1 Delivering the Programme |
1. In December 2010, the government announced a new
programme to build affordable housing (defined by the Department
as below market price) in England. The Affordable Homes Programme
(the Programme) allocated £1.8 billion capital funding in
government grants to social housing providers. The Department
for Communities and Local Government (the Department) has overall
responsibility for the Programme, which is delivered by the Homes
and Communities Agency (the Agency) through contracts with housing
2. The Department expects the Programme to support
the provision of approximately 80,000 homes in the four years
from April 2011 to March 2015, less than 5% of the total number
of families on local authority waiting lists in November 2011.
The Agency secured commitments from providers to build 24,000
more homes than its initial target of 56,000. At the time of our
hearing in July 2012, the Agency told us that they are on track
with work starting on 13,800 homes.
3. Most of the Agency's work to date has been on
appraising and selecting applications from housing providers.
Through negotiation the Agency reduced the average grant per home
to £20,000; a third of that under the previous programme.
Most notably, government funding in London has reduced from around
£90,000 per home under the previous National Affordable Housing
Programme, to around £26,000 per home under the current Programme.
4. The delivery of new houses is skewed towards the
end of the Programme, with more than half planned in the final
year. The Agency told us they have revisited the timetable for
planned completions and have brought forward the development of
6,500 new homes for areas outside of London.
There is also a provision to move funding allocations between
providers if it looks likely that they will not be able to deliver
on their commitments.
5. In addition, in order to get the Programme moving,
the Agency revised its payment structure. The Agency originally
planned to pay providers 100% of agreed funding once the homes
had been delivered. However, to encourage providers to start earlier,
the Agency paid 75% of the grant to housing providers who started
development by March 2012, with the remainder to be paid on completion.
The Agency told us it considers paying 25% on completion a sufficient
incentive for providers to deliver on their commitments but they
plan to review how paying 75% of funding upfront will impact on
the flexibility to move between sites or between providers.
6. Some 51% of schemes are indicative, because sites
have not been identified, projects are not sufficiently progressed,
or do not yet have planning permission.
The Agency explained that having indicative sites is a symptom
of the fact they invited housing providers to submit offers for
the whole four-year Programme. The Agency plans to work closely
with housing providers to firm up the schemes. Where a provider
is not able to deliver indicative schemes, there is an opportunity
within the Programme to move to alternative sites that are more
7. Under this Programme, providers are required to
finance a greater proportion of the cost of the new homes themselves.
The NAO report estimates that housing providers will spend some
£12 billion on new homes, funded by a combination of the
£1.8 billion government grant, £6 billion in borrowing
and £4 billion from other sources.
Providers told us that they have used their surpluses, profits
from selling stock and re-letting some properties, to borrow more.
They have also benefited from stronger balance sheets as a result
of the rise in the value of their housing assets in the last ten
years. The Department
told us that the sector has £11.6 billion in undrawn borrowing
8. The Agency told us that as part of its application
process, the Tenant Services Authority, (the then regulator) assessed
whether housing providers were in a financially viable position.
It told us that it looked at each of the associations that put
forward a bid and identified a few where there were some concerns.
We queried how the assessment took into account changes to interest
rates given that the current rates are so low.
The Agency told us that each housing provider has different arrangements
for its borrowing and it was therefore not possible to identify
a 'tipping point' at which a change in interest rates could impact
on the financial viability of all providers. The Department also
told us that due to the size of their portfolios, housing providers
were able to secure preferential interest rates and are less affected
by short-term movements.
Most of the borrowing for this Programme is on fixed rates and
the Agency told us that, in its view, interest rates would not
affect this Programme, but could affect housing associations overall.
9. We asked about the sustainability of the Programme
in the longer-term. Witnesses from housing providers raised concerns
about whether they could continue to borrow at the same scale
and therefore, if the model could be repeated.
The Department thought that there was still 'headroom' with capacity
in the housing sector to do more. It admitted that it still had
to make decisions on the size, scale and form of the Programme
post 2015 as part of the next spending review.
10. More broadly, there was acceptance from all the
witnesses of the urgent need to find a way to fund the growing
demand for social housing, given that 4.5 million people are still
waiting to be allocated an affordable home in England. The sector
cautioned that there needed to be serious attention given to where
the subsidy for social housing will come from post 2015.
2 C&AG report, paras 1-3 Back
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C&AG report, para 2.20 Back
Q 68 Back
Q 126 Back
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Q 125; C&AG report, para 2.25 Back
Q 125 Back
C&AG report, para 3 Back
Qq 18, 94, Back
Qq 47, 82 Back
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Qq 3-4, 42-43 Back
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Qq 15, 114 Back