Annex
ASSUMPTIONS USED IN BETTER VALUE FOR INVESTMENT
MODEL
1. The model currently assumes costs of
permanent accommodation at purchase and repair levels rather than
new build levels. The value for money case is clear irrespective
of whether permanent homes are acquired on the open market or
built from new. It is generally cheaper to build from new but
it takes longer, and, in this case, time really is money.
2. We have assumed that registered social
landlords (RSLs), as opposed to local authorities, would deliver
additional permanent supply. Therefore, the permanent side of
the model is based on RSL costs rather than local authority costs.
Local authority costs (eg major repairs allowance [MRA] and management
and maintenance allowance [M&M]) could be inserted into the
model in the place of RSL costs.
3. The value for money analysis assumes
that tenants will be charged normal social housing rents. In order
for this to be viable for a RSL, the model assumes that the RSL
pays interest only on its loan. The RSL would then need to be
able to sell the property and the end of the loan period and would
expect to be required to recycle grant.
4. To put the model into practice would
require a lead in time for purchase of multiple properties. Similarly
there would be a subsequent time lag in the RSL receiving rental
income. It is suggested that RSLs would need to assume a 12 month
period to purchase properties and should assume only 50% of rental
income in year 1.
| 
