The Government first announced plans for a shared ownership right to buy in October 2019. At the time the sector raised concerns about the impact the plans would have on housing associations ability to borrow. An election and a pandemic later the Government announced, during the CIH Housing Festival last week, the return of the right to shared ownership as part of its Affordable Homes Programme (AHP).
It was the Government announcement the Community-Led Housing sector had been waiting for; the £163million fund to build new community-led housing is now live.
The prospectus for phase one of the funding is out now, but what do you need to know?
What is ‘community-led’ housing?
For consideration of your proposal as community-led housing, you should ensure that:
- There is meaningful community engagement and consent throughout the process. The community does not have to initiate and manage the development process or build themselves, but they could;
- The local community group or organisation owns, manages or stewards the homes and in a manner of their choosing, may be done through a mutually supported arrangement with a Registered Provider (RP) that owns the freehold or leasehold of the property; and
- The benefits to the local area and/or specified community are clearly defined and legally protected in perpetuity.
Key information about the fund:
- You can see the prospectus here;
- The fund is available across England only (equivalent schemes are available elsewhere);
- The fund is available up to March 2020. Applications are open now and will remain so until the fund is fully committed or 31 December 2019, whichever comes first;
- The fund will be released in two phases; Phase one (out now) supports: Applications from organisations that are or intend to become a corporate body, or a local authority or RP on behalf of the community group, for revenue funding for ‘project-specific activities that support development of community-led housing proposals’ (i.e. seed funding to get started); and, capital bids awarded to local authorities (only) for local infrastructure projects to support community housing development that ‘will result in housing developments that meet the criteria for being community-led’ (i.e. access roads, remediation, utilities);
- Phase two will deal with capital funding for the construction of community-led housing and is expected to launch later this year. Recipients who are to be the landlord of rental properties must be or intend to be RPs before completion of developments and payment of funding (no funding is available to support the costs of registration);
- Homes England will manage and deliver the fund. The Government is working with the Greater London Authority (GLA) to develop a similar scheme in London;
- There is no strict cap on the amount of grant funding that any one project can receive under the fund or the number of bids that an organisation can submit. However, payments are subject to State Aid requirements; the fund does not intend to provide 100% of costs, groups should contribute at least 10%; obtaining funding under phase one does not guarantee phase two funds.
Challenges and solutions?
To RP or not to RP?
It’s not a requirement to be an RP to apply for revenue grant funding under phase one, as it doesn’t deal with grants towards the construction costs of affordable housing (neither is there any need to be an RP if you are not going to be a landlord, delivering Shared-Ownership homes, for example).
However, if you intend to be the landlord of completed low-cost rental properties through the Phase two capital grant of the fund or Homes England’s affordable housing grant programme, then you must be or intend to be an RP before completion of the development and payment of funding.
Registering as an RP can be a lengthy and costly process. The initial fee to pay on successful registration itself is £2,500, and some organisations will need to take independent legal and tax advice on the application itself. Registration also introduces a layer of regulation that the RP must comply with and train the Board appropriately.
Community-led housing organisations should, therefore, consider whether a partnership working with either an RP or local authority is a viable option. If not, and your plans involve the development of affordable homes, then you will need to register as an RP or be ineligible for applying to the fund for capital costs.
We’ve seen RPs work successfully alongside community-led housing providers and there can be numerous benefits to such a partnership. These include access to expertise, access to financial capacity, access to grants, potential to build capacity, and an increased understanding of regulation and risk management, for example. Additionally, this could save a significant amount of money by avoiding having to go down the RP registration route, which for smaller organisations may be completely disproportionate in time and costs. The National Community Land Trust Network has produced the following guidance on partnering with RPs.
Leaseholds and perpetuity
The Government has been consulting on proposals to ban the use of leasehold for houses with the aim of banning unfair and abusive practices in the leasehold system. All good intentions, however, there will be some community-led housing models, like community land trusts, where using leaseholds guarantees affordability and using ground rents is a common part of the business plan. The Community Housing Fund also requires the assets to be protected in perpetuity.
The prospectus devotes only one paragraph to this issue, noting that ‘in bringing forward legislation, the Government will consider further whether there are any particular cases where leasehold houses can be justified and if they can, the Government will work with sectoral partners to ensure that leasehold houses are provided on acceptable terms…”.
Currently, no exemption has been guaranteed for community-led housing. We have previously been involved in drafting a definition of community-led housing for use in legislation; we anticipate there being an increase in activity here. Watch this space for any updates.
The time is now
The prospectus makes it clear that the Government is supportive of the community-led housing movement and uses strong aspirational statements, noting that the fund is “creating a once-in-a-generation opportunity” to increase the community-led housing supply.
Whilst there is still a way to go until we fully understand how accessible the fund will be in practice, we all know what a real difference community-led housing projects and developments can make to communities. It seems that the time is now, submit your bids!
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