The government has issued the Prospectus for bids against increase of £1billion
in the housing revenue account borrowing programme
announced in the Autumn Budget.
Local authorities in London and other areas of "high
affordability pressures" will be able to bid for increases in their
HRA borrowing caps between 2019 to 2020 and 2021 to 2022.
The Chancellor announced in the 2017 Autumn Budget a selected
lifting of Housing Revenue Account (HRA) borrowing caps in areas of
"high affordability pressures" by up to £1bn across England by the
end of 2022, subject to some form of bidding process. The
government also promised to monitor how authorities respond to this
opportunity, and consider whether any further action is
needed.
Some 7 months after the announcement was first made the
government has at long last issued the detailed prospectus and
bidding process and invited selected councils to bid for increases
in their caps from 2019-20, up to a total of £1 billion by the end
of 2021-22. However councils will only have a matter of weeks to
put together detailed bids.
The Prospectus and bidding process was issued by the Ministry of
Housing, Communities and Local Government (MHCLG) on 26 June, with
a deadline of 7 September 2018 for submission of bids. ARCH has
been pushing MHCLG officials for an early announcement to enable
local authorities to plan accordingly and ensure that bids for the
additional borrowing headroom are not undersubscribed and in this
respect the relatively short 10 week period coming as it does, over
the summer holiday period, for preparation and submission of bids
is disappointing.
The £1bn additional borrowing headroom will be allocated over 3
financial years from 2019/20. £400m will be available in 2019/20,
with £300m in 2020/21 and £300m in 2021/22 but the additional
borrowing is being apportioned between London boroughs and local
authorities across the rest of the country on a 50/50 basis
although the prospectus does indicate "that the precise allocation
of borrowing between London and the rest of the country may alter
in light of bids received".
Bids for London authorities will be dealt with by the GLA
(Greater Lindon Authority), bids for authorities outside London
will be dealt with through the Homes England Continuous Market
Engagement Process. Alongside the publication of the Prospectus for
additional HRA borrowing the Government also confirmed a total
additional budget for Homes England of £1.67billion to deliver
social rent as well as other tenures available through the Shared
Ownership and Affordable Housing Programme (SOAHP) and an addendum to SOAHP has been
published.
Outside London only those councils determined as being "in areas
of high affordability pressures" will be able to bid to use the
additional borrowing approvals to build social rented housing,
affordable rented housing, sheltered housing or supported
housing.
Areas of high affordability pressures have been defined by
government in the Prospectus as those where there is a difference
of £50 per week or more between the average social rent and private
rent at the local authority level. A list of 162 local authorities
defined as being in areas of high affordability pressures,
according to this measure is set out in the appendix to the
Prospectus.
The Prospectus introduces some flexibilities that were not
available when previous relaxation of HRA borrowing was announced
in 2013 and councils in areas of high affordability pressures will
be able to bid for:
- Additional borrowing headroom only
- Additional borrowing headroom to be used alongside grant
funding from Homes England through the 2016-21 Shared Ownership and
Affordable Homes Programme)
- Additional borrowing to be used alongside the councils own
unspent RTB receipts
Local authorities can also use commuted sums arising from a
developer contribution, through Section 106 agreements generated on
other sites. Commuted sums can be used alongside additional
borrowing and SOAHP Grant.
Bids that combine additional borrowing alongside unspent RTB
receipts and SOAHP grant will not be accepted.
The Prospectus makes it clear that bids will be assessed and
councils will need to demonstrate 3 key elements:
- Value for money - based on unit scheme costs and maximising the
number of homes delivered, for example by utilising their own land
or offering cross-subsidy where possible.
- Deliverability - local authorities must demonstrate that they
are ready to start building in relevant years and have the
capability and a track record of delivery to time and budget
- Affordability - bids will be ranked according to the areas of
the highest affordability
Councils must also set out in any bid their existing HRA
borrowing headroom and the extent to which such headroom is
committed for other schemes in their 30 year HRA business
plans.
Bids must be submitted via Homes England electronic bidding
system and assessment will be at individual scheme level and the
primary metrics used for assessing the value for money of each bid
will be:
- Overall per unit scheme costs
- Level of additional HRA borrowing requested per new affordable
home and as a percentage of total scheme costs
- Enhanced value for money where local authorities bring forward
land and can demonstrate procurement efficiencies in delivery of
new supply
In assessing deliverability, factors taken into account will
include:
- The stage of planning achieved
- The status of land ownership
- Forecast delivery in terms of numbers of units and draw down of
borrowing approval; and
- The council's track record of housing delivery
Providing bids are assessed as demonstrating value for money and
deliverability, they will be ranked according to local authority
areas where there are judged to be the highest affordability
pressures with the local authorities, with the highest
affordability pressures having priority in the allocation of
additional borrowing headroom.
Full details are set out in the Prospectus: "Additional Housing Revenue Account Borrowing
Programme: Prospectus for local authorities in England outside
London":
ARCH has arranged a special seminar for officers from ARCH member
councils and colleagues from the NFA and the Councils
With ALMOs Group who may be involved in putting together bids under
the HRA Borrowing Programme to be held in London on 18 July, at
which senior officials from MHCLG and Homes England will take
members through the Prospectus and the detailed bidding
process.