Move being made to ensure housing associations have appetite to deliver new homes
Grant rates for new shared ownership homes are set to increase to prevent the affordable homes programme from being derailed by new rules which housing associations say risk making their development less financially viable.
Housing association chief executives say they have been assured in recent weeks by both the Greater London Authority, which administers the scheme in London, and Homes England, which awards grants in the rest of England, that approved grant levels per unit will be adjusted to take into account the new requirements.
The new rules, which were set out in a consultation paper in November, introduce a 10-year period during which leaseholders of new build shared ownership properties are protected from essential repair costs, with landlords footing the bill instead.
This has caused concern about the impact on the viability of schemes, and hence the extent to which associations will bid to develop shared ownership homes, which are expected to form around half of the 180,000 homes to be delivered through the £11.5 billion affordable homes programme.
Paul Hackett, chief executive of Optivo, said there is now a ‘tacit agreement’ in place with both funding bodies that grant allocations for shared ownership homes will take into account the extra cost burden.
Geeta Nanda, chief executive of Metropolitan Thames Valley and chair of the G15, also said there has been an indication of greater flexibiltiy around grant following early concern about the impact on development. The GLA in London is currently finalising the first round of grant applications under the programme.
Nanda, in an exclusive interview with Housing Today published today, said: “The assumption initially was that it would cost [housing associations] more, but the strong message we got was that the costs will be assessed within the grant programme.”
The government’s announcement in November that repairs costs for landlords of new shared ownership properties will now be capped at £500 a year over the 10-year period is also understood to have made it easier for grant to cover the costs.
Hackett warned however: “It is important that the grant rate will fully compensate for the extra repairs cost otherwise housing associations’ appetite to invest in shared ownership will be affected.”
Nanda said there will still be costs around administration of repairs payments under the new shared ownership model.
The model also introduces a new ‘right to shared ownership’ on most new build properties and allows buyers to purchases a much smaller initial stake, of as little as 10%, on the value of the property.
The news comes in the same week as Peabody chair Lord Kerslake told Housing Today that the government needed to up grant rates more broadly if it wanted to hit targets under the affordable homes programme, in the light of financial pressures on housing associations from building safety costs and the move to net zero.
A spokesperson for the Chartered Institute of Housing said: “It is a positive step if GLA and Homes England are providing such flexibility, as the new shared ownership model included a number of features that will have increased the costs and complexity of the model for providers, and the repairs obligation was a big one in that mix.”
A spokesperson for the Greater London Authority said the 2021-26 programme moves away from fixed tariffs and has “introduced flexible grant rates”. He would not however confirm the level of any increase for shared ownership properties, citing commercial confidentiality.
He said: “The grant rate for shared ownership will cover a proportion of the costs of the unsold equity in the normal way. The GLA is in the process of finalising the first round of applications and will confirm successful partners in due course. “ He added that the GLA still expects to hit targets set for London in the government settlement to deliver 79,000 affordable homes by March 2026.
Homes England and the Ministry of Housing, Communities and Local Government have been approached for comment.
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