Report EMT SHG
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CYNGOR SIR POWYS COUNTY COUNCIL. Cabinet July 13th, 2021 REPORT AUTHOR: County Councillor Iain McIntosh Portfolio Holder for Economic Development, Planning and Housing REPORT TITLE: Powys Affordable Housing Programme Delivery Plan Guide. REPORT FOR: Decision 1. Purpose To approve the Council’s Affordable Housing Programme Delivery Plan (PDP) Guide. 2. Background 2.1. Programme Delivery Plan Overview 2.1.1 As the strategic housing authority for Powys, the Council must submit a proposal to Welsh Government (WG) setting out how it wishes to allocate grant support for the development of affordable housing in Powys. This proposal is called the ‘Programme Delivery Plan’ (PDP). All schemes proposed for financial support must be in line with the Council’s strategic housing priorities and contribute towards maximising the provision of affordable housing. Once submitted, WG considers the PDP proposals and unless there are major concerns, provides its approval for the recommendations made by the Council. Once approved by WG, housing providers can claim the approved grants from WG for approved schemes. 2.1.2 There are three grant types currently included in the PDP: Social Housing Grant (SHG): provides a capital grant of 58% of the total cost to develop a social rented home. ‘Rent to Own’ (RtO): provides a capital grant of 25% of the total cost to develop a ‘Rent to Own’ home1. 1 Rent to Own: the occupier pays a rent up to but not exceeding a market rent for the property. A proportion of the rent payments are accrued to help support the tenant being able to secure funding from a mortgage provider to buy the property after two years of occupancy. A tenant unable to purchase remains a tenant. When a ‘Rent to Own’ home is sold, any grant must be recycled within Powys by the housing provider to increase the provision of affordable housing. Recycled Capital Grant (RCG): this covers grant awarded to affordable homes which have since been sold – the selling landlord is required to recycle to support development of affordable homes in the Local Authority area in which the grant was invested. 2.2. Future Financial Support Scheme for Affordable Housing 2.2.1 Until 2021-2022, both the SHG and RtO grant schemes were available only to housing associations. Different grant schemes were in place for the development of new homes by local authorities. However, as a result of the Independent Review of Affordable Housing Supply undertaken by WG in 2017-2018, which explored ways to simplify and streamline the grant schemes for affordable housing development in Wales, a new grant system has been introduced with effect from April 2021. 2.2.2 All social housing, regardless of provider, will be supported with SHG from a single grant programme. New affordable housing developments by both the Council and housing associations will therefore from April 2021 be supported from a single grant scheme. RtO grant will no longer be available. 2.2.3 Included in the new approach is a different way of determining how much grant will be made available for each scheme. This will be determined on a scheme-by-scheme basis by the WG using the Standard Viability Model (SVM) which is a gap funding model. The SVM considers the amount of grant needed to make sure that the rent to be charged is within the affordability guidelines set by the WG for affordable homes. The SVM considers for each model income and costs over a thirty-year period. This means that each scheme will receive a bespoke award of grant, replacing the previous approach in which all schemes received grant of 58%, subject to the Total Scheme Cost (TSC) being within the WG’s Acceptable Cost Guidance2. 2.2.4 The new approach is designed to tailor the use of grant more efficiently, encouraging providers to focus on controlling TSC to secure value for money while still developing new homes at costs affordable to people with low and middle incomes. At the same time, due recognition will need to be given to making sure that homes are still provided in high-cost areas, where the demand for affordable housing is often higher than areas with lower property values. 2.2.5 There will remain opportunities to complement SHG with other funding sources. These include the WG Innovative Housing Programme (IHP)3, 2 Acceptable Cost Guidance figures (ACGs) are provided by the Welsh Government as guidance on the likely acceptability of social housing scheme costs for grant purposes. 3 The Innovate Housing Programme offers support to help with additional and extraordinary costs incurred in trialling new ways of designing and building homes. the ‘Land for Housing’ loan scheme4, the Integrated Care Fund (ICF)5 and the Town Centre Loan Fund6 which may help with the cost of converting redundant commercial properties for residential use. 2.2.6 The Council’s Housing Revenue Account Business Plan is under review to allow it to generate surpluses which could be used to support increased development of new Council homes. 3.0 Advice 3.1 The Council, as the strategic housing authority for Powys, will retain the lead role in determining which proposals by providers should be recommended to the WG for financial support. The end to separate grant regimes for different categories of landlord will mean that the Council and housing associations will be considered as equally competent providers. It will therefore be important for the Council to have a robust, equitable and transparent approach for deciding the relative priorities of proposed affordable housing schemes. This will allow providers to make informed investment decisions and make sure that the Council is able to secure investment by the most appropriate providers in the homes that are most needed by the people of Powys. 3.2 The ‘Powys Affordable Housing Programme Delivery Plan Guide’ is attached as Appendix One. The purpose of the guide is to give clarity to all competent providers – including the Council’s own Development Team – on how grant recommendations will be considered and prioritised. Housing associations and the Council’s own Housing Services Development Team have been consulted in drawing up the guide. All have given their support. 3.3 Proposals for social and affordable housing will be assessed by the Council’s Housing Strategy team, which is independent of the Development Team, against the following criteria: Housing market trends. Unmet housing need. The Council’s strategic priorities, including those set out in ‘Vision 2025’. Other recent or planned affordable housing schemes in the area. The availability of grants and other financial support for development in Powys. Cross subsidy between tenures. 4 The Land for Housing scheme allows housing associations to borrow money to buy land to build on. The money is recycled as loans are repaid. 5 The Integrated Care Fund, which includes primarily capital investment but also some revenue expenditure, is designed to help health and social care services to work together to support people with care needs. An example is Extra Care housing for older people. 6 The Town Centre Loan Fund is an interest free loan available to reduce the number of empty sites and properties in urban areas. Other specific considerations unique or relevant to the proposal, for example regeneration or pooled funding from different sources. 3.4 Options Appraisal 3.4.1 Option 1: do not adopt the Powys Affordable Housing Programme Delivery Plan Guide. The lack of clear guidance for determining the allocation of resources may lead to decisions being challenged on the basis of a lack of transparency and discourage investment by developers. 3.4.2 Option 2: adopt the Powys Affordable Housing Programme Delivery Plan Guide. Clarity for all providers of affordable homes about how the Council manages its PDP and how it ranks affordable housing schemes for the allocation of grant will encourage investment in the County. A robust process will provide reassurance to the WG that the PDP is evidence based, makes best use of the resources available to all affordable housing providers and demonstrates transparency and equity in the way proposals have been considered. 3.4.3 Cabinet is therefore recommended to adopt Option Two and approve the use of the Powys Affordable Housing Programme Delivery Plan Guide for managing the Council’s PDP, with effect from April 2021. 4.0 Resource Implications 4.1 To help providers plan ahead as housing developments invariably span a number of financial years, WG provides indicative SHG levels for each local authority area. It is possible that the actual grant award to Powys may be more or less than this indicative figure. However, as the provision of affordable housing is a WG priority it is possible that the total grant available may be higher than the current indicative figures. 4.2 For 2021-2022 only the Welsh Government has allocated SHG between councils and housing associations. From 2022-2023, a single allowance will be awarded to each local authority area, with the strategic housing authority responsible for the allocation of the SHG across all providers, including councils and housing associations. The amount to be allocated from 2022 onwards, to each local authority in Wales, is to be decided during 2021-2022. Table 4.1: SHG for Powys 2021-2022 Year Housing Powys Total for Notes Associations County Powys Council Indicative 2021/22 £8,388,125 £2,097,031 £10,485,156 SHG 4.2 The ICF allocation for Powys for 2021-2022 is £1,800,000. 4.3 Powys County Council has a comprehensive PDP covering proposals until 2024. It includes thirteen local authority schemes which, if all are considered viable and feasible, together need an estimated £17,000,000 grant funding.