With the launch of the National Housing Bank, and now the Housing Streamlined Subsidy Scheme, you can’t help but feel that there may finally be some real solutions to the viability issues which have been frustrating housing development.
Over the last few years, the viability of a development (impacted by high land values, building safety delays and materials inflation to name a few) has prevented many schemes from progressing (or has resulted in conditionality being built into contractual documents to allow parties to walk away if viability isn’t met). The introduction of the Housing Streamline Subsidy Scheme (the Scheme) seems to be the Government's answer to attempt to plug these viability gaps.
In the Government’s own words, ‘Streamlined Routes’ are “voluntary mechanisms that can be used by UK public authorities to give certain subsidies.” The idea is that public authorities will be able to review proposed subsidies against the criteria of the specific Streamlined Route, rather than undertake a full review against the subsidy control principles. In theory, this will allow public authorities to speed up the award of subsidies.
There are already streamlined routes established in a number of areas – arts and culture, community regeneration, research / development / innovation, energy usage, and local growth. Housing is the latest area added to the list.
The two strands
There are two ‘strands’ under the Scheme; strand one is available for eligible costs in relation to purely social and affordable housing schemes, and strand two is available for sites of any tenure mix and can be schemes comprised entirely of market rate housing.
The criteria for either strand will need to be met in order to be able to access the Scheme but if the criteria is satisfied the funding can be used to cover acquisition costs, works costs (including remediation costs) and on costs (design costs, insurance premiums, etc.). For strand 1 (social and affordable developments) it is also possible to access the Scheme for work costs to existing buildings including converting existing buildings back into affordable stock and the installation of energy efficient/renewable measures and decanting costs.
Strand 1 and strand 2 both come with an upper limit of £75m of funding over three financial years, limited to, in the case of strand 1, 80% of the housing project costs, and in the case of strand 2, 50% of the housing project costs.
Helpfully the Scheme can be used on projects (a) with historic or pre-incurred costs where funding is needed retrospectively, (b) where reinvestment is required, (c) where a loan extension becomes necessary mid-project due to delays or (d) where an unforeseen viability issue arises.
Subsidies can be given directly to housing developers, Registered Provider/Registered Social Landlords (and their subsidiaries) or other housing providers or newly established entities created for the purpose of delivering housing regardless of whether they have previously provided housing.
Amount
The amount of subsidy granted under the Scheme cannot exceed the viability gap as determined by the public authority but can include a reasonable profit to the developer which will hopefully make the Scheme an attractive option. The identified viability gap cannot however be attributable (directly or indirectly) to any act, omission, default or negligence of the beneficiary and funding under Strand 1 must be strictly ring-fenced to the costs associated with the delivery of social and affordable housing so careful management will be required.
The ability for public authorities to address viability gaps in housing developments is a welcome addition to the grant funding under the Social & Affordable Homes Programme.
As with all initiatives like this the key point will be how easy is it to actually access the Scheme but on the face of it the Scheme does look like a real option to help plug viability.
