized Enterprises (SMEs) – from progressing on sites with a Section 106 obligation.
• DMS is an affordable housing product that does not require the involvement of a Registered Provider(RP) and can help maintain the delivery of AHO while demand from Housing Associations is subdued.
• DMS and other forms of AHO could play a key role in maximising the absorption rate of new homes into local markets, supporting the Government’s home ownership commitments and its ambition to rapidly expand housebuilding.

Is DMS really affordable?

• Homes sold as DMS are discounted by at least 20% from open market value. First Homes, a type of DMS, are sold with a minimum 30% discount.
• Affordability of DMS is typically between that for Help to Buy and Shared Ownership. It therefore has a role to play alongside those products.
• The discount for a DMS home is retained in perpetuity, serving the affordable housing needs of the local community forever.
• The same household income caps that apply to other AHO products are usually applied to DMS homes - £90,000 in London and £80,000 outside London.

How many people could DMS help?

DMS has other advantages

• It is tried and tested. Although a small part of national housing delivery, many DMS schemes have been successfully delivered across the country. Many local planning authorities are comfortable with the product, but others are sceptical.
• Delivered alongside other affordable housing tenures, homes for open market sale and build to rent, it increases the diversity of products that can be delivered on a site, which in turn will increase absorption rates.
• Increased DMS delivery through Section 106 would enhance the diversity of tenures being delivered more generally, with the Social and Affordable Homes Programme (SAHP) being more focused on rented tenures, particularly social rent.
• Most AHO products are restricted to first time buyers. But home movers may also need support to access suitable homes, particularly in a market with low price growth. DMS could support some of these households and enable more home moving activity.
• In common with other AHO products, DMS reduces the deposit requirement to access homeownership. It therefore supports social mobility, helping those who cannot rely on the Bank of Mum and Dad.
• Eligibility criteria can give local buyers priority to purchase DMS homes, both at the initial and subsequent sales. This could help to ensure there is stronger community support for new development.

DMS has the potential to unlock stalled sites and support increased housebuilding

• Applying cascade mechanisms by default that allow developers to convert Section 106 packages to DMS would have an immediate effect in unlocking sites that are stalled without an RP partner. This would speed up Section 106 negotiations and allow permission to be more reactive to changes in RP demand. Securing an RP bid for conventional affordable housing tenures may remain the preferred option, depending on the local planning authority’s assessment of local circumstances and the role of different tenures. But in the absence of demand from RPs, a mixture of DMS and payments in lieu could be a much more common recourse. Private housebuilding would be unlocked, AHO would be delivered and/or payments in lieu could enable local councils to support affordable rented homes elsewhere.
• SME housebuilders are particularly affected by the challenges in the Section 106 market. The lack of a clear exit for the Section 106 element of a site makes financing hard to secure and deters smaller players from promoting sites through the costly planning system. Providing that clear exit, including a role for DMS, would improve site viability and unlock activity in this part of the market.

• Government is seeking to expand Section 106 delivery. The expansion of private housing delivery required to meet Government ambitions, including Grey Belt sites delivering up to 50% affordable housing in line with the ‘Golden Rules’, will deliver more Section 106 packages into the market. The rate at which Government would like to see housebuilding numbers increase means that the number of Section 106 packages coming to market will increase at a faster rate than capacity in the Housing Association sector can expand to absorb them. DMS can provide part of the solution to this mismatch of timing, allowing delivery of AHO to increase without a need for additional public subsidy.
• Demand for DMS and other AHO is limited by income caps, both in London and other higher value markets. In higher value areas, households unable to access market housing are nonetheless excluded from AHO if their household incomes exceed the caps. The income caps for AHO have not risen in line with either house prices or incomes. They are a form of fiscal drag that prevent an ever-growing number of people from accessing AHO and should be reviewed. Removing the income caps would allow an additional 55,000 families in the PRS to afford a three bedroom new home through DMS.

This report is sponsored by Barratt Redrow, Richborough and Land, Planning and Development Federation (LPDF)