Guidance

Apply for affordable housing funding

Information on how to apply for the Affordable Homes Programme 2021 to 2026.

Applies to England

Stay up to date

This guidance tells you about the Affordable Homes Programme 2021 to 2026. The guidance will be updated if anything changes.

About the Affordable Homes Programme 2021 to 2026

Affordable housing, as defined by the National Planning Policy Framework, is housing for sale or rent for those whose needs are not met by the market. The provision of affordable housing is a key element of the Government’s plan to end the housing crisis, tackle homelessness and provide aspiring homeowners with a step onto the housing ladder.

The Affordable Homes Programme provides grant funding to support the capital costs of developing affordable housing for rent or sale. As the Government’s housing accelerator, Homes England will be making available £7.39 billion from April 2021 to deliver up to 130,000 affordable homes by March 2026 – outside of London. Partners looking to develop affordable housing in London can find more information on the Greater London Authority’s website.

Homes England is committed to working closely with a diverse range of partners – both existing and those we haven’t previously worked with – to maximise the impact of this funding. In return, we expect partners to share the ambitions set out in Homes England’s strategic plan to create a more resilient and diverse housing market. This means partners will also be expected to focus on promoting significant use of Modern Methods of Construction (MMC), high-quality sustainable design and working closely with local small to medium-sized enterprises (SME) housebuilders.

What this funding is for

The funding is for the supply of new build affordable housing.

The information below provides an overview of the standard tenures and types of housing supported. Please refer to the detailed guidance for specific rules around each tenure set out in the Capital Funding Guide.

Homes for rent (around half of homes delivered)

There are 2 types of rent: social and affordable rent.

Social Rent

Homes let at below market rent by a registered provider. The rent level is calculated according to a formula based on property values and local earnings (target rent). This is set out in the Regulator of Social Housing’s Rent Standard. . For full details, please refer to the Social Rent guidance in the Capital Funding Guide.

Social Rent homes can be funded within areas of high affordability challenge, as defined by government for the AHP 2021 to 2026, or elsewhere provided that the grant requested is not higher than it would be for Affordable Rent

Affordable Rent

Homes let at below market rent by a registered provider. The rent (including service charge) is set at up to 80% of the local market rent for an equivalent home. For full details, please refer to the Affordable Rent guidance in the Capital Funding Guide.

Routes into Home Ownership (around half of homes delivered)

There are 4 types of home ownership routes: shared, ownership for people with long term disabilities, older persons shared ownership and Rent to Buy.

Shared Ownership

Shared Ownership allows a customer to purchase a share of a home and pay rent on the remaining share. The new Shared Ownership model sets the minimum share for purchase at 10% and places the repair and maintenance liability with the provider for the first 10 years. Further details are set out in the Shared Ownership guidance.

Home Ownership for people with Long term Disabilities (HOLD)

Shared Ownership purchase of a home on the open market for people with a long-term disability who are unable to find a new build home which meets their specific needs. Please see the detailed guidance on HOLD for more information.

Older persons Shared Ownership (OPSO)

Shared Ownership available to over-55s. Ownership is capped at 75% of the value of the home. Once this cap is reached, no rent is payable on the remaining share. Please see the detailed guidance on OPSO for more information.

Rent to Buy

Homes let to working households at a lower cost to give them the opportunity to save for a deposit to buy their first home. The rent (including service charge) is set at or below 80% of the market rent for an equivalent home for at least five years to allow a tenant to save for a deposit or purchase sooner via Shared Ownership. Full details are set out in the Rent to Buy guidance.

This funding supports the development of:

  • Supported Housing (10% of homes delivered) - any housing scheme where accommodation is provided alongside care, support or supervision to help people live as independently as possible in the community. See the Capital Funding Guide for information on the specific client groups that this funding covers. Supported housing can be developed both through new build and repurposing/improvement of existing homes. For details, refer to the guidance on reimprovement.
  • Rural Housing (10% of homes delivered) - housing delivered in settlements with a population fewer than 3,000.
  • Traveller pitches - funding to develop new sites and to add new pitches onto existing sites, to help meet the accommodation needs of traveller communities. For details, refer to the guidance on traveller pitches.
  • Empty homes - affordable homes can also be created by bringing existing empty homes back into use. Please see detailed guidance on purchase and repair (our preferred model) and lease and repair options.

Please note, this funding does not provide grant for:

  • Regeneration – the replacement of homes demolished through regeneration work is not eligible for funding. A grant may be available to support the delivery of net additional affordable homes on those schemes.
  • Section 106 - the purchase of homes built under Section 106 agreements, where the affordable homes are secured through developer contributions is not funded. However, we still record information on all nil-grant affordable homes for rent and reporting requirements will be set out in the contract.
  • Major Repairs – works to ensure homes are habitable are not eligible for funding as this is the responsibility of the provider (see further guidance on major repairs). We may award funding in exceptional circumstances, in the case of alms houses for example, where the charity isn’t able to cover the cost of works itself.

The Right to Shared Ownership (RTSO) will apply to all grant funded, rented homes, with some specific exemptions on types of home and for certain providers, which will be explained in the guidance. Exemptions may also be given if there are clear business reasons for the provider not to sell, for example if the market value is lower than the cost of developing the home (including financing costs). Please see the Right to Shared Ownership (RTSO) guidance for further information.

The funding also supports wider strategic objectives, including:

  • Placing significant focus on and investment in Modern Methods of Construction outlined in the MMC section of the Capital Funding Guide. There is more information in the MMC definition framework, which sets out the 7 categories of MMC in detail.
  • Encouraging uptake of the National Design Guide, which is part of the government’s collection of planning practice guidance within the National Planning Policy Framework.
  • Improving the energy efficiency and sustainability of new affordable housing supply.
  • Encouraging the use of SME contractors.

To allow for this, some of these elements are included in the assessment criteria for funding applications, and others are included in the standard conditions of funding.

Currently most affordable housing is built by housing associations, but we know that there is more ambition out there in untapped parts of the market. Homes England welcomes proposals from existing and new partners – housing associations, local authorities, developers, for-profit providers, community-led organisations and others who have an ambition to develop affordable homes – including those we haven’t previously worked with. You can apply for funding as an individual organisation or as part of a partnership or consortium. Please check the Capital Funding Guide for more information about consortium arrangements.

To receive grant funding, you need to be a qualified investment partner of Homes England or be working with an organisation that is. In a consortium, only the lead organisation needs investment partner status, unless other partners also intend to apply for funding on their own. Investment partner status confirms that organisations have the financial and technical capacity to deliver their proposed scheme, and that they have financial and legal good standing.

Full information on the process and criteria are available in the applying for investment partner status guidance. If you are an existing Investment partner, you will not need to reapply for qualification for the 2021 to 2026 funding.

For partners who will be landlords of homes built with our funding for Social or Affordable Rent and Rent to Buy, you are required by law to be registered with the Regulator of Social Housing as a registered provider (RP). Applications to register must be done in good time. For more information on timescales and how to apply, please see the RP guidance. This requirement does not apply to homes for Shared Ownership

Funding routes

There are two routes to access funding:

  • Scheme by scheme bidding through continuous market engagement (CME).
  • A multi-year strategic partnership to access grant for a longer-term development programme.

 Continuous Market Engagement Route (CME)

CME provides access to grant throughout the duration of the programme, while funding remains available. This route allows providers to apply for funding for individual schemes. All schemes funded through CME must have started on site by 30 September 2025 and be completed by 31 March 2026.

You do not need to be an investment partner to apply for funding through CME, but you must have gained investment partner status before grant payments can be made.

 Strategic partnerships

Strategic partnerships are a range of tailored, longer-term deals for organisations that have the ambition, capacity and successful track record of delivering large numbers of new homes at significant pace. This route gives partners the certainty of agreed funding for the duration of the deal, with greater flexibility to deliver within agreed parameters on location and tenure.

Strategic partnerships offer significant support outside of grant funding, with potential to access a wealth of knowledge and expertise from across the agency, and greater emphasis on collaboration with Homes England and within the sector. Partners are supported by a dedicated key account manager (KAM), who will help you to get the most from our diverse range of resources, and manage the strategic focus of the relationship through the Strategic Framework Agreement.

To submit a proposal for a strategic partnership, you must be a qualified investment partner. The key parameters for funding under the four types of partnership are:

  • that you will build a minimum of 1500 homes
  • that all strategic partnerships will be expected to deliver a minimum of 25% of homes through MMC.

A maximum of 10% of the total homes in your proposal can be delivered through acquisitions of stock (for either remodelling or improvement for supported housing and/or purchase of completed homes newly built for market sale).

Schemes funded through strategic partnership must start on site by the 31 March 2026 and be completed by the 31 March 2028 with focus on ambitious levels of delivery in the first five years of the programme.

All partners allocated funding in the 2021 to 2026 programme must fulfil their contractual commitments under any existing grant agreement. Strategic partnerships for 2021 to 2026 will begin a new, separate contract with Homes England -and all grant will need to be drawn down by 31 March 2026.

Read the strategic partnership application guidance for full details on parameters and conditions of funding through a strategic partnership.

How to apply for funding

Scheme by scheme (CME) applications

CME is now open for funding applications.

Applications through CME will stay open while funding remains available. These applications are assessed on their individual merits.

Information required for an application will cover two areas:

  • applicant details (for example, type of organisation and location)
  • scheme details (for example, geography, tenure, number of homes, costs, land, planning and grant requested)

CME applications will be assessed against the following criteria:

  • Cost minimisation - the primary assessment metric is grant per home. This is benchmarked against national, local and scheme type averages to ensure bids are competitive on both costs and outputs.

  • Deliverability - to ensure the scheme can be delivered within the funding timeframe, deliverability will take account of the level of planning, land ownership and progress on contracting at the point of bidding. We will also consider past performance for current partners and forecasts from comparable schemes for new partners. Bids will also be tested on how they are supporting local authorities in meeting local housing needs.

We will also consider how schemes demonstrate alignment with the strategic objectives (use of MMC, use of the National Design Guide, working with local SME contractors and provision of rural housing and supported housing). Detailed information on the assessment process and criteria, and how to submit bids for funding is available in the guidance on applying for funding through CME.

Strategic partnerships

Applications for funding through a strategic partnership are made through a competitive process and fixed bidding period.

The bidding period is expected to open in March 2021 for 6 weeks. We will confirm the submission deadline in due course.

To apply for a strategic partnership, you will submit a proposal through our online portal within the bidding period. These will be assessed, scored and ranked to determine the successful applications which will also be subject to consideration of budget availability.

Strategic partnership proposals will be assessed against the following criteria.

  1. Value for money (50%) – scoring uses a benefit-cost ratio (BCR), 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, the higher the BCR score.
  2. Strategic priorities (30%) – use of Modern Methods of Construction (MMC), use of the National Design Guide, working with local SME contractors, and provision of rural housing, and supported housing.
  3. Home Ownership (20%) – applications will be scored against how well they contribute to the Government’s ambition to increase home ownership.
  4. Deliverability – an assessment of how deliverable the proposal is will identify whether the overall proposal has passed or failed.

Read the strategic partnerships application guidance for full details on parameters and requirements of funding which apply to different partner types, and how to submit a proposal online.

If your proposal is successful, we will work with you to identify how we can best support you through the non-grant related interventions outlined in our broader strategic partnership offer. Where appropriate, we will create a co-developed delivery plan which will support the partnership and help you to work with Homes England to maximise its outcomes.

Next steps following approval

Confirming eligibility and entering into contract

If your funding application is approved, you will need to meet certain requirements before you can receive affordable housing grant.

Your application to become an investment partner must be made and approved before any payments are made. This may involve some level of ‘Know Your Customer’ due diligence checks. See the guidance on applying for investment partner qualification for full details.

If you are applying through CME, or you are a delivery partner for a strategic partnership, you must qualify as an investment partner before any grant payments are made.

Some level of Know Your Customer due diligence checks may be involved.

If applicable, your application to become a registered provider with the Regulator of Social Housing must be approved.

You will be required to enter into a new supply agreement with Homes England. The Capital Funding Guide includes a summary of the terms of the agreement.

Receiving payments

Following the execution of the contract, Homes England will pay out grant depending on the route you applied through.

 For scheme by scheme CME

CME bids grants will be paid against the achievement of delivery milestones – 40% on site acquisition, 35% on start on site and 25% on practical completion. For some eligible providers, it may be possible to claim up to 95% of payment at start on site. Further information on grant payments for CME is available in the Capital Funding Guide.

Strategic partnerships

For strategic partnerships grant payments will depend on the type of organisation:

  • For non-profit registered providers and local authorities, grant will be paid on a quarterly basis against relevant capital development expenditure incurred in arrears in the previous quarter.
  • For for-profit registered providers and URBs, grant will be paid quarterly against achievement of delivery milestones.

The contract will specify the agreed schedule for drawdown of grant. If different types of organisation become delivery partners, this means that grant will be paid differently for each partner.

Further information is available in the strategic partnerships guidance.

For organisations who are not registered providers (referred to as Unregistered Bodies or URBs)

Homes England will carry out due diligence checks on viability (including long term if it intends to retain an interest in the homes). URBs will be paid 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

All partners will be required to report on delivery at regular intervals. This will include data and metrics relating to the strategic priorities of the Affordable Homes Programme.

As part of our programme and contract management, Homes England also carries out an annual procedural compliance audit on a sample of schemes to ensure requirements have been met. More information about this is available in the programme management guidance and strategic partnerships guidance as applicable.

Open Book and transparency

Homes England publishes information relating to the costs and expenditure of schemes funded through the Affordable Homes Programme. As a condition of funding, there are contractual obligations for partners around sharing and publishing of this information. Partners who are awarded funding of more than £3million also need to publish details of expenditure over £500 relating to their development schemes every quarter, which Homes England may also publish.

Partners are required to supply information about development costs and agree that Homes England can verify this on an ‘open book’ basis at any stage.

Regulatory requirements

The Regulator of Social Housing will provide advice to Homes England on whether any proposal to award grant to a registered provider will have an adverse impact on the Regulator’s published judgement on the organisation’s governance and financial viability rating. Registered providers may be asked to provide additional information to the Regulator to inform the assessment as necessary.

Timetable

  • Launch – 10 September 2020
  • Stakeholder engagement – September – November 2020
  • CME applications invited – 15 December 2020
  • Strategic partnership proposals invited – anticipated by the start of 2021

The timetable will be updated with more detailed information as and when it becomes available.

Contact

For further information, contact us at ahp2126@homesengland.gov.uk

Published 10 September 2020
Last updated 15 December 2020 + show all updates
  1. Updated to include information about continuous market engagement (CME) funding applications and links to detailed guidance documents, including assessment process, criteria and terms of agreement.

  2. First published.