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Social Housing Speed Read – Extended deadline for local authority borrowing programme

In this week's Speed Read, we discuss the Additional Housing Revenue Account Borrowing Programme in light of the extended deadline to bid for extra borrowing capacity, which is now 30 September 2018.

In order to fund the building of new homes, local authorities outside London (which are facing increasing pressure in respect of housing affordability) have been invited to bid for £500m borrowing capacity, as part of a scheme administered by Homes England. An additional £500m borrowing headroom has been reserved for local authorities in London as part of a parallel programme administered by the Greater London Authority.

The Additional Housing Revenue Account Borrowing Programme (the “Programme”) was announced by the Government in July 2018, in response to concerns raised from local authorities that limits previously placed on their borrowing capacity meant that they did not have the resources to build new council and affordable housing. It is hoped that the additional funding offered by the Programme will aid the Government in achieving their aim of supplying 300,000  new homes per year.

Eligibility and assessment of the bid

As the initial deadline was 7 September 2018, it is likely that many local authorities have already considered their suitability for the Programme. Eligibility is contingent upon the location of a local authority being considered a “high affordability pressure area”. An area meets this definition if average private rents are at least £50 a week more expensive than social rents.

Where local authorities are bidding for additional borrowing headroom only, the bids will be assessed against three key criteria:

  • Value for money: local authorities should demonstrate that they are able to finance the bid and that the borrowing is affordable. Efficiency shall be assessed against overall per cost per unit, and what percentage the total cost of the bid will be funded by Housing Revenue Account;
  • Deliverability: clear explanation of the deliverability of the bid will be assessed taking a range of factors into account, including the local authority’s track record of delivering affordable housing, the current stage of planning and the current ownership of the land;
  • Affordability: at the second stage, bids will be ranked according to affordability pressure, using the definition outlined above.

Still more work to do

The Programme has been met with widespread praise within the social housing sector, as many local authorities will now be able to deliver more ambitious plans for supplying affordable housing through relying on increased Housing Revenue Account.

However, there is still concern that the Programme will not be sufficient to meet the demands placed on local authorities to deliver a satisfactory number of affordable homes, even when considered alongside additional proposals in the Government’s Social Housing Green Paper. This concern is heightened as, even though the housing crisis is widely accepted as a national issue, a number of councils have been excluded from applying for the Programme as a result of their failure to meet the eligibility criteria.

It is the prevailing wisdom in the sector that more steps need to be taken in order to see a substantial increase in the provision of affordable and social housing. Local authorities who are successful in their bids will receive a welcome boost to their Housing Revenue Account, and by the same token, their house building activities, meaning that council’s may re-take their mantle as a major builder of new homes and investment in local communities.

If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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