For-profit providers to see ‘welcome boost’ in SAHP rule change, Homes England says

He told Inside Housing that this rule change has received good feedback from for-profit providers, who have previously warned of being held back by a “two-tier” approach on grant funding.

The agency’s bidding guidance for strategic partners, published last month, says that “all routes except for developer delivery will see grant funding paid quarterly in arrears based on eligible development expenditure incurred”, whereas for the developer delivery route, grant payment “will be based on applicable delivery milestones”.

In a statement, Homes England added: “We have removed differences specified by status as a for-profit or not-for-profit that were in place under the previous programme. This particularly impacts the payment mechanism and working with delivery partners (e.g. payment on incurred expenditure).

“We are also pleased to confirm that the ‘onward sale’ concept will no longer apply. Instead, all disposals will be managed consistently through the disposal notification process.”

Mr Islam said these changes are part of an “evolution” of the strategic partnership model, which opened to for-profits in 2021.

“We have the lessons learned around how we engaged with those for-profit partners to be able to apply further parities with the not-for-profits in this programme,” he said.

Homes England is also looking at “more extensive” changes to its capital funding guidance, Mr Islam said, based on feedback from the sector on “parity around the uplift rules when it comes to recovery of grant” and shared ownership staircasing transactions. 

Currently, in shared ownership staircasing transactions, all partners need to recover some of the grant, but for-profits also have to recycle or recover the associated uplift value, Mr Islam explained.

This leads to “uncertainty” among for-profits and investors, he said, because uplifts are applied based on market values at the time, so the “forecast of returns... becomes very unpredictable”.

Mr Islam continued: “We’re trying to understand whether the calculator can be amended to manage some of that uncertainty. 

“So we’re not going to get rid of uplift as a concept, but... we can potentially look at our current rules – can they be more flexible? Can they be more amenable in terms of giving the investor more confidence in investing in shared ownership homes?”

“We are talking to a lot of our for-profit partners to understand that in a bit more detail... if we do make any changes, they won’t be immediate. They’ll be delivered through the development of the next financial year,” he added.

On council housebuilding ambition, the affordable housing director suggested that some local authorities may become strategic partners this time around.

Under the 2021-26 Affordable Homes Programme, there were no local authorities among Homes England’s 31 strategic partnerships.

Based on “lessons learned from the previous programme”, Homes England has this time reduced the hurdle rates for councils to become a strategic partner, from 1,500 down to 800 in the current programme.

Mr Islam said: “The sentiment from the ground is that there are local authorities interested in becoming a local authority strategic partner. 

“I think though most of our local authority partners are still probably coming through CME [continuous market engagement], particularly now that we’ve launched the CME portfolio route.”

“We are anticipating quite strong interest from local authorities on the CME portfolio,” he added.

On the new ‘strategic partnership plus’ route, Mr Islam said some partners “have said they can do much more above the £700m cap”.

This route almost triples the previous cap from the previous programme, which was £250m.

The affordable housing director previously told Inside Housing that partners may be able to access funding above the £700m cap if the agency has “certainty and confidence” in deliverability.

“I’d say a few partners have said they can do above the cap. But I think what I would caveat that with, what I’ve told partners, is that there are reasons why caps are in place to kind of protect government money and also to see that deliverability comes through first,” Mr Islam said.

For providers seeking funding above £700m, he said: “I don’t anticipate re-engaging with partners before year three.”