DCLG expects huge interest in new affordable housing 'product'
Published by Jon Land for 24dash.com in Housing and also in Central Government, Local Government
DCLG unveils details of new affordable housing 'product'
The Department for Communities and Local Government today unveiled details of its latest affordable housing 'product'.
The 'Affordable Rent to Buy' is backed by £400 million of government funding, which will be made available from 2015 to 2017 for organisations to pilot the new model.
Part 'affordable rent', part 'right to buy', the government believes this new type of housing will attract a wide range of developers "as it combines an affordable rent with the opportunity for a longer-term housing product". Local authorities and other public bodies are, however, not allowed to bid for funding.
For the social housing purist, however, it represents the worst of both worlds - high rent affordable housing that is likely to be sold on after seven years.
In a working paper published today, DCLG said: "We are particularly interested in hearing from non-registered providers who would be interested in delivering this product, as well as housing associations and other currently registered providers of affordable housing.
"As this is a returnable government investment, all bidders will need to meet a high standard of credit-worthiness and offer sufficient security to provide a high level of assurance that the government’s investment will be repaid."
Unveiling how the new product would work, the paper said: "Affordable Rent to Buy will provide repayable investment to providers to fund additional new build homes which must be let at Affordable Rent – that is, up to 80% of market rent - for at least seven years.
"After this initial seven year period, the requirement to hold the property at Affordable Rent will continue to apply until government’s investment is repaid.
"On repayment of government’s investment, the provider will have full flexibility over the use of their property. For example, they may choose to convert the property for market sale or rent, or to retain the property as affordable housing.
The government says its investment must be repaid within 15 years, even if the provider chooses to retain the homes for affordable housing or other purposes beyond this point.
The paper added: "For this pilot scheme, in order to deliver homes quickly, we propose that the government funding will be in the form of a loan with a fee. We would however be prepared to consider an equity-style investment – i.e. a model in which government’s return was linked to the performance of the investments – for any future rounds of funding. To inform these considerations it would be useful to understand the market appetite for such an approach.
"The funding will be provided to meet part of the development costs of the new homes. We expect to take a similar approach to eligible expenditure to that laid out in the prospectus for the 2015-2018 Affordable Homes Programme.
"As one of the aims of this scheme is to stimulate the supply of new housing, all properties funded must be newly built, rather than acquired.
"To drive value for money, the bidding process will favour schemes that can deliver more homes per pound of government investment. Government funding will only cover a proportion of the development costs of the Affordable Rent to Buy homes in any single scheme."