Contracts will keep grants to developers fair, says ODPM

The government is confident it can use contracts with private developers to guarantee a level playing field when they bid against housing associations for social housing grant.

It is understood the Housing Corporation will sign “accreditation contracts” with housebuilders that get grant. The measure forms a key plank of a 20-page consultation on the proposal, to be published by the corporation next week.

The ODPM – which was last week threatened with legal action over the grant plan by registered social landlords (HT 12 November, page 9) – is understood to be exploring how strict it can make the contracts without scaring off developers.

John Prescott’s department hopes the deals will appease RSLs that believe the scheme is, in the words of one chief executive, “doomed to failure” and “fundamentally flawed”.

A senior corporation source said: “We will be looking to use a system of accreditation that is the equivalent of association regulation.”

The corporation’s £200m pilot of the grant plan will start next February. The consultation, which will run until 31 December, is also understood to cover:

• requiring bidders to demonstrate competence in social housing managementn requiring bidders to have an agreement with relevant local authorities on nomination rights
• European procurement rules. The corporation says private sector bidders will not be subject to European rules because they are not bodies “governed by public law”, unlike housing associations
• examining how to claw back social housing grant when homes are sold to private buyers
• setting maximum grant available at 60% of development’s value
• allowing arm’s-length management organisations and councils rated excellent by the Audit Commission to bid for grant
• setting 400-home threshold for suggested developments
• no need for regional consideration as part of allocation process as pilot will be nation-wide.

Housing associations are likely to accept that the corporation has done as much as it can to level the playing field. However, concerns will remain over European procurement rules.

A contract could mean that non-RSLs would be subject to the same restrictions as housing associations, including European rules

ODPM source

The government is understood to believe its accreditation contracts can tackle this problem. An ODPM source said: “A contract could mean that non-RSLs would be subject to exactly the same restrictions as housing associations – including European rules.”

But a source at the National Housing Federation said: “Even if that is what the government does, we would still take legal advice on our options.”

Terry Fuller, chair of the affordable housing group at the House Builders Federation, said the idea sounded “a bit bizarre”.

“If housebuilders received corporation money they would spend it – that is their business. It is not the same for associations as they don’t directly build homes.

“We would obviously use subcontractors, but we wouldn’t want to add another 70-odd days to the process by going through the tendering process in the EU’s Official Journal.”

He proposed an alternative approach. “Why not go through the EU procurement phase when the initial £200m pot is up for grabs – that way the boxes have been ticked for both associations and non-housing associations?”

The consultation paper has been delayed until now by the Housing Bill passing through parliament and gaining royal assent. This finally happened yesterday.