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Temporary Social Housing Grant

What Is Temporary Social Housing Grant?

Temporary Social Housing Grant ( TSHG)  is available from the Homes & Communities Agency  ( HCA) and provides funding  for Registered Social Landlords ( RSLs  - eg housing associations) to bring back into use properties, in public or private ownership, that would otherwise remain empty and unavailable for social housing. Examples are properties awaiting redevelopment or sale and accommodation over shops.

What makes TSHG so important is that it’s possible for RSLs to do this in partnership with local community based housing organisations (e.g. self help housing organisations). There are a number of conditions relating to such arrangements  ( see  Section 3 below), but in view of the access which TSHG offers to substantial funding, it would usually be worth accepting these.

Jargon Buster

TSHG: Temporary Social Housing Grant

RSLs : Registered Social Landlords. This refers to housing associations (and  housing co-operatives) that are registered under the Housing Act 1996, which qualifies them, in principle, to receive funding from the Housing & Communities Agency

HCA: Homes & Communities Agency is the organisation that funds RSLs. It was set up on 1.12.08 and replaced the Housing Corporation.

1.  Eligible Properties

The HCA’s Capital Funding Guide sets out the terms and conditions on which properties are eligible for TSHG funding.  Properties are eligible for TSHG funding where:

• Life of Property: they are available for use by a body  which is a Registered Social Landlord (RSL) ( eg a housing association)  for a period of time covered by a lease or licence for longer than 2 years and less than 30 years
• Lease/Licence : the RSL acquires a documented, legally binding interest in the property. Ideally this should be a written lease/licence but where this is not possible a legally binding ‘Agreement to Lease’ is acceptable;
• Ownership: they are not owned by a RSL. TSHG is therefore only payable in respect of property in the ownership of:
  • public bodies e.g. local authorities, Health Authorities, Government Departments etc.;
  • unregistered social landlords and co-operatives, which are not subsidiaries of RSLs;
  • private individual(s) or companies.

2. Eligible Registered Social Landlords (eg Housing Associations)

When looking for an RSL with whom you can work and who can claim TSHG then it’s important to understand that  to be eligible to claim TSHG directly from the HCA an RSL/ housing association must be approved to bid for HCA funding. Not all RSLs are approved.

This means that they must have obtained “Investment Partner Status” with the HCA through a pre-qualification process There are two ways of achieving this. They can either be an:

Investment Partner: This means that they:

• Have Investment Partner status  in their own right or
• Are  a member of an Investment Partnership, comprising several RSLs   or

Specialist Provider: Specialist Provision criteria include providing homes in rural communities, black and minority ethnic housing provision, supported housing and environmental innovation.

3. Self-Help Housing Organisations Accessing TSHG Via An Eligible RSL

An  RSL can enter into a Management Agreement with an unregistered  housing organisation (eg a self help housing organisation)  ”with relevant management expertise” . The RSL must be satisfied that:

• the agency is a viable organisation;
• the aims of the managing agency are compatible with its own;
• the capacity, experience and resources of the managing agency are commensurate with the responsibilities it will hold.

This will involve drawing up a Management Agreement which sets out the terms under which the housing organisation  will undertake to manage the property/scheme on behalf of the RSL. The terms must allow the RSL to:

• retain overall responsibility for the financial control of the scheme;
• monitor the condition and occupancy of the properties;
• let the units on a tenancy agreement between the RSL and the occupant  (ie the occupants will legally be tenants of the RSL, although the management agent will deal with everything on a day-to-day basis)  .

RSLs are not allowed to t grant a lease/licence to an unregistered social landlord or agency on a grant funded property, since if they do this, then it would be classed as a disposal and  trigger a grant recovery procedure.

However, in the case of RSLs  (housing associations & co-operatives)  that are actually registered with the  HCA but which are not eligible to claim TSHG themselves (see section 3 above) a sub-lease can be issued on a grant funded TSH property and there will be no need for a management agreement.

4. The Agreement With The Owner

The letting arrangement between the owner of the property and the RSL can be either a lease or a licence and must be for an agreed period.

The RSL must ensure that there’s a clause in the agreement which states that if the agreement is terminated prematurely by the property owner, then they  will reimburse, to the RSL, the  proportion of the grant  spent on the property relating to the unexpired period.

The  owner can charge a weekly rent/fee to the RSL for the use of the property, which will be met from the rent received from letting the property and possibly also from a residual element of the TSH Grant (see Section 6 below). However, the HCA can be expected to take a view as to what level of payment to the owner represents value for money.

Where properties are in private ownership, then it is to be expected that the owner will want to maximise their rental income, but in the case of publicly owned properties it’s not unreasonable to expect a reduced and possibly even a peppercorn (nominal) rent. For example Leeds City Council have recently granted peppercorn rents of £1.00 per week in respect of empty properties leased for 29 years.

5. Scheme Costs & Allowances

Scheme costs are agreed on a project by project basis with the HCA regional office. Each scheme will be accessed on its own merits and the amount of grant available in respect of each property/unit will depend on:

-          the number of people accommodated

-          the number of years for which the property/unit is available

-          the amount of rent payable to the owner  &

-          the regional office’s view as to what represents value for money, which will be guided by the Housing Corporation’s historic Total Cost Indicators  (TICs)

In March 2009 average grant levels were £54k in London and £21k outside of London, but these will change as new schemes are approved.

Eligible costs within the grant calculation include:

-          The cost of  works to repair the property plus vat ( if applicable)

-          Up to 21% of the cost of works to cover on-costs ( eg clerk of works  or surveyor’s fees)

-          A residual amount to subside the rent payable to the owner: where the rent paid to the owner cannot be met from the rent paid be the tenant (after the cost of management and maintenance has been taken into account..

Annex 1 is a worked example showing how grant payable in respect of a notional scheme might be calculated.

It’s admissible to top-up the amount of money available via TSHG from other sources and there are examples of where the local authority has raised additional funding to makes schemes viable (eg in Rochdale and Harrogate).

6. Management & Maintenance costs

The management and maintenance costs in respect of each property/scheme are met via the weekly rental income from the tenant.

These can include: management, routine maintenance, gas servicing, cyclical repairs ( where the lease is for a sufficient period of years) and voids/bad debts @ £10%

Where a self-help organisation is working with an RSL on the basis of a management agreement, then it will be important to ensure that they are permitted to retain sufficient rent to meet whatever element of management and maintenance responsibilities they have undertaken.

7. Tenancy Agreements/Nominations/Move On

- Tenancy Agreements: The tenancy arrangement between the RSL and the occupant of the property has to be either :

• an assured short hold tenancy or
• an assured periodic tenancy,

Under the 1996 Housing Act, temporary lettings to the homeless are required to be on an assured short hold basis.

• Nominations:  Local authorities leasing accommodation to an RSL, which is to be developed with TSHG, are entitled to a minimum of 50% nomination rights on these properties.
• Move On: The HCA expects RSLs’ strategies to incorporate opportunities for tenants to move into permanent accommodation whenever possible and where appropriate. However, this is clearly negotiable and depends on local circumstances.

8. Rents Charged To Occupants

The RSL claiming TSHG is expected to ensure that::

• The rent + any HBSC (Housing Benefit Service Charge) charged is within the housing benefit threshold, in their local authority; and
• The rent chargeable is cheaper than the cost of bed and breakfast accommodation which might be used, in the case  for homeless families/people being housed.

9. Standards

Standards for TSHG properties are set out in the HCA’s  Design & Quality Standards Guide:   http://www.housingcorp.gov.uk/upload/pdf/Design_quality_standards.pdf

TSGH standards are is dealt with in Annex 1 of the Guide and are not  unduly onerous .

10. Bidding

Bids can be submitted at any time as part of continuous market engagement and are not restricted to certain windows.

There is no specific allocation of funding to TSHG at regional level and the availability of funding will depend on a variety of regional factors. That said, take up in the past year has been largely very low.

The RSL bidding for TSHG needs to bear in mind that  HCA regional staff are likely to be unfamiliar with applications, since there are only a very limited number of RSLs  claiming TSHG at present.  This may result in schemes being processed more slowly.

Annex 2 sets out in some detail how the HCA processes schemes

References:

- Housing Corporation Affordable Housing: Capital Funding Guide

http://cfg.homesandcommunities.co.uk/temporary-social-housing-tsh.htm

- HCA Design & Quality Standards Guide

http://www.housingcorp.gov.uk/upload/pdf/Design_quality_standards.pdf

Jon.Fitzmaurice@ self-help-housing.org

January 2010

Annexes .

Annex 1.

A Worked Example Demonstrating How The Proposed Grant Rate  Is Calculated On A Property In London ( courtesy of Hyde Housing Group)

1. The Property: A 3 bedroom 5 person house in the London borough of Bexley that has been empty for 18 months.  It is an eyesore and has been subject to deterioration and is a target for local anti-social behaviour. The private owner is prepared to lend it to the association for 7 years

2. Cost Of Works: A local builder with whom the association work regularly has estimated the cost of works, necessary to bring the house up to the required standard, to be  £35,000 plus VAT.

3. Calculation of Grant: Assuming a grant rate of £1,800 per person per year   - the total grant available would amount to £63,000  ( 5 persons x  7 years x £1,800 = £63,000).

NB: The actual grant rate has to be agreed with the regional office of the Homes & Communities Agency, who will judge what is acceptable in terms of what they consider to be “value for money”. In this case, £1,800 is an average level of grant for schemes submitted by this association in this part of London.

In other parts of the country outside of London an acceptable grant would have to be lower

4. Use Of Grant: The resulting grant of £63,000 in this case would be used to support:

- Cost of works:  £40,250 (inc  VAT @ 15%)

- On-costs:  £8,452. It’s permissible to spend up to 20%  of the total works costs to cover on-costs ( contract supervision/surveyor’s fees etc)

- Rent to the owner: In this example the tenant is charged £200 per week ( an amount that falls within the local reference rent) and the management & maintenance allowance (inc. voids @ £10%)  for the property amount to  c£3,990, per year.

Taking into account the residual amount from the grant: (ie  total grant  less <cost of works + on-costs>) then over a seven year period it would make it possible to pay the owner c£164 per week over the seven years.

NB: This example relates to a privately owned property, where a significant rent is being charged, however it’s preferable to secure a property for a nominal peppercorn rent (which could be possible with publicly owned property) , since this will reduce the project cost and should make the scheme more attractive to the HCA in terms of  value for money

Annex 2.

Summary Of The Procurement, Approval, Supervision & Administration Process Relating To A TSHG Project.

Preliminaries

1. Identify Property.

2. RSL development officer or Building Surveyor inspects initially to ascertain whether property is suitable. Property could be unsuitable if it requires too much work and funding is inadequate.

3. Cost of works estimated

4. Financial Appraisal carried out by RSL on the basis of either:

- The RSL organising the works alone  or

- The a voluntary organisation ( eg self help housing project) being involved in

carrying out the works.

5. Offer letter issued to landlord giving approximate works costs, rent and summary

of works

6. Landlord returns acceptance form if proceeding

HCA Scheme Approval Panel ( SAP) Process

7. Consult with Local Authority regarding requirements and obtain their support for proposal. If they are involved

8  RSL to prepare SAP Risk Assessment form, SAP report, Scheme Appraisal Panel control form and send to Finance department with appraisals.

9. RSL to present to costed proposal  to HCA Scheme Approval Panel  in order to gain  approval

10. Land Registry search requested ( to verify ownership - esp if private sector owner) .

11.Building Surveyor or RSL’s  agent appointed.  Letters needed together with re-inspection of property to draw up full specification of works

12. Tenders returned - Check that budget is sufficient and re-calculate rent and re-appraise if necessary

13. Tender/Value for Money form completed

14. Bid for grant - await HCA  ”Bid Clinic’s”  decision - approx 2 weeks

15. Prepare leases and agreement and send to landlord for signing.  .

On-Site

16. Start on site agreed, lease and agreement signed by landlord and initial  claim made - 60% of overall grant

17. Building surveyor oversees works, including liaison with external parties, and landlord.  Ensuring that necessary approvals obtained

18. Contractor’s invoices received supported by payment certificate

19. Pre-inspection needed by RSL and landlord at snagging stage

20 Practical Completion Certificate issued

22 Handover arranged involving Building Surveyor  etc.

23 Forms prepared - handover form, landlord rent form, copies of certs, leases etc

24 Handover - documents dated etc, photographic schedule of condition prepared.

25 Practical Completion claim made.

26. Audit undertaken to ensure that everything has been completed/checked off.