Yesterday Eric Pickles and Danny Alexander announced new borrowing powers for local authorities in order to facilitate new affordable housing which they stated will act as a stimulus for the development of around 10,000 new affordable homes.
Each authority will have a Housing Revenue Account (HRA) business plan and the ability to develop new housing will depend on generating surpluses and taking advantage of any spare borrowing capacity within the HRA. This is a significant development in local government housing finance and should give much-needed support to the required surge in house-building.
Whilst the reform of the HRA subsidy system in April 2012 has given local authorities that own housing stock the opportunity to manage and finance such housing locally without central control, the government introduced a "cap" on the amount of borrowing a local authority could make against its HRA. To date this has acted as a brake on the ability of local authorities to fund investment in new housing.
The government's announcement yesterday is significant because local authorities can now apply for a share of £300 million of extra borrowing which will in effect lift the "cap" on the amount of borrowing that they can make against the HRA to enable additional investment in new housing.
The borrowing limits are being raised by £150 million in 2015-2016 and £150 million in 2016-2017. In short, the government is asking for local authorities to bid for a share of the increase in borrowing in order to deliver new schemes for affordable homes.
The government has published a prospectus for local authorities considering bidding for a share of the increased borrowing and certain factors have been identified in this as making potential bids likely to be successful.
These factors include ensuring that local authority land is made available for any proposed affordable housing scheme including, in particular, high value vacant housing stock. Partnership working with registered providers or joint ventures is being actively encouraged.
The government also announced yesterday that authorities can now
dispose of vacant housing land to private registered providers and
non-registered providers at less than market value. This should
also help unlock new housing schemes by acting as a catalyst for
greater co-operation between local authorities and registered
providers on housing schemes.
There are two bidding option open to local authorities:
- making a bid for borrowing to support capital expenditure in 2015-2016 and/or 2016-2017 for a firm scheme, or
- submitting an expression of interest which contains an outline of the estimated borrowing required, per scheme, in 2016-/17 with a firm bid to be submitted at a later date depending on the outcomes of the initial bidding round for 2015-2016.
Bids or expressions of interest have to be submitted by 5pm on 16 June 2014.
Our specialist housing team is always available for a discussion
to help you with strategy or to provide the resources you need to
deliver your projects. Areas we could help you with include: vires,
partnership working/joint ventures, planning, property, tax advice,
housing law and commercial issues around risk and reward.