It was all too clear when providers were asked to put in bids to provide new homes under
the ‘affordable rent’ programme that the timetable was tight, the risks were high, and that there was a lot of confusion about who would actually have influence over issues such as rent levels.
Housing associations, in particular, had hugely complex assessments to make of the financial implications for their organisations. Subsidy per unit would be tiny and associations would have to use up a high percentage of their private borrowing capacity to make the schemes work. Many were extremely concerned about the levels of rent that would be required, which could be up to 80% of market rents, and the fact that they would be completely unaffordable to their normal profile of new tenants. Privately, quite a few were outraged that a share of their re-lets of social rented homes would have to go into the ‘affordable rent’ pool to fund the developments.
During the period when the bids were being prepared and put in, it became obvious that many local authorities were being bypassed and that quite a few of them were not on the ball and influencing what was happening. There were genuine problems for housing associations, who might have been looking at schemes in a large number of different council areas, often dealing with indicative figures for future years and not real schemes on specific sites.
It must be said that some housing associations, but not all, have tried hard to make some
sense of the scheme, appreciating that the scheme will work less badly in some places
than in others and trying to keep rents, especially for family homes, down wherever possible. It has been said by the mayor in London that the average rent will be 65% of market but there seem to be no published official statistics to see how this is calculated.
A little late in the day in some cases, councils have realised that new development in their
district was being determined in confidential contract negotiations between individual providers and the Homes and Communities Agency, and that final decisions would be made by Ministers, no doubt taking due account of the political implications.
There are now some unholy rows going on as councils see sites that they thought would produce some units of social rented housing going for ‘affordable rent’ and they are
sticking to their guns and insisting that rent levels should come down. This might then make individual schemes unviable. Some are demanding that re-lets of existing social rented homes should not be taken out of the genuinely affordable housing pool just to finance new expensive homes. Providers thought they had deals with Government which may now unravel and are unclear what impact this might have on their total borrowing. Councils may face a choice between having homes that are far too expensive or having developments drop out of the scheme altogether.
It is not entirely clear who has the final say. Councils think they have a veto. Providers
thought it was a done deal and won’t do schemes they think are not viable. The HCA is trying to negotiate a brand new scheme with a lot of risk under strict political instructions. And CLG Ministers have the final sign-off on the schemes. There have already been
significant delays.
Perhaps Grant Shapps should tweet less and manage his portfolio more effectively?
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