New Affordable Homes Programme – How does it compare?
On 10th September, the Government announced the initial details of the Affordable Homes Programme 2021 to 2026; a £7.39 billion fund to deliver up to 130,000 affordable homes outside of London by March 2026. This programme represents a new iteration of the Shared Ownership and Affordable Homes Programme, following the conclusion of the 2016 to 2021 fund in March 2021.
As displayed in the table below, the new programme is comparable in size.
Breakdown of Funding
|2016 to 2021||2021 to 2026|
|Initial Amount||£4.1 billion||Initial Amount||£7.39 billion|
|November 2016 Addendum||£1.4 billion|
|June 2018 Addendum||£1.67 billion|
|Total||£7.17 billion||Total||£7.39 billion*|
The fund seeks to support England’s supply of affordable housing. It will deliver the following approximate tenure proportions:
- 50% of homes to be delivered as sub-market rented products (a mixture of affordable rent and social rent);
- 50% of homes as affordable home ownership products (a mixture of Shared Ownership, Rent to Buy and other specialised products); and
- Of these delivered homes, the fund also seeks to deliver portions of Supported Housing (10%) and Rural Housing (10%) as well as empty home projects and traveller pitches.
Though the previous programme’s ambitions are mostly replicated in the new version, seeking to bolster Modern Methods of Construction (MMC) adoption, sustainable builds and the Small to Medium Enterprise (SME) housebuilding industry, the 2021 to 2026 programme has a stronger strategic emphasis by tying these ambitions directly to Homes England’s Strategic Plan. These objectives are partially included in the assessment criteria for funding applications and partially written into the standard conditions of funding.
As per the 2016 to 2021 programme, grant will not be provided for Section 106 opportunities, major repairs and replacing homes demolished through regeneration activities. Also, as existing, funding is accessed either by a scheme-by-scheme basis or through a strategic partnership with Homes England; all applicants must be Homes England Investment Partners when they formally receive the grant.
For scheme-by-scheme allocations, the new programme as a baseline offers a more cashflow positive release of funding, as displayed in the table below.
Timeline for the Release of Funding
|2016 to 2021**||2021 – 2026|
|Start on Site||50%||Acquisition||40%|
|Practical Completion||50%||Start on Site||35%|
The programme’s approach to sub-market rental products remains broadly the same as the 2016 to 2021 programme. There is a ringfenced amount for Social Rent for locations with large affordability challenges, or in areas where the grant requested would not be higher than it would be for Affordable Rent. More details on Social Rent and Affordable Rent can be found in Homes England’s Capital Funding Guide.
The greatest changes relate to Shared Ownership with a new model for the tenure aiming to improve affordability for purchasers. Firstly, the minimum first tranche sale of 25% has been reduced to 10%. Secondly staircasing tranches have been reduced from a minimum of 10% to 1%. Additionally, landlords will now be responsible for the property’s repairs and maintenance costs for the first 10 years. These costs exclude those covered by the defects period or new build warranty, however it is likely that this change will cause a decrease in value of the tenure to RP’s creating wider viability challenges. Understanding the likely costs associated with this change will be key for developing organisations – both at investment appraisal and business planning levels.
In line with their commitment to increasing homeownership the Government has released details of their new initiative – Right to Shared Ownership (RTSO); a measure to enable housing association tenants with social housing tenancies to purchase a share of their property. With Government quoting that “two-thirds of social housing tenants would like to buy a home, yet only a quarter currently believe they will ever be able to do so”, RTSO hopes to give an alternative route to home ownership for tenants who previously due to affordability constraints have been unable to utilise their Right to Acquire.
These significant shifts in the landscape of Homes England grant in relation to Shared Ownership will impact how Registered Providers undertake development viability appraisals, assess risk and conduct business planning exercises. It is crucial that Registered Providers successfully adapt to these shifts so to have a robust foundation of understanding materialised in an appropriate business approach throughout the programme’s lifespan.
Altair are well equipped to assisted Registered Providers to develop their approach in response to these changes. Our inhouse development appraisal toolkit, Podplan Scheme, that is used by over 30 Local Authorities and Registered Providers nationwide, is up to date with these changes and enables RP’s to accurately assess viability both on a tenure-by-tenure basis and a consolidated scheme basis. Podplan is easy to use and includes a Shared Ownership affordability calculator as well as functionality to undertake stress tests on Shared Ownership first tranche sales and staircasing. Additionally, we are experienced in assisting with business planning exercises and formulating development strategies so can provide wider consultancy support as required.
For more information, please contact Aaron Elliott at firstname.lastname@example.org.
* However, it should be noted that the £1 billion of additional funding to extend Homes England’s Strategic Partnerships was announced in September 2018. This is now included in the 2021 to 2026 programme.
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