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MHCLG invites bids for additional HRA Borrowing Programme 05/07/2018 Labelled as Finance

The government has issued the Prospectus for bids against increase of £1billion in the housing revenue account borrowing programme announced in the Autumn Budget.


Local authorities in London and other areas of "high affordability pressures" will be able to bid for increases in their HRA borrowing caps between 2019 to 2020 and 2021 to 2022.


The Chancellor announced in the 2017 Autumn Budget a selected lifting of Housing Revenue Account (HRA) borrowing caps in areas of "high affordability pressures" by up to £1bn across England by the end of 2022, subject to some form of bidding process. The government also promised to monitor how authorities respond to this opportunity, and consider whether any further action is needed. 


Some 7 months after the announcement was first made the government has at long last issued the detailed prospectus and bidding process and invited selected councils to bid for increases in their caps from 2019-20, up to a total of £1 billion by the end of 2021-22. However councils will only have a matter of weeks to put together detailed bids.


The Prospectus and bidding process was issued by the Ministry of Housing, Communities and Local Government (MHCLG) on 26 June, with a deadline of 7 September 2018 for submission of bids. ARCH has been pushing MHCLG officials for an early announcement to enable local authorities to plan accordingly and ensure that bids for the additional borrowing headroom are not undersubscribed and in this respect the relatively short 10 week period coming as it does, over the summer holiday period, for preparation and submission of bids is disappointing.


The £1bn additional borrowing headroom will be allocated over 3 financial years from 2019/20. £400m will be available in 2019/20, with £300m in 2020/21 and £300m in 2021/22 but the additional borrowing is being apportioned between London boroughs and local authorities across the rest of the country on a 50/50 basis although the prospectus does indicate "that the precise allocation of borrowing between London and the rest of the country may alter in light of bids received".


Bids for London authorities will be dealt with by the GLA (Greater Lindon Authority), bids for authorities outside London will be dealt with through the Homes England Continuous Market Engagement Process. Alongside the publication of the Prospectus for additional HRA borrowing the Government also confirmed a total additional budget for Homes England of £1.67billion to deliver social rent as well as other tenures available through the Shared Ownership and Affordable Housing Programme (SOAHP) and an addendum to SOAHP has been published.


Outside London only those councils determined as being "in areas of high affordability pressures" will be able to bid to use the additional borrowing approvals to build social rented housing, affordable rented housing, sheltered housing or supported housing.


Areas of high affordability pressures have been defined by government in the Prospectus as those where there is a difference of £50 per week or more between the average social rent and private rent at the local authority level. A list of 162 local authorities defined as being in areas of high affordability pressures, according to this measure is set out in the appendix to the Prospectus.


The Prospectus introduces some flexibilities that were not available when previous relaxation of HRA borrowing was announced in 2013 and councils in areas of high affordability pressures will be able to bid for:


  • Additional borrowing headroom only
  • Additional borrowing headroom to be used alongside grant funding from Homes England through the 2016-21 Shared Ownership and Affordable Homes Programme)
  • Additional borrowing to be used alongside the councils own unspent RTB receipts


Local authorities can also use commuted sums arising from a developer contribution, through Section 106 agreements generated on other sites. Commuted sums can be used alongside additional borrowing and SOAHP Grant.


Bids that combine additional borrowing alongside unspent RTB receipts and SOAHP grant will not be accepted.


The Prospectus makes it clear that bids will be assessed and councils will need to demonstrate 3 key elements:


  • Value for money - based on unit scheme costs and maximising the number of homes delivered, for example by utilising their own land or offering cross-subsidy where possible.
  • Deliverability - local authorities must demonstrate that they are ready to start building in relevant years and have the capability and a track record of delivery to time and budget
  • Affordability - bids will be ranked according to the areas of the highest affordability


Councils must also set out in any bid their existing HRA borrowing headroom and the extent to which such headroom is committed for other schemes in their 30 year HRA business plans.


Bids must be submitted via Homes England electronic bidding system and assessment will be at individual scheme level and the primary metrics used for assessing the value for money of each bid will be:


  • Overall per unit scheme costs
  • Level of additional HRA borrowing requested per new affordable home and as a percentage of total scheme costs
  • Enhanced value for money where local authorities bring forward land and can demonstrate procurement efficiencies in delivery of new supply


In assessing deliverability, factors taken into account will include:


  • The stage of planning achieved
  • The status of land ownership
  • Forecast delivery in terms of numbers of units and draw down of borrowing approval; and
  • The council's track record of housing delivery


Providing bids are assessed as demonstrating value for money and deliverability, they will be ranked according to local authority areas where there are judged to be the highest affordability pressures with the local authorities, with the highest affordability pressures having priority in the allocation of additional borrowing headroom.


Full details are set out in the Prospectus: "Additional Housing Revenue Account Borrowing Programme: Prospectus for local authorities in England outside London":

ARCH has arranged a special seminar for officers from ARCH member councils and colleagues from the NFA and the Councils With ALMOs Group who may be involved in putting together bids under the HRA Borrowing Programme to be held in London on 18 July, at which senior officials from MHCLG and Homes England will take members through the Prospectus and the detailed bidding process.


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