Affordable housing funding: strategic partner application process
How to prepare your application for an affordable homes grant as a strategic partner.
Applies to England
Before you start
If you’re eligible to apply for grant funding, you’ll need to submit your proposal using our online application process. You should use this guidance to help you prepare your proposal.
Applications are now open. The deadline for submitting an application is midday on 18 May 2021.
At the time of this guide’s publication, the full findings of the technical consultation for the Ministry of Housing, Communities and Local Government (MHCLG) New Model for Shared Ownership have not been published.
The new Shared Ownership Product and the Right to Shared Ownership Model have also not been finalised and published.
Check if you’re eligible
If you have not already done so, you should first check if you’re eligible to apply.
The minimum number of homes you’ll deliver
The minimum number of homes you must deliver depends on the type of strategic partnership you apply for.
If you contract with delivery partners to help you deliver the housing, we expect you as the strategic partner to deliver a significant proportion of the housing yourself.
Not-for-profit strategic partnerships
You will need to deliver at least 1500 homes, or at least 500 for each partner in a joint strategic partnership.
Long term strategic partnerships
You will need to deliver at least 4000 homes, or at least 1500 for each partner in a joint strategic partnership.
For-profit strategic partnerships
You will need to deliver at least 1500 homes.
Local authority strategic partnerships
You will need to deliver at least 1500 homes, or at least 500 for each partner in a joint strategic partnership.
Working with delivery partners
A delivery partner is another organisation that:
- you as the strategic partner (or joint strategic partners) want to work with to honour your contractual commitments as part of the contract
- is eligible to benefit from affordable housing grant, whether a not-for-profit, for-profit or local authority
We would pay the grant as we usually would pay that type of organisation. For-profit organisations are paid on achievement of milestones. All others are paid in areas against eligible development expenditure.
We do not expect delivery partners to join more than one strategic partnership, but delivery partners can also bid under Continuous Market Engagement (CME) outside the geographical locations covered by the strategic partnership.
Telling us who your delivery partners are
You’ll need to name your delivery partners in the proposal, and state the number of homes they are likely to deliver. This helps us understand the level of commitment that strategic partners can make in their own right.
As a strategic partner you must conduct your own due diligence on delivery partners, which will be followed by our formal approval.
Before you can receive a grant payment, all your delivery partners will need to be qualified as one of our investment partners.
Strategic partners’ responsibilities for delivery partners
You have full responsibility for all affordable housing homes agreed in the contract, including homes intended to be delivered by any delivery partners.
You should agree all mutual obligations with your delivery partners.
Delivery partners are not in a contract with us. They will enter into a delivery partner deed at practical completion of the homes.
Homes delivered by delivery partners receive the relevant fixed grant rate for the relevant tenure and region within the strategic partnership.
What to put in your proposal
Your proposal should set out the development plans by tenure and region, detailing the grant rate you’re asking for by tenure, within that region. This fixed grant rate will be applied to each home you complete.
Your proposal should also set out the timescales for delivering the homes and when you expect to received grant payments.
Grant rates agreed within individual strategic partnerships are confidential and must not be shared.
Where you’ll build the homes
You should state which region the homes will be built. Choose from:
- East of England
- East Midlands
- North East
- North West
- South East
- South West
- West Midlands
- Yorkshire and the Humber
Meeting government objectives
You’ll need to tell us how you’ll meet the strategic objectives of the funding.
These include:
- delivering at least 25% of homes using Modern Methods of Construction (MMC)
- providing housing in rural areas
- providing supported housing
- working with Small and Medium Enterprises (SMEs)
- use of the national design guide and approach to sustainability
- providing a proportion of homes for home ownership
In your application you’ll need to tell us the numbers of homes you’ll deliver for each category. You will be expected to deliver against the numbers you’ve provided and this will be monitored and reviewed.
We’ll also ask for the number of homes you’ll deliver for Community Land Trusts outside of rural areas.
Using Modern Methods of Construction (MMC)
Every strategic partnership must deliver at least 25% of homes using MMC. The number of homes you state in your proposal will become a monitored contractual output.
We will ask you to state which categories of MMC you will use on a project. You can deliver the requirement using any of the categories in the MMC definition framework.
MMC categories
- Category 1: Pre-manufacturing – 3D primary structural systems
- Category 2: Pre-manufacturing – 2D primary structural systems
- Category 3: Pre-manufacturing – Non systemised structural components
- Category 4: Pre-manufacturing – Additive Manufacturing
- Category 5: Pre-manufacturing – Non-structural assemblies and sub-assemblies
- Category 6: Traditional building product-led site labour reduction and/or productivity improvements
- Category 7: Site process led labour reduction and/or productivity improvements
However, we encourage organisations to use categories 1 or 2, or with construction processes that achieve a pre-manufactured value (PMV) score of 55% or above.
For these higher categories, you should input the:
- additional estimated costs
- additional amount of grant you may need to fund the development
This will be automatically applied to the homes on completion, in addition to the standard grant rate you’ve already requested.
Read more about the MMC Definition Framework and PMV in the MMC section of the Capital Funding Guide.
Additional costs for rural and community-led housing
You may want to tell us of an additional cost for rural and community-led housing. If there is a valid business case, you can request an additional amount of grant for these homes.
This will be automatically applied to the homes on completion in addition to the standard grant rate you’ve requested.
Homes in higher MMC categories in rural and/or community-led areas
If you are delivering homes in higher MMC categories in rural and/or community-led areas, the additional grant rates will be added to the final grant attributed to the home on completion, subject to the grant level being supported by actual development capital expenditure.
Additional amounts and calculating the total grant
Any additional amounts will be automatically added into the total grant you are bidding for, so to avoid double counting these additional costs and grant should not be counted in the base grant ask.
What type of sites the homes will be built on
We ask this because our priority is that the affordable housing grant is applied to net additional new build homes.
You should apportion the total number of homes across the categories. The total of the three boxes should add up to the total number of homes in your bid. The boxes are:
- brownfield
- greenfield
- other
If your homes are categorised as ‘other’
If you cannot class your homes as brownfield or greenfield, then a maximum of 10% in total of the homes in the proposal can be procured through acquisitions.
This 10% must include (but is not limited to):
- existing accommodation or buildings acquired from the private sector for re-modelled or re-improved supported housing
- housing that was originally built for market sale – this is where you’re purchasing new homes off-the-shelf from developers that were intended for sale on the open market
Working with Small and Medium Enterprises (SMEs)
A Small and Medium Enterprise, also known as a Low Medium Volume Builder (LMVB) is a contractor that builds less than 2000 homes each year.
You will need to tell us the number of homes that SMEs will deliver for you through a building contract in your application. You should also set out how your strategic partnership proposal will support SMEs.
This should include how the partnership will:
- support local SME contractors - an in-house contractor does not qualify as an SME
- how you will work with SME registered providers
Delivery partners who are your subsidiaries cannot be included as SMEs.
How much grant funding you’ll need and cost breakdown
Here you should tell us your estimated average total scheme costs, broken down into:
- land acquisition
- build costs
- eligible on costs
We also expect you to provide average open market values.
You’ll need to give this breakdown for each region you’re bidding for. You’ll also need to tell us the grant rate you are seeking (by tenure) for each type of tenure and region.
The grant rates for each joint strategic partner must be the same.
Costs should relate to the average cost of building a home. We’ll ask you later in the application for the additional cost of building categories of MMC housing.
Inflation
Grant rates are applied across the funding period and there is no inflation to grant rates across the timeframe for the fund.
Starts and completions of each tenure
You should tell us how many grant funded affordable homes you will start and complete every year for each tenure.
All homes must start and complete within the programme period, but we expect to see a focus on early delivery.
The Capital Funding Guide (CFG) has definitions for:
Development expenditure
You should provide an estimate of the development expenditure that will be incurred per year by the grant recipient strategic partner including any delivery partner. Expenditure must be incurred by the grant recipients. Check the CFG for an explanation of the eligible development expenditure in the grant agreement.
Any in-house development companies must become delivery partners to have eligible expenditure for the purpose of drawing down grant.
How much grant you’ll draw down yearly
You should set out your expected timescales for grant drawdown according to the type of strategic partnership you’re applying for.
If you have different types of delivery partners, you should take account of different payment arrangements when forecasting your grant draw down.
A secure legal interest in a site is required before any grant can be claimed.
All grants must be claimed before 31 March 2026.
Total funding cost and other funding
The total funding should equal the total cost of delivering your development programme.
You need to show that the total costs of delivering the full proposal and the total funding across a range of sources equals the total cost of developing your programme.
Total grant funding requested
The grant you are asking for will be automatically populated:
- summing up the grant asks
- building on the grant per tenure, by region and the number of homes
- including any additional grant ask for delivery of MMC and rural housing
Other sources of funding
You need to tell us how you’ll fund the programme from sources outside of our grant. This includes:
- debt funding from net rental income - this is the total net rent you’ll receive for all tenures from the homes in your application
- other debt funding - this is borrowing you may take out on other stock to help fund your programme
- cross subsidy from open market sales - this is your profit from housing for sale outside your grant funded delivery that you may want to help fund your programme
- first tranche sales - this is the income from the first sales you achieve from shared ownership homes supplied in this programme
Recycled capital grant funding (RCGF)
You should input the amount of RCGF your organisation wants to use to fund the programme. You can include an estimate even if it has not yet all been generated.
It should not include RCGF that any delivery partners may want to use. You should indicate these under ‘other sources of funding’.
Other internal subsidy
This includes:
- internal subsidy - other contributions from within your organisation
- public subsidy - for example, funding from local authorities or other public bodies
- other sources of funding - this can include anything not mentioned in other categories and we may seek clarification from you if you tick this box
Understanding your strategic ambitions
Strategic partnerships are designed to enable our most ambitious partners to go further. We want to understand your reasons for entering into one and the difference this approach will make to what you can achieve.
Alongside the quantitative elements of your proposal, we will ask you to explain your strategic ambitions for the partnership and how you will meet the government’s objectives for the fund.
There are 9 questions under the following headings which have a maximum answer of 500 words each.
1. Strategic ambitions
You’ll need to consider:
- What do you want to achieve through a strategic partnership that you wouldn’t be able to achieve otherwise?
- What are your expectations of us as a strategic partner – what do you need, aside from a grant, to deliver the outcomes you expect from the partnership?
- How would we benefit from entering into a strategic partnership with your organisation(s)?
You should explain:
- how your proposal aligns with your development strategy, current areas of operation, plans for growth
- what problems you are trying to solve
- what markets you are trying to change
- any local relationships you have
2. Sustainability
You should outline how sustainability is embedded in your organisation’s strategy and operations. You should include the expected average Standard Assessment Procedure (SAP) rating for homes to be delivered as part of your proposal.
You may also want to refer to plans that:
- increase biodiversity
- improve waste and water management
- promote sustainable transport
- meet proposed changes to Building Regulations and the Future Homes Standard.
You should also outline any carbon emissions targets:
- that you have set for your stock or corporate operations – for example, when you achieve net zero carbon
- and how you will measure these
3. Productivity
You should outline any work you’re doing to support the development of construction skills – for example, apprenticeships programmes – or construction innovation and how a strategic partnership would support this work.
4. Design
You should set out how your strategic development plans meet the government’s priorities for good design, as set out in the national design guide, under the identified ten characteristics.
5. Modern Methods of Construction
You should explain what impact using MMC will have on your developments, for example:
- costs
- construction time
- quality
6. Deliverability
To support your proposal we will ask you to evidence and quantify your organisation’s development capacity, expertise and track record for delivering new homes at scale.
Set out how you will use your strategic approach to development to bring forward the pipeline of affordable housing required to support the scale of your proposal to become a strategic partner.
Before you submit your proposal
By submitting your proposal, you are confirming to us that:
- this is a full and final offer
- you have authority to submit the proposal and board or cabinet approval from the applicant organisation(s) is in place
- the applicants are qualified as Homes England investment partners
- the applicants are not part of a separate proposal to the one submitted
- all delivery partners are unique to this proposal, not part of a separate proposal to the one submitted and hold Homes England investment partner qualification or (where not already) before submission of the first grant claim
- all information, confirmations and certifications made in the proposal are correct in all material respects – and if applicable joint applicants and/or delivery partners have authorised the applicant to make such confirmations and certifications
- you consent that, if applicable, relevant financial information provided may be shared with the Regulator of Social Housing by Homes England for assessment purposes you acknowledge that Homes England reserves the right to ask for additional information for assessment purposes
- this proposal will not displace delivery under any other Homes England programmes (including existing strategic partnership pipeline delivery)
- the offer submitted contains all the information available at the time of bidding
Further grant funding
You are aware that any subsequent award of grant funding will be subject to the terms of the programme, including that:
- applicants must enter a suitable form of grant agreement with Homes England
- the intended owner and landlord of all sub-market rental homes must be a Registered Provider of Social Housing before first let
- grant paid will be social housing assistance as defined in Section 32(13) of the Housing and Regeneration Act 2008 and is subject to the provisions of the Housing and Regeneration Act 2008 and any applicable determinations
- all rent dwellings provided with the benefit of grant funding shall be deemed to have been provided with public money for the purposes of Section 180 of the Housing and Regeneration Act 2008
- rent dwellings provided with the benefit of grant funding shall be subject to the Right to Shared Ownership model and published exemptions
Qualitative assessment of your proposal
You will not be able to upload or link to any documents with your qualitative responses.
How we assess your bid
The bid as submitted in your proposal is your best and final offer. We may seek clarification of the information you’ve supplied, but there is no negotiation process. We will not assess non-compliant bids.
Joint partnership applications will be assessed as a single bid.
How we score your bid
Bids will be assessed, scored and ranked to determine the successful applications which will also be subject to consideration of budget availability.
Value for money - 50%
This will be scored using the government’s benefit cost ratio (BCR).
Factors that affect the BCR include, but are not exclusively:
- the amount of grant required to deliver the homes
- Land Value Uplift
- the speed of delivery of homes and the timing of payment of grant
For a definition of BCR, see the Department for Communities and Local Government appraisal guide.
Meeting the strategic objectives – 30%
This will be scored against:
This will be scored against:
- your use of MMC
- provision of housing in rural areas
- provision of supported housing
- your use of SMEs and local contractors
- your use of the national design guide
Amount of your proposal for affordable home ownership – 20%
Proposals with at least half of homes in these categories will be awarded maximum points.
Deliverability
This is scored by pass or fail.
After you’ve submitted your application
We will:
- contact you to confirm we’ve received your application
- only contact you to discuss your application if we need clarification of any detail
- confirm the exact timescale for announcements on the awards of funding in due course
If your application is successful
Before you can enter into a contract, you’ll need to meet certain requirements.
Investment partner status
Before you can receive a grant payment, all your delivery partners will need to be qualified as one of our investment partners.
Register with the Regulator of Social Housing
Partners who will be landlords of homes built with our funding for Social or Affordable Rent and Rent to Buy, must be registered with the Regulator of Social Housing as a registered provider.
This requirement does not apply to homes for Shared Ownership.
If you’re working with unregistered rural or community-led groups they must apply to register in good time so that they are registered by practical completion of the homes.
For more information on timescales and how to apply, see the guidance for registered providers.
Entering into a contract with Homes England
You’ll need to enter into a new supply agreement with us. A summary of the terms in the agreement will be published and linked from this page.
Applicants who are not registered providers
For these organisations, usually referred to as unregistered bodies (URB), we will:
- carry out due diligence checks on viability – including long term if the URB intends to retain an interest in the Shared Ownership homes
- pay URBs 100% of the agreed funding at practical completion of the scheme
Earlier payment may be possible if satisfactory forms of security are available.
Monitoring and reporting on progress
Strategic partners are responsible for managing the contract in line with the agreed delivery profile. We will monitor the contract regularly through our Programme Management Board to enable grant payments to be made.
Our partners must report on delivery at regular intervals. This should include data and metrics relating to the strategic priorities of the Affordable Homes Programme.
As part of our programme and contract management, we also carry out an annual procedural compliance audit on a sample of schemes to ensure requirements have been met and there is an annual review of grant drawdown including a Statement of Grant Usage.
Read more in the strategic partnership section of the CFG.
Transparency
We publish information on the costs and expenditure of schemes funded through the Affordable Homes Programme.
As a condition of funding, partners have a contractual obligation to share and publish this information.
Where you’re awarded more than £3 million
Partners who are awarded funding of more than £3 million need to publish details of expenditure over £500 relating to their development schemes every quarter, which we may also publish.
Partners must supply information about development costs and agree that we can verify this information on an ‘open book’ basis at any stage.
Regulatory requirements
The Regulator of Social Housing will advise us on whether any proposal to award grant to any registered provider will have an adverse impact on that organisation’s governance and financial viability.
Registered providers applying for a strategic partnership for the first time, who have a published regulatory judgement, must have achieved a G1/V1 or G1/V2 rating.
Registered providers may be required to provide additional information to the Regulator to assist that assessment.
Grant recovery
Grant is paid under section 19 of the Housing and Regeneration Act 2008, with grant attributed to each home on completion.
Grant rests in the home until the next relevant event where historical grant is subject to the relevant Recovery Determination.
Contact
For further information, email: sp.application@homesengland.gov.uk
Last updated 8 April 2021 + show all updates
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Applications for affordable housing funding through a strategic partnership are now open.
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First published.