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£2 billion boost for affordable housing 12/10/2017 Labelled as Development, Finance

The government has confirmed plans for what it says will be a new generation of council and housing association homes by increasing funding for affordable homes by a further £2 billion to more than £9 billion, But how much of this will be available for council housing?


Previously, the government's Affordable Housing Programme (AHP) primarily supported 'affordable rent' (i.e. rents of up to 80% of local market level) and low-cost home ownership schemes but the Prime Minister at the recent Conservative Party conference announced that an additional £2bn will be allocated to the AHP and the programme will now extend support for 'social rent' - which are lower rents, set according to national guidelines.


The numbers of homes that can be provided with these extra funds will be determined by the type and location of housing and bids received for funding, but the government announcements says that with a typical grant subsidy of £80,000, this £2 billion investment can supply around 25,000 more homes over the next 5 years.


The announcement of £2bn additional resources for the AHP was made alongside the announcement that a further £10bn will be allocated to the government's Help to Buy Scheme to provide equity loans for around 135,000 households to purchase a new build property up to the value of £600,000. 


It would appear that any bids for funding for new social rented housing may be limited to areas"of acute affordability pressure, and where working families are struggling with the costs of rent and some are at risk of homelessness."  It is not clear at this stage what the government may determine to be "areas of acute affordability pressures". The money will be allocated by the Greater London Authority (GLA) in London and the Homes & Communities Agency (HCA) for the rest of England.


The government's Affordable Homes Programme will increase from £7.1 billion of public funding to £9.1 billion, and the government say that the £2 billion additional funding for affordable housing could lever in total investment by housing associations and councils of up to £5 billion. 


Despite the allocation of this additional money being heralded in some parts of the media as a renaissance for council housing, at this stage it remains unclear how much of this extra £2bn will find its way to councils for new council housing. To start with ARCH understands this additional money is not specifically "ring-fenced" for social rented housing and, even if it was, councils will have to compete with housing associations in bidding for this additional money.


ARCH Chief Executive John Bibby discussed the government's announcement of an additional £2bn for the AHP with senior officials at the Department for Communities and Local Government (DCLG) immediately following the announcement and we are seeking clarification on a number of matters relating to the announcement including:


  • Whether the additional £2bn allocation to the AHP to be ring-fenced for social rent only?


  • Confirmation that this is an additional £2bn over the life of this parliament - i.e. over 5 years?  And whether the allocation to be spread evenly over those 5 years or if there a different allocation profile?


  • Whether all of this additional allocation be open to bids from both Local authorities and housing associations in some form of competitive/vfm process?


  • Presumably the bidding process will be managed by the HCA/GLA in accordance with their usual processes?


  • Who will determine locations for invitations to bid? i.e. who defines "areas of acute affordability pressures"?


  • How much of the additional £2bn will be targeted at London?


  • Will the "typical £80,000 subsidy" be in the form of grant for both HAs & Las and if councils have committed their borrowing headroom will consideration be given to increasing the HRA debt cap?


  • When will the bidding guidance be available and the bidding process open?


  • If, as appears to be the case, there is now an acceptance that a typical subsidy of £80,000 is needed to deliver social rented housing will the government reflect this in 1-4-1 RTB agreements and can ARCH provide more evidence, for example on the impact of the "30% rule" to demonstrate the need for more flexibility in use of RTB receipts for 1-4-1 new build.


  • How does this allocation link to use of public land?


  • Whether this additional allocation & bidding process in any way linked to the introduction of "Bespoke Housing Deals" referred to in the Housing White Paper and the governments manifesto pledge to build "a new generation of council housing" in the form of 10/15 year Fixed Term Council Housing? 


John also pressed DCLG on what this announcement might mean for the future of the High Value Asset (HVA) Levy and the sale of higher value council housing - policies set out in the Housing & Planning Act 2016 and previously announced to be introduced at some time after April 2018. John Bibby, ARCH Chief Executive comments:


The fact that the government, for the first time in many years, is now prepared to back a policy of investment in social rented housing (including council housing) marks a significant change in housing policy which up to now has almost exclusively been geared towards the promotion of home ownership.


ARCH welcome's the allocation of an additional £2bn in the AHP for social rented housing - hopefully as a first step to further investment in the future but we recognise that in response councils will need to deliver.


We are pleased that the government have at long last recognised the need for social rented housing alongside other tenures but compared to the additional £10bn for Help to Buy and way the announcement had raised high expectations in the sector having been hyped in the earlier press briefings as the "unveiling of a major council house building programme" there is inevitably a little disappointment that it was not more, that the funding is to be spread over the life of the parliament and that it is not exclusively available for new council housing.


Greater certainty around future rent income and availability of these additional funds in the AHP is most welcome but ARCH have concerns that the continued and ongoing uncertainty around the HVA levy is still likely to act as a drag for some councils in building new council housing. There is a very strong appetite amongst councils to build, as demonstrated by the number of councils setting up local housing companies, but some councils are concerned that any new build council housing may exceed the, as yet to be defined, Higher Value thresholds and may therefore be taken into account in the HVA Levy formula and ultimately increase the levy they will be required to pay and force councils to sell off any new build properties when they become vacant after first letting in order to raise the money to pay the levy.


We urgently need to know from government when wecan we expect an announcement on the HVA Levy and if the government is still intent on pressing ahead with the HVA levy whether minister's will at least consider exempting any new build council housing from the levy calculation?




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