The launch of the long awaited 2011-15 Affordable Homes Programme by the DCLG and HCA sees affordable housing providers face a one-in-four-year chance to secure the DCLG/HCA's unallocated funds. They hope this will deliver a significant contribution to the desired 150,000 new affordable homes target during the spending review period.
So what should providers consider in the runup to the 3 May 2011 deadline if it they are to secure a share of the available £2.2bn over the next four years?
The framework contracts need to meet the following criteria for the supply of affordable homes:
• Meet local needs and priorities in their proposed locations
• Offer good value for money
• Have a realistic prospect of delivery within the programme timeframe
• Provide social housing (as defined by sections 68-71 of the Housing and Regeneration Act 2008)
The new Affordable Rent product is encouraged to form the principal element of a provider's offer, with forms of affordable home ownership or social rent being considered only if coupled with Affordable Rent outputs and substantiated with strong cases of local need and local authority support. Affordable home ownership will have to provide good value for money and increase overall affordable housing supply.
To demonstrate financial viability and programme wide value for money (given the significantly reduced levels of grant) providers must demonstrate how they will apply the adoption of new flexibility, which will allow a proportion of social rent properties to be made available at re-let at an affordable rent.
Providers will then need to show how the additional capacity generated from those re-lets will be applied to support delivery of the proposed new supply, whilst making use of alternative forms of subsidy (eg s106 nil grant, free land, RCGF, profits from outright sale activity etc).
As this is the first time providers will need to demonstrate the capacity they have unlocked from their portfolio and business practices, I believe that bidding providers need to focus on three key areas when compiling their proposals:
1. Demonstrate waste reduction measures leading to improved performance
The new Affordable Homes Programme rewards waste reduction, particularly in demonstrable savings in procurement and drives improved quality and innovation.
I would recommend that organisations that have not already done so should look to quickly embrace cost reduction measures and smarter procurement practices to achieve demonstrable efficiencies.
2. Creation of capacity from strategic management of housing assets
Those providers with "rounded asset strategies", which show where they can unlock capacity, while investing in neighbourhoods and existing stock will be credible bidders in the value for money stakes.
My advice to providers is to consider using innovative strategic asset management and financial modelling tools to profile their entire stock portfolios; while seeking to manage a "programme" of subsequent capital investment and revenue generation opportunities.
Such tools allow activities such as stock rationalisation, re-lets at different rents, outright and low cost home ownership, environmental works enhancements or improvements to local amenities, to be factored in to an overall "neighbourhood investment strategy".
3. Secure pipelines of privately controlled land
Despite house builders and residential developers still being able to bid for funding, it is the expectation of DCLG and the HCA that section 106 led affordable housing of any tenure will attract nil grant. Offers purely for affordable home ownership (ones that do not include any affordable rent) will not be considered.
These providers in the main, therefore have little incentive to take part. Indeed, they will not be able to demonstrate the unlocking of capacity within portfolios and charging of affordable rent; as a consequence of a build-to-sell business model.
Registered providers should seek to form partnerships using innovative partnership/JV structures, which will in turn secure valuable pipelines of plots and other potential supply chain efficiencies to feed a four-year programme.
There is no doubt that we are in a new world, and I believe this represents an opportunity to create a better approach to place-making through a more joined-up investment programme in new and existing stock.
This is a great opportunity that only comes around once every four years, so providers need to make sure they are getting it right to be in with a chance of securing the funding.
Rebecca Bennett Casserly is head of affordable housing at EC Harris
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