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HRA additional borrowing programme – details announced Matthew Warburton - 11/04/2014

calm_bids_300Earlier this week the Government published details of bidding arrangements for the extra £300 million in HRA borrowing announced in the Autumn Statement last year. Councils are invited to submit firm bids for additional borrowing by 16 June, or expressions of interest for borrowing in 2016/17. However, the prospectus warns that firm bids get priority and councils submitting expressions of interest may find that all £300 million has been allocated to firm bids.

 

Government objectives for the initiative are clearly described. The priority is to increase the supply of homes at affordable rents, and for affordable home ownership. Social rent provision will only be supported in "very limited circumstances" although what these might be is not specified. 

 

Another key objective is to minimise the public sector costs of additional homes, or, to put it the other way round, to maximise the number of additional homes supported by the additional borrowing. The Autumn Statement claimed that the initiative could yield 10,000 new homes, or around four times as many as could be provided if the additional borrowing was the only source of funding for construction.

 

Successful bids will come from councils which maximise contributions from other sources. The prospectus mentions:

 

  • use of local authority land

 

  • receipts from the sale of stock, particularly high value vacant stock

 

  • other sources for cross subsidy, including surpluses from existing stock

 

  • other contributions, including other free or discounted public land, New Homes Bonus or s106 commuted sums.

 

The Government is particularly keen to see councils dispose of high value vacant stock, although the prospectus gives no indication of the potential contribution it believes this might provide. It is clear that councils are expected to have considered, as part of an active asset management strategy, disposal of homes that are either uneconomic to manage or of particularly high value compared with the rest of the stock. Bidders which have not done this are likely to get short shrift, but it is less clear how CLG will respond to a council which can show it has looked at the potential for disposals but concluded, for clear reasons, that it is limited.

 

The prospectus also encourages councils to consider use of private finance to support development through the establishment of special purpose vehicles or similar arrangements. There is also a paragraph encouraging provision of "market tenure housing", presumably meaning homes for letting at market rents.  However, there is no discussion of how privately and publicly funded schemes are expected to fit together and complement each other. All that is left to the ingenuity of local authorities and their legal advisers.

 

ARCH is keen to hear from councils considering bids for additional borrowing, including in particular how they plan to meet the requirements of the prospectus in relation to affordable rents, disposal of high value vacant homes and other sources of cross subsidy and contributions to scheme costs. 

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