Housing Association Guide Part 2 - Mixed Funding for Housing AssociationsContents
1.01Background – Part 1 of the Guide explains the introduction and the main objectives of the Capital Grant system, including the funding available to Associations. This Part of the Guide – Part 2 - deals with the procedures to be followed by Associations in order to access mixed funding from the NIHE (DPG) for the provision of social housing for rent.
[Note: The same procedures are generally applicable to schemes provided by the Association’s Disposal Proceeds Fund (DPF).]
1.02Mixed Funding for Housing Associations – these procedures are designed to establish that in the provision of Social Housing for Rent, a development proposal:
- Meets agreed Housing Needs;
- Is within the agreed Social Housing Development Programme;
- Meets agreed Design Requirements;
- Meets agreed Procurement Requirements;
- Represents Value for Money;
- Meets Financial Viability; and
- Can be let to tenants at fair and reasonable rents.
1.03Housing Needs – (See Appendix: 1 to Part 2) are defined in terms of the client (needs) group, the housing mix and the locality where the units are required. The Association must ensure that the development proposals will be acceptable to the intended client group in the location proposed. The housing need for development proposals must have the support of the appropriate NIHE Area Planner.
1.04Social Housing Development Programme (SHDP) – (See Appendix: 2 to Part 2) is the agreed development strategy, between the DSD and the NIHE to address housing need. The programme sets out, over a 5-year period, the location and units required for the principal needs groups.
1.05Design Requirements – (See Part 3 of the Guide) – includes design requirements, recommendation and advice for various types of housing provision that Associations must take account of in providing social housing. Basic guidance on specification requirements is also included.
1.06Procurement Requirements – (See Part 4 of the Guide) – includes procurement requirements, recommendations and advice that Associations must take account of in providing social housing.
1.07Value for Money – is assessed in a number of ways. The main assessment is the relationship between the capital costs of the scheme and the Total Cost Indicators (TCI). TCI establish total scheme cost ‘norms’ taking account of a variety of factors including the scheme type and the geographical location (See Appendices: 7 and 8 to Part 1).
1.08Financial Viability - of the proposals, i.e., whether income from all sources (including potential rent pooling) will meet expenditure and whether the Association’s overall financial position can cope with the additional long-term commitments being taken on as a result of the scheme. Assessment must take the form of an overall and on-going monitoring of the impact of development proposals on the Association’s viability. Both the short and long term risks involved in the project must be considered, i.e.:
- Short-term risk - relates to the risk of cost overruns during the development period. Associations need to take account of and have sufficient reserves/assets readily available to cover any potential risk.
- Long term risk - long term risk relates to the loan repayment period and the risk that income ceases to cover running costs and provisions as a result of the many variables coming into play during that period (interest rates, inflation, obtainable rents etc). Associations using Private Loan Finance need to have sufficient measured financial strength in reserves and property equity to take the additional risk involved. (See Appendix: 2 to Part 1 of the Guide).
1.09Rents & Rent Benchmarks –– advice and guidance on rent setting, new rents and rent benchmarks – to assist Associations in deciding what rents should be charged for new tenancies - are included in Appendix: 7 to Part 1 of the Guide.
2.01Approval Procedures (Housing for Rent) – (See Appendix: 3 to Part 2) is to be used by registered Housing Associations in providing social housing, with the aid of Housing Association Grant (HAG) from the NIHE (DPG).
[Note: As this Part of the Guide covers the main procedures and requirements for accessing / receiving Grant from the NIHE (DPG), the Board need to be aware of the importance of these and the responsibilities and implications for the Association and its management.]
2.02The Procedures - apply to:
- Housing for rent;
- Developments involving the acquisition of land or property, or on land/property already in the ownership of the Association (Works Only and Re-improvement schemes). Package Deals, Off-the-Shelf schemes, Existing Satisfactory Purchases (ESPs) and Disposals Proceeds Fund (DPF) purchases are also acceptable;
- Self-contained and shared housing; and
- Supported housing.
2.03Main Approval Stages - are as follows:
Site Registration Stage – The purpose of this stage is to prevent unnecessary duplication of effort by two or more Associations investigating the development potential of the same site. This allows one Association a period of time to investigate the feasibility of developing an identified site/property and reduces abortive work in the preparation of schemes to the minimum.
Advanced Purchase of Land – this facility allows Associations undertaking acquisition and new build developments to acquire - in advance - the land element of the scheme with Grant-aid from the NIHE (DPG). Conditions apply to this facility. The Advanced Purchase of Land can also apply to certain Package Deals (see Appendix: 3 to Part 2 for further details) but does not apply to Works Only schemes or Off-the-Shelf schemes.
Project Approval Stage - is the key assessment stage and normally takes place prior to acquisition of the site/property selected for development, or in the case of Advanced Acquisition of Land schemes or Works Only schemes, prior to start on site. It is at this point that the NIHE (DPG) will examine the Association’s proposals in detail and determine:
- The Grant percentage rate which will apply to the scheme;
- The total amount of grant to be made available;
- Any Public Subsidy deduction; and
- The amount to be paid in each Tranche to the Association.
It is therefore essential that the Association’s development proposals are formulated as accurately as possible at this stage. Approval clears the way for the Association to purchase and/or develop the site/property without further intervention from the NIHE (DPG).
Final Costs Assessment Stage – this takes place at Practical Completion of the development on the basis of forecast final costs. At this stage the final costs to be approved for grant will normally be determined by the NIHE (DPG), the exception being tariff-funded schemes.
2.04Grant Payment to Associations - is advanced, subject to the Association’s current financial allocation, in 3 tranches (stages) following 3 key events:
- Exchange of the purchase contract;
- Start on site of main contract works; and
- Practical completion of the scheme (or phase of the building contract).
Fewer stages are needed for certain types of development such as Works Only, Off-the-Shelf schemes and some Package Deals and the arrangements are described in Total Cost Indicators (TCI) (see Appendix: 8 to Part 1).
2.05Certifications – the procedures are designed to minimise NIHE (DPG) examination of development proposals through a system of certifications, through which an Association confirms that it has undertaken agreed actions at various stages of the development.
The importance of the certifications made by the Association cannot be overstressed and it is the responsibility of the Committee of Management to ensure the validity of the certifications being made on its behalf by authorised signatories.
The NIHE (DPG) will wish to check that certifications have been made with the Association’s Committee of Management authority and will require the Association to submit a record of its current authorised signatories, including:
- Specimen signatures of members or officers concerned;
- The relevant extract from the minutes of the Management Committee meeting confirming that such authority has been approved.
2.06Regulation and Inspection – as part of this process the DSD will check the validity and accuracy of the Certifications given by the Association as part of the approval process and verify that all requirements and any conditions of grant approval have been met. Where serious problems are identified the DSD may reduce, suspend or withdraw financial support to the Association.
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