Transparency data

Affordable Homes Programme 2021 - 2026: accounting officer assessment

Updated 6 March 2024

Background and context

Delivering more genuinely affordable housing is one of the central aims of the Department for Levelling Up, Housing and Communities (DLUHC) – the Affordable Homes Programme 2021-2026 (AHP) plays a crucial role in achieving this aim.

The AHP is one of the primary vehicles used by government for the delivery of affordable housing in England. It allocates grant funding to Local Authorities (LAs) and Housing Associations (HAs) to help support the capital costs of developing affordable housing for rent or sale.

The AHP operates with a budget of £11.5 billion, delivering tens of thousands of homes across England for both rent and sale.

Delivery of the programme is delegated to our delivery partners Homes England (HE) and the Greater London Authority (GLA). Delivery partners have full delegated responsibility to make spending and allocation decisions in line with their targets, agreed assessment criteria, and within predetermined delegation limits.

Assessment against the Accounting Officer Standards

Regularity

The department allocates funding to HE under existing legislative powers in the Housing and Regeneration Act 2008 (‘HRA 2008’). The department’s power to fund Homes England by grant is laid out in Schedule 1 para 5 of this Act.

The HRA 2008 gives HE broad powers to provide financial assistance, including in the form of investment, as well as general incidental powers to ‘do anything it considers appropriate for the purposes of its objects, or for purposes incidental to these purposes’, which are:

• to improve the supply and quality of housing in England
• to secure the regeneration or development of land or infrastructure in England
• to support in other ways the creation, regeneration, or development of communities in England or their continued well-being, and;
• to contribute to the achievement of sustainable development and good design in England, with a view to meeting the needs of people living in England.

HE cannot operate in London except under the direction of the Mayor of London.

England in this definition excludes Greater London for which there is an existing delegation by the GLA. Grant payments for projects within Greater London are made under Section 31 of the Local Government Act 2003. Section 31 provides sufficient legal powers, subject to the consent of HM Treasury (HMT), for a Minister to pay a grant – to which conditions may be attached - to a local authority in England towards expenditure incurred, or to be incurred by it.

Propriety

HMT business case approval was granted on 4 September 2020, and the programme was subsequently launched on 10 September 2020.

Memoranda of Understanding (MOUs) with delivery partners underpin and govern the programme. These MOUs set out what we expect each partner to deliver for the funding they receive; how the funding can and cannot be used; as well as codifying the governance, accountability, and oversight arrangements that are in place to ensure that partners are delivering effectively.

Appropriate conditions are attached to all contracts and progress is regularly monitored by HE, the GLA and DLUHC in order to ensure that funds are spent in line with agreed contractual terms, adhering to the principles of Managing Public Money. Control and oversight of the AHP resides ultimately with DLUHC.

Value for Money

Each bid for grant funding from the AHP is assessed by HE and the GLA with Value for Money (VfM), deliverability and a strategic approach to housing delivery in mind. This ensures that each individual AHP project, as well as the programme as a whole, is able to deliver the best possible value to the taxpayer.

In order to drive VfM the AHP employs a Benefit Cost Ratio (BCR) calculation as part of its assessment criteria for bids. This methodology is compliant with MHCLG Appraisal Guide 2016 and HMT Green Book 2018. The ratio weighs the economic benefit of grant funding against the economic cost. The higher the benefits relative to costs, with focus on early delivery of housing, the higher the BCR score.

Economic benefits in the BCR are made up of three main components – the benefits of additional housing supply (monetised through Land Value Uplift), the distributional benefit of transferring wealth from the general taxpayer to people on lower incomes, and the health benefits associated with tackling overcrowding and rough sleeping.

The economic benefits that accrue from additional housing supply are calculated using the estimated Land Value Uplift (LVU) associated with delivery of an additional housing unit.

This also follows HMT Green Book guidance and the DLUHC Appraisal Guide and is defined as the difference between the new use value of the land (as housing), and its previous use value; LVU therefore represents the net private benefits of a development.

Changes in land values, as a result of a change in land-use for a development, reflect the economic efficiency benefits of converting land into a more productive use.

The AHP’s latest BCR is 2.2 and is subject to ongoing review to ensure continued VfM.

There are also wider, non-monetised societal benefits that accrue from the provision of subsidised housing to lower income areas, such as increased health benefits resulting from reductions in overcrowding and rough sleeping.

See more information on how the AHP will meet its policy objectives whilst achieving VfM for the taxpayer.

To further safeguard VfM, regular reporting and evaluation requirements placed upon grant recipients help monitor the delivery of the programme, assessing its expected outputs and outcomes.

Feasibility

All projects within the programme are required to satisfy a deliverability assessment carried out by Homes England and the GLA. This ensures that the scheme can be delivered within the programme timeframe. Deliverability takes into account the level of planning, land ownership and progress on contracting a provider has made prior to the point of submitting a bid.

We also consider the current and previous performance of providers within the existing programme, or for new entrants to the programme – forecasts from comparable schemes and providers are used as a basis for assessment.

The AHP follows HE’s project control framework, which ensures the programme has a high degree of compliance with the functional standard for government grants.

The scheme is part of the Government Major Projects Portfolio and is subject to this additional assurance mandated by the IPA. A further Gate 0 review will be held in due course, and the feasibility of the programme will continue to be independently reviewed by the IPA throughout its lifetime.

Conclusion

As the Accounting Officer for DLUHC I have considered this assessment of the Affordable Homes Programme and I am satisfied that the programme is a good use of public resources.

If any of these factors change materially during the lifetime of this project, I undertake to prepare a revised summary, setting out my assessment of them. This summary will be published on the government’s website (GOV.UK). Copies will be deposited in the Library of the House of Commons and sent to the Comptroller and Auditor General and Treasury Officer of Accounts.

Sarah Healey

10 March 2023