Housing Monthly Diary Archive

Housing Finance

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January 1998
Finance News in Brief

• The Government decided to continue with the plans of the last administration in excluding homelessness from calculations of need, which form the basis of local authority Housing Investment Programme allocations. It was understood that the formula could be reviewed after the Government's completion of its Comprehensive Spending Review.

• A new restriction introduced by the Housing Corporation on availability of grant assistance for aids and adaptations next year became an issue of increasing concern. The new rules excluded associations with £500,000 or more in their rent surplus fund from cash assistance. To put this into context, about one third of the 200-plus associations which received funding for adaptations in 1997/98 would not have been eligible under the new capping system.

• New Progress HA negotiated a new loan facility with Halifax plc and the Nationwide Building Society. The £86 million arrangement restructured previous loans which had been agreed when the Association received the large scale voluntary transfer of South Ribble DC's housing stock in 1994.

• Langstane HA refinanced its Scottish Homes debt with the aid of a £3.4 million loan facility from Dexia Municipal Bank.

February 1998
Estates Renewal Challenge Fund Winners

Details were released of the 58 local authority estates across Britain that would share in £248 million of funding from the Estates Renewal Challenge Fund (ERCF), under Phase 3 of the scheme.

It was estimated that more than 22,000 homes could benefit from Government funding under Phase 3 of ERCF, which would pull in an additional investment of more than £330 million in private finance, to regenerate old, outdated and neglected estates. Funding through ERCF is directly linked to the transfer of estates to a registered social landlord, which can only go ahead with the agreement of the tenants involved.

Summary Details:

• Hackney LBC (Haggerston)

The transfer of 699 units to a new RSL, which was to be a subsidiary of Metropolitan Housing Trust and Community HA. This was a relaunch of Hackney's Round 1 scheme, with an allocation of ERCF funding totalling £13.24 million.

• Hackney LBC (Upper Clapton)

A second allocation of £19.97 million available to Hackney in another relaunched Round 1 scheme, with a possible 1,042 dwellings transferred to a newly created local housing company formed by a consortium led by Guinness Trust.

• Tower Hamlets LBC (Poplar)

Forming a continuation and consolidation of the council's existing ERCF transfers under Rounds 1 and 2 to a new local housing company, this further scheme would bring in an allocation of £14.9 million and involve the transfer of another 1,780 dwellings.

• Tower Hamlets LBC (Cityside)

Representing another continuation of a Council scheme, this time to a new local housing company (Cityside Housing and Regeneration and Community Association), 1,401 dwellings would be affected, with a potential ERCF allocation of £17.23 million.

• Lambeth LBC (Central Stockwell)

A potential transfer of 2,358 homes to Hyde Southbank Homes, which would release an ERCF allocation of £18.15 million - to allow a comprehensive package of works and investment.

• Lambeth LBC (St Martin's)

The proposals were for the estate to jointly transfer to South London Family HA, Metropolitan Housing Trust and Presentation HA. 1,158 homes were involved and the ERCF allocation would be £6.19 million.

• Greenwich LBC (Charlton Triangle Estates)

A successful tenants' ballot would see 1,179 homes being transferred to a new local housing company, formed to take over the stock. The ERCF allocation would be £18.02 million.

• Islington LBC (Copenhagen neighbourhood)

This scheme comprised nearly 40% of the Council stock in the Copenhagen neighbourhood and involved the potential transfer of 1,395 homes to a local housing company, to be formed to take over the stock. The ERCF allocation would be £22.69 million.

• Birmingham MBC (Central City area)

Proposals were for the transfer of 2,023 dwellings to a new landlord, which would be a newly created stand-alone RSL. The ERCF allocation would be £46.6 million.

• Wirral MBC (Leasowe Estate)

This scheme would transfer 1,108 dwellings to a new local housing company - Leasowe Community Homes, a subsidiary of Liver HA. The ERCF allocation would be £5.037 million.

• St Helens MBC (Wargrave Estate)

The proposal was to transfer 789 dwellings to a new RSL - the Trees Community HA. An ERCF allocation of £3.8 million was available.

• Liverpool MBC (Pinehurst Estate)

Support by tenants in a ballot would see the estate's 516 dwellings being taken over by a Liverpool-based RSL - Co-operative Development Services HA. The ERCF allocation would be £5.14 million.

• Liverpool MBC (Garston and Speke Estates)

A new RSL would be created from a partnership of Speke and Garston HAs to take over the 4,685 dwellings, which if transferred would release an ERCF allocation of £43.78 million.

• Allerdale DC (Salterbeck Estate)

The proposed new landlord for this Workington estate was Impact HA, which would receive 1,002 dwellings if supported by tenants at a ballot. The ERCF allocation would be £3.96 million.

• Preston BC (Avenham Estate)

The proposed new landlord was Avenquest, a subsidiary of an existing RSL - Collingwood HA. A successful ballot would see 933 units transferred and an ERCF allocation of £9.27 million made available.

Information notes:

The Estates Renewal Challenge Fund (ERCF) was launched in November 1995, with the aim of transforming some of the remaining big and run-down local authority estates, by facilitating their transfer to registered social landlords, enabling private finance to be raised to help the regeneration process.

When a council wishes to propose an estate for ERCF funding and transfer, it has to consult and ballot its tenants. Before giving consent to any transfer, the Secretary of State must be satisfied that the majority of tenants are not opposed to the transfer.

The above programme was Round 3 of ERCF. Under the first two rounds, £316 million had been allocated to 20 local authorities for 33 schemes, covering 41,000 homes on 69 estates. So far, 4 schemes have actually transferred and 14 successful tenant ballots have been achieved.

Indications were that this would be the last allocation under the ERCF programme, with speculation that the Government’s Comprehensive Spending Review would introduce a new package to bring the various regeneration schemes under one umbrella.

February 1998
Housing Corporation Announces 1998/99 ADP

The housing association sector found little cheer in the release of details of the Housing Corporation capital investment programme for 1998/99. The 1998/99 Approved Development Programme (ADP) expenditure was set at £611.54 million, of which 80% was due to be spent on schemes for rented housing and 20% on home ownership initiatives. The agreed programme was to produce some 820-880 rural homes and 73% of the programme was for regeneration schemes, exceeding the DETR target of 60%.

The number of lettings expected to be generated from the ADP in 1998/99 was 36,000. However, approximately 10,000 of these would actually be funded from programmes brought forward from previous years.

In addition to the social housing outputs produced by the ADP, outputs were also being provided from non-ADP schemes. These included social housing projects sponsored by local authorities under the Local Authority Social Housing Grant (LASHG) scheme. The DETR's initial estimates suggested that outputs produced under this scheme would be boosted by around 4,000 units over the next 3 years, as a result of the additional resources being made available to local authorities under the capital receipts initiative.

The overall trend in provision of new social lettings over the next few years would be guided by the Government's decisions on expenditure, due to be taken in its Comprehensive Spending Revenue of housing programmes. However, the total number of new social lettings in 1998/99 was expected to be around 52,000, split between 36,000 from the ADP and 16,000 from non-ADP programmes.

Larger registered social landlords (RSLs) fared better in allocations than smaller organisations. In total, 577 RSLs received an allocation. Large RSLs owning over 2,500 homes received 56% of the new programme, with small associations of less than 500 homes receiving 10%.

Average rent plus service charges for dwellings completed in 1999 from the main 1998/99 rented programme would be £64.47 per week.

February 1998
New Role for Corporation

The Housing Corporation took over the administration of grants and payments to registered social landlords (RSLs) which had received stock transferred from local authorities under the Estates Renewal Challenge Fund (ERCF) programme. The Corporation was also to monitor the progress of RSLs in delivering the planned programme of estate improvements.

Under the new arrangements, the Department of the Environment, Transport and the Regions (DETR) would continue to make pre-transfer payments (whether to the local authority or the new landlord) and post-transfer payments to the local authority. The Housing Corporation would make dowry and other payments to the RSL, once transfer of stock had taken place.

February 1998
PFI Schemes

• North British HA was selected by Berwick-on-Tweed DC to develop its Private Finance Initiative scheme, in a 5-year programme of building and refurbishing 250 homes. The intention was to put a scheme before the Government within the next few months.

• North East Derbyshire DC became the first council to obtain Government acceptance of a Private Finance Initiative (PFI) bid for social housing. Under the scheme, 34 defective concrete houses were to be demolished and replaced by 51 homes built by South Yorkshire HA.

March 1998
Budget Summary

Chancellor Gordon Brown produced a Budget that made only limited reference to housing or related issues, including:

• No change to mortgage interest tax relief, with MIRAS pegged at 10%.

• A rise in stamp duty to 2% for home sales in excess of £250,000 and to 3% for sales over £500,000 - lower value sales were unaffected.

• Developers in Scotland who convert commercial buildings into residential units were to have the same right as developers in the rest of the UK to reclaim VAT. The change would benefit Scottish associations and would be effective from the date of Royal Assent to the Finance Bill.

• Corporation Tax would be cut from 31p to 30p in the pound from April 1999 (from 21p to 20p in the pound for smaller companies), which would benefit non-charitable housing associations.

• Help for homeless young people, with £50 million to be made available from the Windfall Fund, to set up a national network of mentors.

• Family Credit to be replaced with a family tax credit system (including child care tax credit), which was widely accepted as a signal that similar changes were planned for Housing and Council Tax Benefits.

• VAT on home insulation was to be reduced from 17.5% to 5% from July 1998 for works funded by specified schemes, the more common being the Government's Home Energy Efficiency Scheme (HEES).

April 1998
Repair Backlog Evaluation

The Chartered Institute of Housing published Improving Council Housing - Finding The Money. The paper detailed the findings of a study by Graham Moody Associates, which quantifies the backlog of disrepair in council housing and evaluates alternative ways of bringing in the investment needed to tackle it. The evaluation compared strategies which use only public money with a range of alternatives which bring in private finance, with comment on the effect on the public purse.

The briefing paper now published summarised the first stage of the study, which set out the financial analysis and is submitted as an input to the Government's comprehensive spending review. The next stage is to provide a fuller assessment of the options, which also extend to Wales and Scotland, as well as England.

The key findings that form the basis of the evaluation were that:

• An investment of between £18-20 billion pounds was required to tackle the backlog of repairs to English council housing.

• If this backlog were to be dealt with, then the current levels of ongoing capital investment would only need to be increased slightly to respond to future maintenance costs.

• An estimated cut of 20% in current repair and maintenance budgets could be expected if the investment was made available to tackle the backlog of repairs needed.

A full copy of the interim report is available from the Chartered Institute of Housing's Publication Department: Tel. 01203 851752: £10 + £1.50 p&p.

May 1998
Fair Rents to be Capped

The Government issued a consultation paper, proposing to peg fair rent rises for protected tenants and for secure tenants of housing associations.

The paper proposed that rents would be limited to:

• the retail price index (RPI) plus 10% when first registered with the Rent Officer; and to RPI plus 5% on subsequent re-registrations.

The paper also proposed that capping limits could be exceeded if homes had been repaired or improved.

Tenants' organisations expressed disappointment at the planned rent limits, arguing that the cap was too high and the allowance for higher rent-setting where property had been repaired or improved was open to abuse.

The proposals appeared to bring little cheer to landlords, either, who regard any form of capping as a way of forcing them to subsidise regulated tenants.

Limiting Fair Rent Increases: DETR, Zone 2/H6, Eland House, Bressenden Place, London SW1P 5DU (free).

May 1998
Five-Year Investment Plans

The new application guidelines for next year's Housing Investment Programmes (HIPs) require local authorities to base investment plans on between three to five-year programmes, which should not need annual updating. Generally speaking, the change was welcomed by local authorities, as it introduced a more business-like flexible regime.

The new application guidelines also emphasised the need for local authorities to work with tenants, private landlords, associations, builders, the police, health authorities and the Housing Corporation in developing their plans.

May 1998
Funding Arrangements

• Rother Homes agreed a £62 million loan facility with Halifax plc, which enabled the new local housing company to complete the purchase of 3,000 homes from Rother DC and carry out a programme of repairs.

• Hermitage HA secured a £25 million loan with Halifax plc, along with National Syndications and the Bank of Scotland.

• The Housing Associations Charitable Trust, with the support of the Housing Corporation and the Rural Development Committee, agreed grants totalling nearly £200,000, to assist 16 rural projects across the UK that help vulnerable people.

June 1998
Finance News in Brief

• Scottish Housing Minister, Calum MacDonald, announced a further £7 million to be made available to 27 local authorities to assist them in bringing more than 540 empty homes in Scotland back into use. The funding represented an average contribution of £11,200 per dwelling (the average cost per dwelling is £24,500).

• A new report from Communities and Homes argued that competition between housing associations in central London was contributing to inflating already high land prices and seriously affecting the affordable housing market in the Capital. The report suggested that some associations concealed the true costs of schemes to obtain funding, were involved in obsessive competition and strove to outbid rivals.

• The Government issued a requirement that all Scottish local authorities should reveal financial details of in-house operations, following the revelation by East Ayrshire Council that its Direct Labour Organisation made a £3.5 million loss. This development followed the recent admission from North Lanarkshire Council that its in-house team had a deficit of nearly £4.8 million.

June 1998
Funding Arrangements

• Bourneville Village Trust agreed a £10 million loan facility with the Yorkshire Bank to fund a 2-year housing development programme.

• Hillcrest HA financed some 500 homes in the Tayside and Fife area with a £7.7 million loan facility from Britannia Building Society.

• North British HA raised £100 million to refinance existing loans and support a development programme of about 3,000 new homes, through its Eurobond, issued through Dresdner Kleinwort Benson.

• Swale HA secured an additional £20 million funding from a syndicate headed by NatWest, which would fund improvements, aids and adaptation projects and additional new development programmes.

August 1998
Stock Transfer Levy Announced

The Department of the Environment, Transport and the Regions announced the reintroduction of a 20% levy on stock transfer receipts, commencing with next year's programme - one year earlier than planned in the 1996 Budget Statement. The product of the levy is to be held in a pool, for redistribution to local authorities with an overhanging debt from prospective stock transfers.

It was estimated that over 130 local authorities, with an outstanding collective debt charges in excess of £14 billion, could benefit from the levy. A detailed consultation paper was not planned for release until after the date by which councils must register an interest in the 1999 transfer programme. The move was of particular concern to those authorities generating a surplus from transfer and which had already committed expenditure towards possible stock transfer in 1999, but with budgets which had not allowed for the levy.

The Department also confirmed that councils would have to set aside at least 75% of their capital receipts or, if higher - an amount equal to their Housing Revenue Account Debt. This meant some councils would have to set aside all of their capital receipts, whereas they had previously had access to 25% which could be used for new housing.

August 1998
VAT on Refurbishments

The European Commission asked Cecodhas (the European liaison committee for social housing) to define social housing, with a view to reviewing VAT rules regarding refurbishment of older buildings.

Currently, zero rated VAT is levied on refurbishment for social housing. In Britain, local authorities are classed as providers of social housing, but housing associations are not. The rules are given a more flexible interpretation in some other European countries and the intention appeared to be to introduce a degree of standardisation. The move could save Britain’s housing associations millions in VAT payments, even allowing for likely reductions in grant.

September 1998
Funding Arrangements

• Springboard HA negotiated a £60 million, 40-year, fixed-rate loan with NatWest, which offered an innovative arrangement of securing borrowings against rental income - rather than against an asset valuation. Previous rental income based deals required social landlords to issue bonds in the City.

• The William Sutton Trust agreed a £50 million loan with Barclays Bank, having rejected the option of seeking the money through the capital markets.

• Liverpool HT negotiated the first social housing market swaption agreement, which allowed it to take out a loan at a future date at a fixed rate based on current rates of interest. This allowed the Trust the flexibility of pre-planning, in the certain knowledge that it was guarded against rises in interest rates affecting its new borrowing.

• Arawak Walton HA negotiated a £7 million loan facility with the National Westminster Bank and Cheshire Building Society, half of which would be used to acquire 142 properties.

September 1998
Finance News in Brief

• Hundreds of housing associations benefit from a change in Inland Revenue tax rules, whereby non-charitable associations are allowed to claim back operating losses from the early 1990s for years when interest and management expenses exceeded profits. Whilst a large number of associations benefit, the 40-odd larger associations involved in early LSVT receive the largest refunds.

• A partnership between Windsor and Maidenhead Council and associations Airways, Chiltern Hundreds, Look Ahead, Maidenhead and District, Toynbee, Warden and Windsor and District agreed to maintain affordable rents in an initiative aimed at combating social exclusion. The partners held discussions about an acceptable rent ceiling.

• Government proposals to charge VAT on internal transactions within group structures, including those between a parent company responsible for overall administration and its housing subsidiaries, alarmed a number of social landlords Such a change would undermine associations which had entered into group structures to reduce administration costs.

• The Office of Fair Trading were reported to be investigating lock-in clauses which require a home buyer to keep their mortgage with a lender for up to 5 years after the fixed-rate ends. Concerns were expressed that lenders could push up rates during the lock-in period and land borrowers with inflated bills to meet. Campaigners called for clear explanations to be given to borrowers at the time of taking out a mortgage of how interest rates would be set in the future.

October 1998
Matched Funding Scheme for Care and Repair

Housing Minister Hilary Armstrong announced a new matched funding scheme for home improvement agencies, to take effect from the coming year, following a widespread consultation exercise.

Home improvement agencies - sometimes known as Care and Repair or Staying Put agencies - are small and mostly voluntary sector bodies providing advice and practical help to elderly, disabled and vulnerable people on home renovation or adaptations. The Government contributes towards agency funding through central grant, paid via local authorities.

As part of the Deputy Prime Minister's statement on the outcome of the Comprehensive Spending Review of Housing and Regeneration in July, the Government announced an increase in resources available for housing improvement agency funding over the next 3 years of 17%. In a consultation paper issued in August, the Government proposed switching these resources progressively into local authorities' revenue support grant (RSG), in order to give them more responsibility for deciding how the money is spent.

Having considered responses from its consultation exercise, the Government decided that the best way forward was to retain an element of specific central grant, which would only be made available if a local authority agreed to provide funding itself. Subject to the availability of resources, the grant would be paid up to a level which would match the amount provided to the agency by the local authority and its funding partners. In this way, the primary decision on support for agencies would be decentralised through local authorities, rather than taken by central government.

It was proposed to introduce this matched funding approach without delay and letters of explanation of the details of the arrangements and inviting bids for funding for next year were being sent to local authorities. In order to give greater certainty to agencies, funding is generally to be for 3 years.

October 1998
Finance News in Brief

• The Government announced a £52 million increase in maintenance allowances for councils in England for the next year, as well as proposals to change the way maintenance is funded, with the aim of targeting resources on repairs. This sees, as from next financial year, calculation of separate allowances for management and maintenance.

The proposal immediately attracted criticism, particularly from those councils trying to increase expenditure on key management areas to promote local service initiatives. Critics also argued that the proposals assumed management and maintenance as separate functions, whereas the two are key elements of a corporate style of service delivery.

• Speaking at a London conference, Regeneration Minister Richard Caborn suggested that the Government might be prepared to address the anomalous situation whereby VAT is charged at the full rate on conversion works but new-build is exempt.

• Suffolk HS agreed a £7 million loan facility with the Newcastle Building Society, to fund the development of 100 new homes.

November 1998
Home Improvement Funding Changes Scrapped

The Government abandoned its proposals to merge funding for home improvement agencies into mainstream local authority budgets, following its consultation exercise in which 184 organisations objected to the plans.

Alternative proposals presented see funds for home improvement agencies continuing to be ring-fenced. New matching funding, whereby central Government funding matches funding from councils, is to be introduced on a three-year basis.

December 1998
Changes to Right to Buy Scheme

Changes to the Right to Buy scheme, aimed at providing value for money to the taxpayer at the same time as giving generous discounts to tenants who want to buy their homes, were announced by Housing Minister Hilary Armstrong.

Current discounts to tenants of up to £50,000 were replaced by 9 regional limits - ranging from £38,000 in London and the South-East to £22,000 in the North-East - to reflect local authority property values in each region. Tenants would continue to be able to claim 60% discount on a house and 70% on a flat. Value for money would come from cutting the cost of the scheme to the taxpayer, currently around £400 million per year.

Following Parliamentary approval, the changes were due to come into force on 11th February 1999. The new limits apply to:

• Council and housing association tenants’ Right to Buy under the Housing Act 1985.

• The preserved Right to Buy, when a tenant with the right to buy lives in housing which is transferred to a new landlord, such as a housing association.

• Sales of council housing in local schemes under Section 32 or 43 of the Housing Act 1985, or under Section 25 of the Local Government Act 1988.

It also affects people applying for a grant under the Cash Incentive Scheme (CIS) in London, the South-East and the Eastern regions. Local authorities in these regions are allowed to pay grants up to 80% of the average Right to Buy discount in their area.

As the new discount cash limit was likely to reduce average Right to Buy discount in some areas, this might reduce the maximum grant which some authorities could offer under CIS.

Housing (Right to Buy) (Maximum Discount) Order 1998, SI1998 2997.

December 1998
Proposed Changes to HRA

The Government launched a consultation paper proposing major changes to the way that councils manage their housing finances. The proposals introduced resource accounting to the Housing Revenue Account and removed rent rebates from it.

Removing rent rebates from the Housing Revenue Account (HRA) would leave the account as a true reflection of the cost of providing decent housing at below market rates. This should give councils greater certainty about future funding and allow them to plan better for the years ahead. Councils would be able to carry forward to future years any unspent balances in the HRA. The proposed change signalled the end to what has been seen by many as tenants' subsidy of Housing Benefit.

The other key difference between the proposed system and the current system was how financing costs of capital were shown in accounts and reflected in subsidy. The new-style resource accounts included a capital charge relating to the value of housing assets. This has two elements - a cost of capital element and an allowance for major repairs. Therefore, the new system - a change from credit approvals - would ring fence funding for structural repairs.

Subsidy would, as now, meet the difference between assumed income and expenditure (excluding rent rebates). Authorities would return to the Department of the Environment, Transport and the Regions the difference between their debt servicing costs and the cost of capital element, but would retain the major repairs allowance. Funding for major repairs would, therefore, be channelled directly into the HRA, rather than feeding through the capital financing system.

A further advantage was that it would be possible to fund major programmes of works by carrying amounts forward from year to year.

The consultation period lasted until 19 March 1999, with an approximate date for full implementation of the results from 2001/02, depending on Parliamentary time.

A New Financial Framework for Local Authority Housing: DETR: free.

December 1998
Fair Rent Capping Proposals Amended

Following a recent consultation exercise, the Government amended their proposals for capping fair rent increases:

• It still proposed going ahead with introducing new limits by making an Order under Section 31 of the Landlord and Tenant Act 1985.

• Where applications for re-registration were made to the Rent Officer after the Order came into effect, fair rent increases would be limited to RPI plus 7.5% for the first re-registration and RPI plus 5% for subsequent re-registrations. This introduced a small amendment to the original proposal, which suggested that fair rent increases would be limited to RPI plus 10% for the first re-registration.

This latest decision did little to pacify tenants who argue that the proposed increases were still far too high and that they should have been linked to inflation only. There was also little indication that the news pleased private landlords, who regard it as a further restriction imposed upon them.

The Order was due to be laid immediately after the Parliamentary recess and would come into force shortly afterwards.

December 1998
NI Housing Budget Cuts

Social housing in Northern Ireland faces a bleak future, as the Northern Ireland Office announce a £38 million cut in spending over the next three years. The budget for the current year was set at £536 million.

As a result of the move, planned targets of 2,400 new homes per year would be reduced to 2,100 and programmes for private sector improvements and maintenance of property owned by the Northern Ireland Housing Executive would also suffer cuts.

January 1999
News in Brief

• The DETR invited local authority housing departments to submit bids for pathfinder projects for the application of the Private Finance Initiative (PFI) to refurbishment programmes. Councils bidding were expected to have previous PFI experience and the number of projects approved was expected to be low.

• A 4.5% rise in rents in Northern Ireland narrowed the gap with those in the rest of the UK from April. The new average rent in NI was announced as £37.55, compared with £43.72 in England. The increase meant an average weekly rent rise of £1.62 for tenants of the Northern Ireland Housing Executive, housing associations and those in the regulated private sector.

• The Government confirmed that it was likely to extend beyond November 1999 the deadline for ending the current interim arrangements for funding supported housing. Under the prevailing provisions, supported housing costs could be met from Housing Benefit. However, this was ruled illegal in a 1997 Judicial Review. The intention to change from the interim arrangement to a planned transitional scheme was due to be a gradual process, with the latter to run from November 1999 to 2003. The interim arrangement deadline is now expected to be extended to April 2000.

February 1999
New Right to Buy Discounts

England

Changes to the maximum Right to Buy discounts came into force, with the previous discount of up to £50,000 being replaced by nine regional limits - ranging from £38,000 in London and the South East to £22,000 in the North East, to reflect local authority property values in each area.

The new limits are based on 70% of the average value of local authority houses and flats in each region, and 65% in London, where pressure on social housing is currently greatest. The new limits will be kept under review, taking account of changing property values and other factors - including the cost of the Right to Buy scheme.

The new limits introduced apply to:

• Local authority and housing association tenants' Right to Buy under the Housing Act 1985.

• The preserved Right to Buy, when a tenant with the Right to Buy lives in housing which is transferred to a new landlord, such as a housing association.

• Sales of council housing in local schemes under Sections 32 or 43 of the Housing Act 1985, or Section 25 of the Local Government Act 1988. People applying for a grant under the Cash Incentive Scheme (CIS) in London, the South East and Eastern regions are also affected. Local authorities in these regions have been allowed to pay grants of up to 80% of the average Right to Buy discount in their areas. As the new discount cash limit is likely to reduce average Right to Buy discounts in some areas, this may reduce the maximum grant which some authorities can offer under the CIS.

The Housing (Right to Buy) (Maximum Discount) Order 1998, SI 1998 2997 and the Cost Floor Determination 1998 extend the cost floor - a rule which limits discount if the landlord has recently spent £5,000 or more on buying, building or improving the property. The cost floor now includes costs incurred since the start of the financial year ten years before the year in which the tenant applies to buy (being two years more than at present). The cost floor also includes repair and maintenance costs over £5,500 (repair and maintenance costs were previously excluded).

Wales

• The Housing (Right to Buy) (Limits on Discounts) (Wales) Order 1999, effective from 11th March 1999, introduced reductions to the maximum Right to Buy discounts in Wales.

• Previously, the scheme allowed tenants to buy their homes at discounts of up to 60% for a house and 70% for a flat, up to a maximum at present of £50,000. The new reduced limit is £24,000, which is calculated on the basis of 70% of the average value of local authority houses and flats in Wales.

• In addition, the Housing (Right to Buy) (Cost Floor) (Wales) Determination 1999 came into force on 11th March 1999, allowing Welsh councils (or other landlords) to recover more of their costs - by allowing calculation of costs incurred over a ten-year period, rather than eight, as had been the case. Additionally, certain repair costs may also be included in cost floor calculations (as in England) for the first time from that date.

February 1999
New Funding Regime for RSLs

The Housing Corporation issued a consultation paper, proposing a new funding regime for Registered Social Landlords (RSLs), with plans for a new framework for the Approved Development Programme (ADP).

The proposals include:

• Using Regional Housing Statements to help guide decisions on Corporation investment. These statements describe the local housing, economic, demographic and planning context and take a three- to five-year view.

• Moving away from the current formulaic approach based on the Housing Needs Indicator, which in future may only be used to allocate ADP resources to the regions, allowing funding to be directed to particular schemes.

• New grant policies, such as funding RSLs to demolish private sector stock and using Innovation and Good Practice Grants to help tenants participate in regeneration proposals.

The consultation period ran to 9th April 1999 and it was expected that the new framework would be implemented for the 2000/01 programme.

Developing our Investment Strategy: Housing Corporation: Tel. 0171 393 2228

February 1999
RSL Allocations for 1999/2000 Announced

Housing Minister, Hilary Armstrong, approved a total of £668 million of Social Housing Grant for RSLs over the next financial year. The Corporation expects the allocation to produce just over 30,000 homes in total and that an additional 14,000 homes will be generated by Local Authority Social Housing Grant.

The average grant allocated in the rent programme equates to a rate of 49%, which is 4% higher than in 1998 and just 5 points lower than the headline grant rate of 54%.

Two-thirds of the programme was earmarked for regeneration schemes, meeting the Government's agenda for regeneration and economic growth.

February 1999
£400 Million Boost for Scottish Housing

Scottish Homes is planning to spend over £224 million on Scotland's housing in the next year, which in turn will attract a further £170 million of private investment.

Following the Secretary of State's approval of the Agency's investment programme for 1999/2000, Scottish Homes announced that its development funding budget is being increased by over £13 million to £207 million next year. A further £16.9 million is also to be spent on Scottish Homes' remaining houses.

Overall, the combined investment of almost £400 million funds the provision of around 6,200 new or improved homes throughout Scotland - an increase over the number planned in the current year. Priorities for investment next year include support for projects directed at tackling social exclusion, particularly those which form part of wider partnership initiatives.

Expenditure on housing projects under the Care in the Community programme is also to be increased by around 25% - to £50 million.

The Agency has also proposed to increase spending on rural housing in Scotland, taking its planned rural investment to over £40.8 million next year. Emphasis will be maintained on affording priority to projects that can help sustain fragile rural communities and which can be developed in partnership with other agencies as part of a wider regeneration plan.

Key areas of investment for next year include:

• Glasgow - most of the funding goes to local, tenant-controlled housing associations. Work with the private sector in the City includes a project to provide 200 homes for sale as part of the completion of the Crown Street regeneration project in the Gorbals.

• Argyll - £5 million is to be invested in rural areas, including a £1.5 million investment in three projects on the island of Mull - at Tobermory, Dervaig and Fionnphort.

• Edinburgh - work starts on a major development of 100 houses for rent and 145 homes for sale as part of the Waterfront project in the north of the city.

• Dundee - the Agency plans to support a £2 million project by Bield HA, to provide a new sheltered housing complex in the Kirkton area.

• Stirlingshire - 14 homes for rent and 6 for shared ownership are being developed in a £1.2 million project by Rural Stirling HA.

• Aberdeen - support is to be given to Castlehill HA for a project to build 32 flats for rent.

• Highlands and Islands - the programme includes a number of projects in Drumnadrochit, the latest of which is a £775,000 development by Albyn HS to build 13 new homes for rent and 4 for shared ownership.

• Orkney - a £700,000 grant is to be provided towards a £1.6 million development by Orkney HA, to provide 22 new homes for rent and shared ownership.

• Greenock - two projects are being supported, to provide supported accommodation for over 20 people with mental health problems and special needs.

• Arran - support is to be given to a £50,000 Care and Repair project.

March 1999
News In Brief

• The Government announced a new initiative to help council home buyers in financial difficulty. From 1st April1999, the Government is to cover 35% of all costs incurred by local authorities who buy back ex-council properties from people in financial difficulty (above a total expenditure threshold of £50,000 per council per year). A consultation paper published in July 1998 offered to cover 25% of the councils' costs but many respondents were concerned that the incentive offered was too small.

• Following the issue in October 1998 of a consultation paper on creating a single housing allocation for capital investment to local authorities, Housing Minister Hilary Armstrong announced that the Government is proceeding as planned with its introduction in the financial year 2000/2001. The guidance being issued to local authorities for this year's Housing Investment Programme covers the detailed implementation of the single pot. It also addresses concerns raised in consultation responses about the importance of taking full account of the needs of the private sector in authorities' housing strategies.

• March announcements from the Welsh Office include:

Funding of £1.1 million to be made available for Care and Repair Cymru and individual home improvement agencies for 1999/2000. The increased funding level includes £64,500 for new agency initiatives during this financial year.

An investment of £130 million in social housing projects in Wales during 1999/2000. This includes an investment of £68 million to Welsh RSLs towards the development of 2,300 new homes. It was anticipated that associations would contribute an additional £6 million from their own resources and £58 million would come from private finance. More than 75% of the work comprises the renewal of existing estates, the conversion and rehabilitation of existing private sector property and other brownfield developments.

 

During 1999/2000 £100 million in supplementary credit approvals is to be made available to local authorities to fund housing schemes.

• Scottish Homes announced a 10% increase in its funding plans for Glasgow next year, as part of a £150 million public and private sector investment in Glasgow and North Clyde region.

• Scottish Homes is to contribute £75 million across the region in 1999/2000 - an investment which will attract £75 million of private sector funding. This combined investment should create nearly 2,300 new and improved homes in areas of need.

• Chancellor Gordon Brown announced that tax relief on mortgages will end in April 2000, introducing a projected saving of £1.8 billion per year. The announcement came as part of the Chancellor's Budget speech, which also revealed that the basic rate of Income Tax will be cut to 22p from April 2000.

April 1999
NIHE Programme Totals Over £220 Million

The Northern Ireland Housing Executive published its Corporate Plan for 1999-2002 and Business Plan for 1999/2000 at the Housing Forum meeting at Belfast Castle. With more than £220 million allocated to planned expenditure in the coming year, the Executive affords high priority to maintaining or improving its 135,000 homes. A further £38 million is budgeted for grant aid to improve housing conditions in the private sector.

In addition to its own programme, the Executive is working with the housing association movement to provide 2,200 new homes.

The Executive's main expenditure areas for the coming year are:

• New Housing: £7 million.

• Improvement Work: £63 million.

• Maintenance: £114 million.

• Private Sector Grants: £38 million.

This £222 million programmed expenditure does not include some £60 million to be spent by housing associations on new-build projects.

April 1999
Homebuy Start Delayed

The Housing Corporation announced that the introduction of the Homebuy scheme will be delayed by about a month because of the need to ensure that it complies with the requirements of the Consumer Credit Act 1974.

Under the Homebuy scheme, registered social landlords (RSLs) can provide equity loans to qualifying applicants who wish to buy a home on the open market. The scheme replaces the Tenants' Incentive Scheme (TIS) and Do-it-yourself Shared Ownership (DIYSO) programmes. It is aimed at tenants of RSLs and local authorities and those nominated as being in priority housing need from the housing waiting list.

Loans are grant funded and they will be limited to 25% of the purchase price. Applicants need to negotiate conventional mortgages for the remaining 75% of the purchase price.

Whilst the loan provided under the scheme is interest free in the commercial sense, its repayment is calculated at 25% of the value of the property at the point of its sale. Thus:

• If a property's value rises between the date of its acquisition and its later sale date, the amount repaid will be greater than the original loan.

• The difference would have to be regarded as a charge for credit, which makes loans under the Homebuy scheme subject to the provisions of the Consumer Credit Act.

Revised procedures will take account of the requirements of the Act and it is expected that these, with guidance for applicants, will be published in May.

April 1999
PFI Pathfinder Schemes Shortlisted

The Government invited eight local authorities from about 50 bids to develop their proposals for Private Finance Initiative (PFI) projects to fund council housing improvement programmes. If these progress, they will be the first public sector homes to benefit from private sector funded improvements without the council concerned relinquishing ownership.

Under PFI provisions, local authorities remain landlords of the homes benefiting but a registered social landlord is competitively selected as estate manager. Management fees would be met annually from the local authority's Housing Revenue Account. Essential to the success of PFI is the freedom for estate managers to raise private finance for improvement and modernisation programmes.

The councils selected are Camden LBC, Leeds CC, Islington LBC, Manchester CC, Newham LBC, North East Derbyshire DC, Reading BC and Sandwell MBC.

May 1999
News in Brief

• An asset-backed bond issue organised by Greenwich NatWest secured loans for Beacon HA and Springboard HA, totalling £94.25 million. The loans are being used to re-finance existing debt, as well as fund new developments - including 900 homes already in the pipeline for development by Beacon HA over the next 3 years.

• The Chartered Institute of Housing published A Guide to Housing Benefit and Council Tax Benefit 1999-2000 - written by John Zebedee and Martin Ward. Copies are available (£16.95 plus £1.50 p&p) from the Institute at Octavia House, Westwood Way, Coventry CV4 8JP.

June 1999
HRA Reforms Confirmed

Housing Minister, Hilary Armstrong, confirmed that the Government is to go ahead with reforming the local authority housing finance system and introduce resource accounting to the Housing Revenue Account (HRA). It will also remove rent rebates from the HRA, making it into a pure landlord account.

Local authorities are being given slightly longer than originally proposed to prepare for the changes. The revised envisaged timetable requires councils to prepare shadow accounts and a framework for business plans in 2000-01, rather than by the previous proposed target date of the Autumn of 1999, with the HRA being kept on the new basis from 2001-02. In preparation for the new system, local authorities need to value their stock and assess its condition for the purpose of calculating the capital charge and the new major repairs allowance, and to draw up a business plan - examining all the options for managing their housing assets.

Rent rebates are being removed from the HRA at the same time, or as soon as possible thereafter, subject to Parliamentary approval of the necessary legislation. This change does not affect tenants' entitlement to benefit, as it concerns only the way in which central government reimburses local government for the cost of rent rebates for council tenants.

Under the new arrangements, local authorities receive a major repairs allowance to reflect the cost of maintaining their housing assets directly into the HRA, rather than being given credit approvals for borrowing and subsidy to reflect the cost of financing that borrowing. The method of calculating the allowance is the subject of further consultation.

June 1999
Corporation's New Spending Approach

The Government gave the green light to the Housing Corporation's proposals for a new approach to spending its annual investment budget, as outlined earlier this year in its consultation paper - Developing Our Investment Strategy. The Minister for Local Government and Housing, Hilary Armstrong, agreed to a phased introduction of the Corporation's proposals, which are:

• That the Approved Development Programme should be targeted on regeneration projects, the provision of new social housing in areas of projected economic and demographic growth, and supported housing.

• To assist this process, Regional Housing Statements should be produced in each region, identifying the particular characteristics of regional and sub-regional housing markets; providing key statistics about the region's stock and, in time, highlighting regional priorities for future investment.

• A move away from the use of the Housing Needs Index (HNI) at a local authority level to allow for a more selective distribution of funds within regions, tackling key regional priorities. The introduction of a framework of five criteria to be used to decide which projects should receive ADP funding.

• The Housing Minister confirmed the Government’s view that the pace of change may need to vary between regions, depending on progress with the development of Regional Housing Statements, but full implementation by 2002/03 would be a realistic target for most, if not all, regions.

June 1999
Investment in Scottish Housing

Figures released showed a vote of confidence from the private sector in Scotland's social housing sector. A record £821.2 million from the private sector has been secured to fund housing developments and large-scale voluntary transfers, according to figures released by Scottish Homes. The lending to Registered Social Landlords, as at 31st March 1999, showed an increase of £125.8 million in the last year and, in the first half of 1999 alone, there was an increase of £69 million.

The figures showed that just nine lenders have a market share in the Scottish sector of 94% of the total book. The most active player in the first half of 1999 was the Nationwide Building Society, who advanced £17.7 million of the new finance raised. The Royal Bank of Scotland committed a further £6.3 million, Abbey National £8.5 million, Bank of Scotland £7.6 million, Britannia £6.5 million and Clydesdale £6.2 million. Other active investors were Dunfermline Building Society, Dexia, Housing Finance Corporation and Co-operative Bank.

July 1999
Allocation of Capital Resources

A DETR consultation paper recommended the reinstatement of homelessness as a needs index in calculating housing capital allocations.

The consultation paper recommended that homelessness, in the form of the number of people in temporary housing, should be allocated up to 20% weighting in the new provision index, which is a major factor in determining cash allocations for new housing association homes and also partly influences allocations to local authorities.

If implemented, London and the South-East would gain at the expense of the North and Midlands. However, this is partly offset by the weighting given to stock condition, which is based on information that works against the South of England.

The paper also suggests that surplus and low-demand housing may, for the first time, be taken into account when allocating capital resources. If this is introduced, there could be some gain for local councils in the South.

Copies of the paper - Allocation of Housing Capital Resources - are available free from the DETR - Tel: 0870 1226 236.

July 1999
SRB Programme Announced

The Government announced details of the £1.04 billion Single Regeneration Budget (SRB), more than three times bigger than last year, which is to fund some 160 local authority, community group and housing association projects. Estimates are that, with matching funding, the total investment could rise as high as £3 billion over the seven-year life of the projects.

As in previous years, Greater London was the biggest winner, with £320 million of funding - some four times more than in 1998. An urban facelift for the Elephant & Castle and improved transport links, housing and employment for Finsbury Park were among 38 community projects set to share the regeneration package announced for the capital. The funding could trigger another £365 million in private sector support for the schemes.

Elephant & Castle and Finsbury Park were two of seven London areas identified as among the most deprived in the country to get SRB funding of more than £20 million each, along with Dagenham and Rainham in the Thames Gateway, South Greenwich, Forest Gate and Plaistow, Tower Hamlets and Silwood in Lewisham.

Allocations saw £217 million going to the North-West, £119 million to the North-East and schemes in Yorkshire and Humberside securing £108 million.

July 1999
Scottish Homes Funding News

Communities in Lothian, Borders and Forth Valley benefit from a record £93 million investment in affordable housing this year. New Government funding boosted Scottish Homes' grant programme for the region from £35 million to £47 million in 1999/2000, which was expected to generate a further £46 million of private sector finance. The package is directed towards assisting housing associations and developers to start 1,600 new or improved homes and to complete around 1,420 good quality affordable homes which are already underway. It was estimated that the funding would create 920 new homes in Edinburgh alone.

A community-driven art project to enhance a housing estate in the East End of Greenock was given a £10,000 cash injection from Scottish Homes as part of its major investment in the area. Following joint proposals from Cloch HA, Inverclyde Council and the Inverclyde Regeneration Partnership, Scottish Homes committed the funding towards a £20,000 community artwork project in Whinhill, to improve the image and entrance to the housing estate. The grant is being used to appoint three artists to work with a cross-section of the local community to develop individual pieces of public art for display in the Strone Farm area.

Scottish Homes announced that it would target all of its £75 million investment in Glasgow and North Clyde this year at helping to achieve the Government's social inclusion objectives.

The Agency issued a publication which looks in detail at how its investment is tied to the social inclusion agenda in the region, particularly in Glasgow, where seven of its eight priority areas for investment have been declared Social Inclusion Partnerships by the Government.

Scottish Homes is to use its investment in the Social Inclusion Partnerships to:

• Dramatically improve run-down housing estates by tackling poor housing conditions and widening housing choice.

• Contribute to a reduction in homelessness by providing suitable homes for vulnerable people.

• Improve Victorian tenements and offer a wider variety of house types and size, both for rent and ownership.

• Provide suitable housing, well integrated within the community, for people with particular housing and care needs.

• Provide affordable housing, within the reach of local people, in rural areas where housing is in short supply.

The Agency's investment attracts a further £75 million of private sector funding to housing in the region, helping to create over 2,300 new and improved houses.

August 1999
RSL Grant Rate Pegged at 54%

Housing Minister, Nick Raynsford, announced that the average headline grant rate for new housing developments by registered social landlords (RSLs) would be held at 54% in the financial year 2000/01. This is the third year running that the headline grant rate has been pegged at 54% for RSL schemes funded under the Housing Corporation's Approved Development Programme (ADP).

The Housing Minister also asked the Housing Corporation to start the gradual implementation of the proposals for developing its investment strategy, as set out in a consultation document issued earlier in the year. The Housing Corporation consultation document in question was issued on 15th February 1999 (Developing Our Investment Strategy), in which proposals were detailed for gradually moving away from a formulaic approach to the allocation of resources to local authority areas and adopting a more strategic, regional-based approach (see H4/0899/03).

The Housing Minister also asked the Housing Corporation to increase the proportion of the ADP which follows the principles proposed by the Construction Task Force to around 10%, with the aim of further progressive increases in subsequent years. Sir John Egan's Construction Task Force's report - Rethinking Construction - was published on 16th July 1998. It calls for radical new approaches to construction, to improve quality, increase productivity and reduce costs.

August 1999
Grants for Welsh Housing Projects

Grants of more than £439,000 for innovative housing projects were announced by First Secretary of the National Assembly for Wales, Alun Michael. The funding is targeted to assist local authorities, registered social landlords, tenants' and residents' associations (and other housing organisations) to improve housing management, increase tenant involvement and prepare for the introduction of the Best Value approach in housing.

The grant funding was allocated to over 40 projects, which between them have total projected costs of approved bids in the region of £860,000. The successful bids included:

• Local Government Benchmarking Reference Centre: £13,000 for a review of housing applicants and procedures in the context of Best Value.

• Glyntaff Tenants' and Residents' Association: £10,000 towards a community radio project.

• The Welsh Federation of Housing Associations: £26,600 towards the development of a website and data base, and for producing a directory of community involvement in Wales.

• Cardiff Mediation: £37,000 towards the costs of a dispute settlement service.

• Cardiff Community HA: £13,720 towards the funding of a community-based tenant participation compact.

• Trothy HA: £10,600 towards a project to evaluate assured tenancies on supported housing.

• North Wales HA: £32,100 towards an estate playbus.

• Rhondda HA: £10,900 towards the costs of developing a tenant consultation and Best Value partnership.

• United Welsh HA: £10,500 towards developing Best Value in a responsive repair service.

• Vale of Glamorgan CBC: £10,000 towards the costs of developing Best Value in the delivery of responsive repairs.

• Flintshire CC: £8,400 towards promoting tenant participation in the county.

August 1999
Corporation's New Investment Strategy

The Housing Corporation launched a new-look Investment Strategy, which will phase in a more strategic approach to the distribution of resources to better tackle England's housing problems.

There will be three key objectives, which will determine how the Approved Development Programme (ADP) is spent in future:

• Providing new affordable housing in areas of economic and demographic growth.

• Involvement in the regeneration of deprived neighbourhoods.

• Continued funding towards provision of new supported housing.

The new strategy signalled a shift away from the use of the Housing Needs Index (HNI), which accounted for a minimum of 80% of the distribution of total resources at local level. From 2000, this is expected to fall to about 50% and diminish further, as regional priorities become clearly identified. To assist this process, regional housing statements being produced in each region will:

• identify the particular characteristics of regional and sub-regional housing markets;

• provide key statistics about the region's stock; and

• in time, highlight regional priorities for future investment.

The pace of implementation of the new strategy was likely to vary between regions but full implementation by 2002/03 was considered a realistic target for most, if not all, regions. To ensure that allocation decisions are transparent and justifiable, broad sets of criteria will be used to assess bids for funds from registered social landlords (RSLs):

• Bids must meet priorities set out in the Housing Corporation's regional investment strategy and the appropriate local authority housing strategy.

• They must clearly show a need for Social Housing Grant, rather than for another source of funding - such as the Single Regeneration Budget or Housing Investment Programme resources.

• They must demonstrate that projects will facilitate the creation and maintenance of sustainable communities.

• There must be a realistic delivery plan, setting out when any other funding contributions will come through.

• They must show value for money.

The strategy was developed after a thorough consultation exercise, from which there were more than 200 responses, which have been taken into account in finalising the new system.

August 1999
Finance News in Brief

The Housing Executive announced that it has increased the maximum grant level for Replacement and Renovation Grants in the private sector. The maximum payable for a Renovation Grant is increased from £20,000 to £25,000 and for a Replacement Grant from £30,000 to £31,500.

Parliament's expenditure watchdog, the Committee of Public Accounts, issued its report on the sale of the Housing Corporation's loan book to NatWest Markets in 1997, with the publication of Sale of Residual Loans to Housing Associations. The paper questions the logic of the sale, which lost an estimated £35 million. Copies - Tel: 0345 585463.

September 1999
Fund to Modernise Sheltered Housing

A £10 million special fund to help RSLs remodel sheltered housing, to bring it up to modern standards, was launched by the Housing Corporation. The fund is being distributed between Regions on the basis of existing sheltered housing and the proportion of the total population of older people living in that Region. It forms part of the Corporation's Approved Development Programme (ADP) for 1999/2000 but Regions which cannot spend all the resources on offer this year can ring-fence any remaining funds for 2000/01.

Bids for the fund have to meet a number of criteria:

• The stock must be in poor condition, hard to let or is inappropriate for use by the current client group.

• It must be specialised sheltered housing, exclusively for older people, which does not receive supported housing management grant.

• There must be a local housing strategy for older persons' housing, which demonstrates the long-term need and demand for the remodelled housing.

• An option appraisal must have been carried out, which has considered the alternatives of demolition and change of use.

• There needs to be a commitment from the local authority to provide revenue funding (where it will be required).

• There must have been consultation with existing tenants.

September 1999
Housing Finance Publications

Publications issued during September 1999 included:

• Housing Finance: A Basic Guide. Shelter, £9.95 + £1 p&p. Tel 0171 505 2162.

• Housing Finance Review 1999/2000. Chartered Institute of Housing, £25 + £3 p&p. Tel: 024 7685 1700.

• In the 23rd September 1999 edition of Housing Today, the National Housing Federation's Update on Indicator Rents 2000/01 was published.

December 1999
Simplifying Council Housing Finance

Simpler, more transparent, arrangements for local authority housing finance were proposed, with the publication of a Government consultation paper on removing Rent Rebates from councils' Housing Revenue Accounts.

Following earlier consultation, the Government decided to introduce resource accounting to the Housing Revenue Account (HRA) from 2001-2002. The change aims to put local authority housing on a more business-like footing, increasing transparency and enabling authorities to make better decisions about the use and maintenance of their housing assets. As part of this change, Rent Rebates will be removed from the HRA, making it into a pure landlord account. This proposal was welcomed in principle in responses to the consultation on the introduction of Resource Accounting and will go ahead subject to Parliamentary approval of the necessary legislation.

The consultation paper - The Handling of Rent Rebates Under Resource Accounting - sought views on the detailed arrangements for removing Rent Rebates from the HRA.

The key proposals in the consultation paper are:

• The calculation of the entitlement to HRA subsidy for individual authorities should continue on broadly the same basis as at present, but that account should also be taken of the Major Repairs Allowance (MRA). The MRA is being introduced as part of the move to Resource Accounting.

• Subsidy for local authority housing should continue to be regarded as a national programme, and assumed surpluses in the subsidy calculation should be pooled and redistributed to authorities in assumed deficit. Local responsibility for decisions on rent levels and spending will remain unchanged.

• Rent Rebate subsidy will be paid into the General Fund. Rent Rebate limitation will continue, although the mechanism by which it is applied will be different. There will be arrangements to ensure that any shortfall in income as a result of limitation will show as a deficit on an authority's HRA, not on its General Fund. Ministers have not come to a view on how best to pay subsidy in the future, and would welcome views on this point.

• The present arrangements will end - whereby authorities in negative subsidy transfer resources from their HRA to their General Fund. Subject to the views expressed in relation to this consultation paper, transitional measures will be provided to ease the transfer. However, these will mainly benefit those authorities where the transfer represents a significant proportion of the General Fund expenditure, and is long-standing.

December 1999
£2 Billion For Housing Investment

An increase of almost 50% in the resources provided by central government for investment in housing by local authorities was announced by Housing Minister, Nick Raynsford. The £2.1 billion package of capital resources for 2000/2001 represented a 48% increase, compared with previous year's allocation.

The resources were to be distributed to local authorities through the Housing Investment Programme (HIP) and included part of the £5 billion of extra resources for housing over the lifetime of this Parliament, promised in last summer's Comprehensive Spending Review.

Councils were to receive just over £2 billion for general purpose allocations (Annual Capital Guidelines), plus £72 million for Disabled Facilities Grants.

Notes

HIP allocations for 2000/2001 have two elements:

• A general purpose housing Annual Capital Guideline (ACG) allocation.

• A guideline allocation of Specified Capital Grant (SCG) resources for disabled facilities grants.

The Government has made changes to the way in which HIP resources are distributed for 2000/01 and it is no longer making separate allocations for private sector renewal or for the Capital Receipts Initiative. This change was announced in March 1999, after wide consultation, and it aims to provide local authorities with greater flexibility in deciding their capital programmes.

The HIP resources were distributed in two stages:

• The distribution of the total resources between regions has been made in proportion to the sum of the relevant needs index scores of the authorities in each region.

• Half of each regional total has been distributed to individual local authorities in proportion to their needs index score, with the remaining 50% being distributed on the basis of assessments of the quality of authorities' housing strategies and their relative performance in delivering housing services made by Government Offices for the Regions.

Local authorities' efficiency and effectiveness in meeting housing need in their area is assessed, relative to other authorities in the region. Four factors are assessed:

• Housing strategies.

• How well authorities perform in managing their investment programme.

• How well authorities perform in delivering housing services.

• How well authorities perform in involving tenants.

Each authority has been placed in one of five performance bands. The bands, which reflect relative performance within regions are - well above average, above average, average, below average, and well below average.

December 1999
Rent Investigation Briefing

A new briefing set out how the Housing Corporation intends to target and conduct the current round of its investigations into rent levels and rent rises. This year, for the first time, the Corporation will investigate Registered Social Landlords (RSLs) who failed to restrain rent rises below the Retail Price Index (RPI) +1% in the previous year.

The Corporation will continue with its policy of looking at RSLs which are anticipating future rent rises above RPI+1%, and those RSLs who charge higher rents than others working in the same local authority areas.

The briefing also covers:

• Policy changes - this year, rents of newly remodelled sheltered or supported housing stock will not be included in the assessment of whether RPI+1% has been breached.

• How the Corporation will treat the rents of supported and low-cost home ownership housing.

• How the Corporation plans to publish details of those found to be a serious cause for concern at the conclusion of investigations.

February 2000
Corporation's 2000/01 Investment Programme

Minister for Housing and Planning, Nick Raynsford, approved the Housing Corporation's £750 million capital investment programme for 2000/01. The money is allocated to Registered Social Landlords (RSLs) to provide new homes in areas of growth and to help regenerate deprived neighbourhoods.

The main features of the programme are:

• The allocations to new schemes total £749 million, which is expected to generate 22,050 lettings.

• 70% of the programme is targeted at schemes which contribute to regeneration objectives. This exceeds the DETR's target of 65%.

• At least 10% of the rent programme will be Construction Task Force (Egan) compliant.

• 750 homes will be produced in rural areas.

• The supported housing programme comprises £66 million of capital investment and new revenue funding of £6 million. £10 million will be used to assist the remodelling of existing sheltered housing.

• The average rents plus service charges for homes completed in 2001 from the main 2000/01 rented programme will be £65.92 per week.

In addition to the mainstream investment programme, £38 million is being provided by the Corporation in a special programme to tackle a backlog of disrepair in supported housing stock.

February 2000
Welsh Strategic Housing Schemes' Funding

Assembly Housing Secretary, Peter Law, announced that £48.2 million supplementary credit approval is being made available to fund Strategic Housing schemes for the financial year 2000/01.

The money will support a wide range of schemes in both the public and private sectors of housing and it is in addition to the £145.6 million funding already announced by the Assembly which will be available to local authorities for housing next year, and the £56.4 million available to Registered Social Landlords.

Leading gainers from the programme are Cardiff CC (£4.05 million), Wrexham Council (£3.2 million) and Carmarthen (£3.07 million).

March 2000
New Report on Rent Patterns

The proportion of districts showing wide variations in rents was 42% in 1998/99 compared with 52% in the previous year. This is just one of the findings in a two-part guide to rents, produced for the Housing Corporation by the Property Research Unit at Cambridge University. Part I compares rents charged by local councils, RSLs and the private sector. Part II analyses the rents set by RSLs at regional and district levels, and also covers increases.

Part I finds that RSLs in general provide higher priced accommodation than local authorities but in all regions are lower priced than market sector housing. On average, rents show a north-south pattern, with rents highest in London and lowest in Merseyside. The amounts by which RSL rents exceed council rents are generally higher in the northern half of the country.

Part II of the guide covers RSL rent levels at 31 March 1999 and the increases over the previous 12 months. The data incorporates preliminary analysis, which shows that the average rent increase for all RSLs examined was 3.8%, well below the RPI+1% regulatory level of 4.7%. Nearly half the RSLs had actually decreased their rent in real terms.

Guide To Local Rents: Part I Cross Tenure Rents; Part II Social Landlord Rents (£25) - available from the Publications Unit. Tel: 020 7393 2228.

April 2000
PFI Update

Central Government funding for projects that provide help for vulnerable groups was announced by Local Government Minister, Hilary Armstrong.

These are the 14 new Private Finance Initiative (PFI) projects to be awarded central Government financial support. Included in the projects are the remaining PFI housing pathfinder schemes, which provide a means to improve housing stock, while allowing it to remain in local authority ownership.

A total of 126 PFI projects have now (as at April 2000) been endorsed from 86 different authorities. Of these, thirty-eight have reached contract signature and another eighty-eight are rapidly progressing towards that stage.

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