INNOVATION & INVESTMENT FUND (IIF) 2011/12
POINTS OF CLARIFICATION AND RESPONSES TO QUESTIONS
Registered Social Landlord Fund
Points of Clarification
1. We expect the provision of Mid Market Rent housing under the registered social landlord fund to be for a minimum of 30 years which is consistent with existing Scottish Government Mid-Market Rent Guidance. Any proposal for the provision of Mid Market Rent housing for a shorter period of time than 30 years may be submitted to the Innovation Fund.
NEW Update below (20 May 2011)
2. For the provision of new shared equity housing under the Innovation and Investment Fund, we expect the existing threshold levels/sales price ceilings published on the Scottish Government web site for the new Supply Shared Equity Scheme with Developers to apply. We also expect properties to be affordable for first time buyers on low to moderate incomes. Where prices are over these levels they need to be justified and agreed with local authorities.
Responses to Questions
NEW Update below (20 May 2011)
On page 2 of the Proposal Form for the RSL funding stream, it asks the RSL to confirm it has secured borrowing capacity. Can you confirm if "yes" is an appropriate answer or does the RSL have to provide written confirmation from their Bank?
Although an answer 'Yes' will be acceptable, we would expect to receive additional information from the RSL including the amount of secured borrowing, the term of the secured borrowing and how much has been drawn down to date.
In the RSL Funding stream bid documentation, reference is made to a more detailed Approval Proposal Form being completed before a grant offer is issued. Should we build in extra time to our start and completion dates to allow for this second stage process and the issue of the final grant offer?
The completion of an Approval Proposal Form will be no more than is currently required at HAG tender return stage for a streamlined project.
We do not therefore expect there to be any significant delay before we issue a Grant Offer Letter to an RSL.
Is self funded shared ownership allowed as part of a mixed tenure, averaging out the grant type of scheme?
No, Following the publication of the LIFT evaluation on 20 January 2011, the Scottish Government has decided that it will not be providing any funding in future for shared ownership. However, you may self-fund Shared Ownership separately and if it generates income this may be used to support your bid to the Innovation and Investment Fund. .
The guidance says that everything within the various funds has to be 2010 Building Regulation or Housing for Varying Needs, but can units being developed be designed to the version of the building regs at the time of warrant approval?
New build housing and renovated housing should aim for full compliance with the 2010 Building Regulations. Where this is not possible, for whatever reason, then they should at least comply with HfVN and current energy efficiency standards. While we do not expect HfVN standards to apply to refurbished housing, we will expect these to be of the best standard possible and to be able to demonstrate that they have maximised improvements to access and that they have also maximised energy efficiency.
In the Proposal Form, registered social landlords are asked to compare tender prices (actual or projected) with information available through the Scottish Social Housing Tender Price Index. Can you confirm whether the Scottish Government is expecting registered social landlords to produce GIC/HAG Tenders return forms for any project that it intends to submit a bid for?
No, this information is not required to be submitted along with a copy of your Application Form, although it may be required to be submitted along with a copy of the Approval Proposal Form. If it is not required to be submitted along with a copy of the Approval Proposal Form, it is expected to be a condition of grant.
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RESPONSES PREVIOUSLY PUBLISHED
A registered social landlord (RSL) purchased a site with Housing Association Grant (HAG) last year and has asked if they sell the site to the Council, can they recycle the HAG into another Innovation and Investment Fund project?
We would expect the HAG to be repaid or if it is to be used for another RSL project which also attracts grant, we would expect it to be netted off against the grant payable.
Can you provide information on Clawback arrangements that will be set out in the grant offer, and in particular around the 30 year grant clawback which can happen should the project be sold or not used for it's original purpose rather than an underspend in the capital build?
The IIF moves away from funding individual affordable housing schemes towards getting maximum leverage and improving value for money from Government funds. Submissions should take into account the costs and assessment of risk to the RSL as there will be no development allowances and there will be no uplift if the project is more expensive than planned. There will not be a direct clawback if the project is delivered for a reduced cost, but the RSL will be expected to set aside the funding not required to meet its housing objectives.
For the RSL funding stream it is expected that the grant offer would cover sale/disposal within the 30 year period. Unlike HAG, because this is a fixed level of grant which has been calculated, we would not expect any clawback to operate after a period of 30 years has elapsed.
Can RSLs who are bidding utilise a version of the New Supply Shared Equity with Developers Scheme?
Yes and each different version will be assessed on its own merits.
Can you confirm that Improvement for Sale is an eligible tenure as part of a bid that we plan to submit to the RSL funding stream of the Innovation and Investment Fund?
Yes, as long as the housing provided is affordable to the same income groups as shared equity purchasers.
Do we have the option to change Shared Equity units to MMR/Social Rent if sales are not being achieved as long as there is no additional grant requirement?
Whilst this is not formally included in the bid documentation letter, the Scottish Government would not wish to see properties sitting empty for an extended period. Subject to agreement of the Scottish Government and the relevant local authority this could be considered but only after confirmation that the marketing period had been exhausted.
We will need to estimate the Shared Equity stakes that will be sold, however these will most likely vary from the actual stakes sold at the end of the day. Will there be a reconciliation based on the actual sales at completion stage?
No. Organisations are advised to set out in their bid documentation what minimum percentage equity stake they will require up to the maximum of 80% and this will be used at the appraisal stage.
We will need to estimate our costs during the development period and the void period from completion to hand over to the purchaser. Given Grant will not be paid until completion; this will impact on the interest to be applied on the borrowings. Will actual interest costs be recognised as part of the reconciliation?
No - the developer must take this into account in its initial bid for funding.
When will a Shared Equity project be considered as 'complete', given we will not be paid any Grant until completion of the project, will there be an interim payment on completion of the build and then a reconciliation when the units are sold ?
No, grant will be paid upon completion of build.
Acquisition and Development Allowances will no longer apply, therefore should we include our own estimate for the marketing and our costs for the project management of the scheme etc and will they be eligible costs ?
The developer should take this into account in its overall bid for funding.
The RSL bid documentation says that "... the social rented 3P benchmark rent will be £3,453 (uprated as normal from current HAG guidance)." Am I correct in assuming that this rent is relevant to a project completing in 2011/12 and that future years' rents will be inflated by 3.75 per cent (as has been the case in more recent years)?
Yes, this is relevant to the project completing in financial year 2011/12 and in future years, rents will be inflated by 3.75%.
Innovation Fund
Points of Clarification
- Even though the provision of housing under the current New Supply Shared Equity with Developers Scheme is for a minimum 10 year period, we will consider bids for the provision of shared equity houses for a minimum of 5 years.
- For the provision of new shared equity housing under the Innovation and Investment Fund, we expect the existing threshold levels/sales price ceilings published on the Scottish Government web site for the new Supply Shared Equity Scheme with Developers to apply. We also expect properties to be affordable for first time buyers on low to moderate incomes.
- Although the provision of Mid Market Rent housing under the registered social landlord fund is to be for a minimum of 30 years, all housing (including Mid Market Rent) under the Innovation fund must be for a minimum of 5 years.
Responses to Questions
Does a developer have to work in partnership with a registered social landlord or a local authority?
No. Applications are welcome from any private developers, local authorities, RSLs or other legally constituted bodies including those which operate in Edinburgh and Glasgow.
Collaboration between organisations is encouraged; especially where it provides clear long-term benefits which can be demonstrated or where better value for money (now or in the future) can be evidenced by sharing or combining resources.
Can a bid be submitted for houses that were previously planned for demolition but we now plan to bring these houses back into use?
The Innovation Fund will consider bids which increase the supply of affordable housing using new approaches to funding and delivery and which include any mix in provision of social rented housing, intermediate housing (including Mid Market Rent), shared equity, or refurbished housing (including bringing empty homes back into use), in both rural and urban locations.
Will the Innovation Fund accept bids for the provision of housing for 'mid market rent' and 'market rent'?
The Innovation Fund will consider bids which increase the supply of affordable housing using new approaches to funding and delivery and which include any mix in provision of social rented housing, intermediate housing (also known as Mid Market Rent), shared equity, or refurbished housing (including bringing empty homes back into use), in both rural and urban locations. This does not include the provision of housing for market rent.
Can proposals along the lines of the 'Kent No Use Empty revolving loan fund model' be included in a bid to the Innovation Fund?
All ideas for the provision of affordable housing are welcome - new ideas are what this initiative is about - and each will be assessed on its own merits. The Value for Money will also be benchmarked against the £30k-£40k subsidy provided to local authorities and registered social landlords for new social rented homes and this must be borne in mind when developing a proposal.
As there are no longer Rural Empty Properties Grants (REPGs), can organisations submit bids to the Innovation Fund?
Any application will need to satisfy the Innovation Fund core criteria and it will also be assessed against certain assessment criteria. Bidders must discuss their bid to provide new housing or to bring empty homes back into use with the relevant local authority before it is submitted to determine how it would support the local housing strategy.
The Innovation Fund Guidance says that "Housing must be of an acceptable quality ensuring compliance with the 2010 Building Regulations. If this is not possible projects must certify compliance with Housing for Varying Needs Standards (HfVN) and energy efficiency standards. Projects using existing buildings should maximise energy efficiency and accessibility." We understand this to mean that most new builds would need to meet the 2010 Building standards, whereas renovations will still need to meet a high standard but do not need to be fully compliant. I would be grateful if you could confirm this .
New build housing and renovated housing should aim for full compliance with the 2010 Building Regulations. Where this is not possible, for whatever reason, then they should at least comply with HfVN and current energy efficiency standards. While we do not expect HfVN standards to apply to refurbished housing, we will expect these to be of the best standard possible and to be able to demonstrate that they have maximised improvements to access and that they have also maximised energy efficiency.
When would a council receive the funds from the Innovation Fund if the model was for an empty homes loan fund rather than new build (i.e. before or after the loan had been issued to the homeowner)?
Grant will normally be provided upon completion of the project. However, as this would be a different type of funding proposal it would be considered on its merits as long as Scottish Government's interests are protected in ensuring that we get what we pay for and payment is not required in advance of need.
Does temporary accommodation count as 'affordable' with regards to the fund?
While the main aim of the Innovation Fund is for the provision of permanent affordable housing, we would consider exceptional bids for the provision of temporary accommodation. The houses would need to be available for at least 5 years (although individual tenancies could be shorter).
The Scottish Government will need to be satisfied that any proposal for temporary accommodation is consistent not only with a local authority's own housing strategy but also with Scottish Government and Scottish Housing Regulator views on best practice. The views of Scottish Government Homelessness policy colleagues and of the Scottish Housing Regulator would be sought and fed into the appraisal process.
Can you provide us with information on what the data source is for calculating income deciles?
The data source is the CACI paycheck data which is distributed as a data pack to all local authorities. A copy is located on the Scottish Government website at:
http://www.scotland.gov.uk/Topics/Built-Environment/Housing/supply-demand/chma/marketcontextmaterials/segment