The HCA needs innovation and greater flexibility from providers

Over the last twenty years, the growth in England’s housing supply has not kept pace with demand. And the consequences mean that house prices are outside the reach of virtually all first time buyers and an estimated 4.5 million people are on council waiting lists.

The HCA will continue to invest in housing, providing a total of £6.8bn over the next four years. And £4.7bn of this has been earmarked for the provision of new affordable homes.

In the current economic climate and with greater scrutiny of public funds, it’s a given that money must go further. So we’re introducing new flexibilities for providers using existing assets and a new offer on rents to support the delivery of up to 150,000 new homes.

At the Housing Forum’s national conference on 7 April, we reiterated our framework arrangements for affordable housing for the next four years. This framework for local authorities and housing providers supports our new affordable homes programme, detailing how it will work and inviting proposals for delivery. Proposals should cover the 2011-15 Spending Review period.

At the heart of the programme is a desire to provide more affordable homes for less subsidy. Providers will be given the freedom to charge higher rents on new properties and greater flexibility to offer lifetime tenancies but also set shorter tenancy periods.

New flexibilities will allow new affordable homes and a proportion of existing social rent properties at the point of re-let, to be made available at an Affordable Rent of up to 80% of market rates, with the additional capacity generated going to support the delivery of new supply.

Providers will also benefit from greater flexibility to manage individual delivery programmes rather than being governed by a scheme-by-scheme approach. The intention here is to agree clear and flexible arrangements that enable providers to plan ahead, but which can be adapted over time.

Though we anticipate providers will focus on Affordable Rent, we are encouraging wider thinking to meet local needs. For example, we’re keen to see products like Mortgage Rescue, hostel provision through the Homelessness Change Programme, Traveller Pitch Funding and empty homes initiatives included in proposals. And low cost home ownership will continue to be supported where it is a local priority. We welcome innovative ideas like conversions or extensions of existing properties to increase the supply of family homes.

Potential bidders should note that proposals will be assessed on the ability to meet local priorities and support inclusive communities. So we’re looking for plans that that meet diverse needs including the provision of larger homes; supported housing for vulnerable and older people; housing in rural areas and housing that will be targeted to meet the needs of disabled people, faith groups and black minority and ethnic communities.

Getting to the crux of how the new model stacks up, four funding streams are available:

• Additional borrowing generated from the increased net rental income stream of new properties and re-lets at an Affordable Rent
• Existing sources of cross subsidy, including provider surpluses, income from developing new properties for outright sale, Recycled Capital Grant Funding (RCGF) and Disposals Proceeds Fund (DPF) and section 106 cross subsidy
• HCA funding where required for development
• Other sources of funding or means of reducing costs such as free or discounted public land, including local authority land, and local authority contributions

But the success of the new affordable homes programme will be equally informed by the level of partnership working across the public, private and third sectors to generate flexible and innovative ways to improve housing supply.

Providers will have to engage more proactively than they have in the past with local authority partners and communities. Stronger and even more constructive engagement and partnership working will be a prerequisite to ensure that delivery matches local priorities.

And as part of our investment and enabling role, we will help to build these relationships, be this through strategic land advice, procurement support, viability modelling or maximising the local benefits from the New Homes Bonus.

We’re confident that the new framework will support housing providers to come up with innovative ideas and develop robust plans to help deliver the right type of housing that our communities so desperately need. We look forward to receiving proposals by 3 May and working with our partners to increase the supply of new homes.

Richard Hill is Executive Director - Programmes and Deputy Chief Executive of the Homes and Communities Agency.