14. Strategic Partnerships
This chapter sets out our requirements for Strategic Partnerships with Homes England.
1. Overview
1.1 Purpose
1.1.1 Strategic Partnerships allow for the delivery of affordable housing new supply under the principles of the Shared Ownership and Affordable Homes Programme (SOAHP) 2016 to 2021 with different contractual terms.
1.1.2 Each Grant Recipient will have a separate Grant Funding Agreement for the delivery of additional grant funded homes, outside of an existing SOAHP 2016 to 2021 contract. This chapter sets out the requirements that must be followed in addition to the relevant guidance elsewhere in the Capital Funding Guide (CFG). These requirements include the administration, management and monitoring of the Strategic Partnership Grant Agreement.
The Affordable Homes Programme (AHP) 2021 to 2026 makes provision for new Strategic Partnerships. Homes England is working through the operational parameters of the fund and further details on the Strategic Partnership framework applicable to the fund will be provided follow once these have been agreed.
1.2 Context
1.2.1 Development undertaken through a Strategic Partnership Grant Agreement operates under the same parameters as the SOAHP 2016 to 2021 as set out in the Capital Funding Guide, except where otherwise stated. This chapter should therefore be read in conjunction with other chapters in the Capital Funding Guide.
2. Strategic Partnership Grant Agreement
2.1 General
2.1.1 Each Grant Recipient is required to enter into a new supply contract with Homes England. Robust contract management is a key principle of the delivery model. This section summarises the contract management process Grant Recipients must follow with regard to their contract.
2.1.2 The Strategic Partnership Grant Agreement is a standard form contract for affordable housing supply to be delivered in addition to any existing contractual commitments. The Strategic Partnership Grant Agreement is in addition to, and will not replace, any existing contracts with Homes England.
2.2 Process
2.2.1 The Strategic Partnership Grant Agreement details both Homes England and the Grant Recipient’s obligations and rights. Each contract will include:-
- Conditions of grant (including eligible Development Expenditure)
- Total Allocated Grant Funding
- The Housing Outputs to be delivered including the number to be made available at a Social Rent
- Grant claim and payment procedures including the requirements that must be met before grant drawdown
- Obligations to meet strategic priorities
- Reporting obligations
- Default and termination terms
- Dispute resolution
2.2.2 The contract is valid for the duration of the grant allocation but will allow for variations to account for flexibilities in delivery, subject to the agreement of such a change by Homes England.
2.3 Contract Management
2.3.1 The housing delivery of the overall Strategic Partnership is monitored through the Strategic Framework Board (SFB) underpinned by a separate Strategic Framework Agreement (SFA) with Homes England. The SFA sets out the terms of reference and basis for the communication, provision of information and collaboration between the Grant Recipient and Homes England to deliver additional affordable housing.
2.3.2 The Programme Management Board (PMB) is responsible for the monitoring of the delivery of the grant funded affordable housing units in accordance with the Strategic Partnership Grant Agreement. Performance of grant funded affordable housing delivery will be reported to the SFB, and issues raised on an exceptional basis only. The PMB is the mechanism for reviewing progress in delivering the Housing Outputs in the Strategic Partnerships Grant Agreement and agreeing the quarterly grant claims.
2.3.3 The PMB will monitor the commitments made by the Strategic Partner in relation to Strategic Priorities which will be reported to each SFB.
2.3.4 The PMB will consider the financial reconciliation exercise in April each year to ensure that the grant paid against development expenditure remains in line with the current Development Delivery and Expenditure Plan (DDEP). Should the number of affordable units be reduced from previous forecasts, or the delivery profile have substantially changed, the Strategic Partner will be expected to in the first instance make appropriate adjustments to their delivery forecasts to remedy any gaps in delivery. Ultimately, accounting adjustments may need to be considered by PMB for Homes England’s consideration and approval
2.3.5 Where a Grant Recipient wishes to collaborate with another organisation to deliver the Housing Outputs in the Strategic Partnership Grant Agreement, it must request approval from Homes England prior to enabling any other organisation to deliver grant funded homes as a Delivery Partner.
2.3.6 Approval of a new Delivery Partner can be sought at any time during the Term of the Strategic Partnership Grant Agreement but must be obtained in advance of submitting a claim including any Active Sites or Development Expenditure incurred by that Delivery Partner. The Grant Recipient is responsible for undertaking due diligence to ensure any proposed Delivery Partners can meet the Delivery Partner obligations set out in the Strategic Partnerships Grant Agreement. In addition, the Grant Recipient will be required to enter into a separate legal agreement with its Delivery Partners, which is outside the contract with Homes England. It may also be possible for delivery partners to access grant through more than one Strategic Partnership where appropriate.
2.3.7 It is anticipated that the introduction of new Delivery Partners will lead to increased Housing Outputs for the Strategic Partnership, and any request for additional grant funding would be subject to resource. The Grant Recipient is responsible for all activity undertaken by a Delivery Partner through the Strategic Partnerships Grant Agreement, to the point that a Delivery Partner Deed is completed for each scheme at Practical Completion).
2.3.8 It is expected that the Grant Recipient will deliver all of its additional grant funded homes through the Strategic Partnership Grant Agreement, with the grant allocation available, rather than bidding through Continuous Market Engagement (CME). The exception is for schemes seeking funding under specialist programmes for which separate bidding arrangements are in place.
2.3.9 The Grant Recipient may continue to lead an existing consortium for administration purposes to support smaller providers but is not expected to deliver any schemes or draw down funding through that consortium.
2.3.10 The grant rate paid per home to Delivery Partners must be at the prescribed rate (i.e. based on tenure and location) within the Strategic Partnerships Grant Agreement.
2.3.11 Where a Grant Recipient or Delivery Partner will deliver their Housing Outputs through a Group Company (e.g. a subsidiary, sibling or holding company of the Grant Recipient or Delivery Partner, such as a DevCo), the following points are to be noted:
- Any Development Expenditure incurred by organisations in Group structures, which are neither a Grant Recipient nor an approved Delivery Partner is ineligible and this Development Expenditure should not feature in any Grant claims, forecasts or monitoring returns
- Group Companies can have an active role in the delivery of the Housing Outputs and the Strategic Partnership Grant Agreement does allow a Group Company of either the Grant Recipient or the Delivery Partners to hold the secure legal interest in an Active Site which will lead to the delivery of Housing Outputs
- A Grant Recipient or Delivery Partner making a relevant payment to a Group Company (e.g. to their DevCo) to procure land or development services can be considered an eligible cost
- Provided a Group Company is a not for profit Registered Provider, the Grant Recipient may propose the Group Company to become a Delivery Partner (subject to Homes England approval in line with the agreed process as set out at 2.3.6 above)
- Any Group Company which will own and manage completed units must be approved as a Delivery Partner and complete the Delivery Partner Deed to confirm the grant in the units and secure the grant once the units have been completed
3. Site Administration and data collection
3.1 Submitting Active Sites and Firm Schemes in IMS
Please note that the information below refers to existing Strategic Partnerships.
3.1.1 Details of Active Sites will be required to be input in IMS to enable Development Expenditure to be recorded and grant claims made using costs incurred. Active Site details will capture information about:
- Location
- Planning status
- Acquisition status
- Build contract progress
- Forecast start and completion dates
- Forecast number of units and tenure mix
3.1.2 The status of starts will be on a forecast only basis to enable flexibility to change tenure up to the point of Practical Completion. Once Practical Completion has occurred a Firm Scheme should be submitted for approval by Homes England through its Investment Management System (IMS). Once Homes England has approved Practical Completion for a Firm Scheme, the scheme will become fixed, and start and completion dates will be firm.
3.1.3 Grant Recipients must submit a Firm Scheme in IMS within a month of Practical Completion. This is the only stage in entering Active Site and scheme details in IMS requiring Homes England’s approval.
3.1.4 At Practical Completion the unit details must be input, including property type, tenure, floor area and any associated supported housing information. It is expected that all units will achieve the Required Standards (see 6 below) unless prior approval has been obtained in writing from Homes England.
3.1.5 At, or before, the Practical Completion submission stage, the Grant Recipient must ensure the spatial information has been completed on the land screen in IMS.
3.1.6 When Practical Completion is approved by Homes England in IMS, the tenure is fixed and grant requirement for the scheme confirmed on the basis of the prescribed rate (i.e. based on tenure and location) in the Strategic Partnerships Grant Agreement. This is needed for the purposes of grant recovery.
4. Funding Principles
4.1 Tenure requirements
4.1.1 Grant funding is available to deliver Net New affordable housing for:
- Affordable Rent
- Social Rent
- Shared Ownership
- Rent to Buy
4.1.2 Strategic Partners must note that Social Rent can only be delivered in the local authority areas listed in the annex to the Strategic Partnerships Grant Agreement.
4.1.3 Nil grant units, such as Section 106 units, should not be administered and cannot secure grant funding through the Strategic Partnerships Grant Agreement.
5. Grant claims
5.1 General
5.1.1 Grant claims made under a Strategic Partnership Grant Agreement are drawn down against relevant Development Expenditure rather than against the achievement of milestones.
5.1.2 Grant claims will be administered through the Homes England Investment Management System (IMS).
5.1.3 Grant claims will be submitted by the Strategic Partner on a quarterly basis for Development Expenditure incurred during the previous quarter against named Active Sites. Grant claims against Development Expenditure incurred earlier than the date at which the Strategic Partnership Grant Agreement has completed is subject to approval by Homes England.
5.1.4 Grant should only be drawn down against Development Expenditure where the Grant Recipient or a Delivery Partner has incurred costs and made a payment. Costs that are committed but not yet defrayed are not eligible for inclusion in the claim (i.e. costs must be incurred).
5.1.5 Grant Recipients should note that the quarter one grant claim submitted in a new financial year (i.e. for expenditure incurred in the period January – March) will be accounted for against Development Expenditure incurred in the last quarter of the previous financial year. This will be treated as an accrual for the purposes of Homes England budget and accounting treatment. This is because Homes England is an Arm’s Length Body to a Government Department and, as such, our financial year end is 31st March.
Example
Where qualifying development expenditure of £2 million was incurred in quarter 4 (January to March) it is expenditure that has been defrayed in that financial year, and so as the claim for that period will not be submitted until quarter 1 (April – June) this expenditure is counted as an accrual for accounting purposes. It will be certified by the CFO and external auditor through the annual Statement of Grant Usage (see section 8 below).
5.1.6 Grant is made available for the delivery of net new additional affordable homes. It cannot be applied for replacement properties (for example under Voluntary Right to Buy) or for the redevelopment of existing affordable homes unless by express approval from Homes England. Any such requests will be considered on an exceptional basis.
5.1.7 Grant can only be claimed against Development Expenditure for an Active Site where the Grant Recipient or Delivery Partner has a secure legal interest (see section 3.1.1 of the Finance chapter).
5.1.8 Development Expenditure must relate to the delivery of grant funded affordable housing only. Where other tenures are provided on the same site costs should be apportioned appropriately and signed off by an independent consultant or the Development Director or Finance Director. Development Expenditure should only be claimed against affordable homes that are eligible for grant funding. It is not expected to include expenditure against any delivery through a Section 106 Agreement or similar planning obligation.
5.1.9 Grant can be claimed against Development Expenditure in line with the agreed forecast profile to the point that the total allocation for the Strategic Partnership is reached. Cumulative grant claims cannot exceed Development Expenditure at any time.
5.1.10 Individual claims must not exceed £20 million. Where claims are higher than £20 million separate claims should be submitted to the total value of the claim. The necessary arrangements in these circumstances must be agreed in advance with Homes England.
5.1.11 The Grant Recipient has flexibility to apportion the total approved Recycled Capital Grant Fund (RCGF) figure within the contract between completed units. This is provided that the Registered Provider can demonstrate that subsidy is required and that total public subsidy does not exceed 90% of scheme costs. The PMB will monitor costs and funding sources throughout the term of the grant agreement.
5.2 Grant attribution
5.2.1 Grant is attributed to units at practical completion at the prescribed rate within the Strategic Partnership Grant Agreement, according to tenure and geography.
5.2.2 Where units are completed by a Delivery Partner, the same grant rate should be attributed to those units as prescribed within the Grant Funding Agreement. The grant rate will be noted in the Delivery Partner Deed.
5.2.3 Where a Grant Recipient wishes to deliver homes for a specific tenure or in an area where they do not have a grant rate, this should be discussed at PMB to determine appropriate terms such as grant levels and scale of delivery in light of the impact of the overall delivery of the terms of the grant agreement.
5.3 Grant claims for For Profit Strategic Partners and Delivery Partners (AHP 2021 to 2026)
5.3.1 All grant payments to For-profit Strategic Partnerships and schemes undertaken by For Profit Delivery Partners (in not for profit partnerships) will be paid quarterly in arrears against milestones achieved and not against incurred development expenditure. Development expenditure should not be included in the Strategic Partner’s quarterly development expenditure submissions for schemes being delivered by For Profit Delivery partners. Instead the milestone payment should be included based on the assumed tenure profile for the agreed grant rate
5.4 Local Authority Partnerships (AHP 2021 to 2026)
5.4.1 Grant payments will be paid once a quarter by Homes England against the grant recipient’s eligible development expenditure incurred up to the end of the previous quarter
6. Required Standards
6.1 General
6.1.1 In addition to any other requirements of the Capital Funding Guide, all Housing Outputs delivered through the Strategic Partnership Grant Agreement are required to meet the following Required Standards:
Building for Life
Whilst not a mandatory requirement, Housing Outputs should aim to achieve a minimum Building for Life score of 12 and record this in IMS
Nationally Described Space Standards (NDSS)
All new homes should aim to meet NDSS. Where the floor area of any units is likely to fall below 85% NDSS, the Grant Recipient should raise the issue at PMB and seek written approval from Homes England for consideration on a case by case basis. Approval should be sought as soon as the floor area is known, which is usually as progress towards securing detailed planning has been made and well ahead of practical completion.
7. Reporting and Audit Requirements
7.1 General
7.1.1 Reporting and Audit requirements must follow the same processes as the SOAHP 2016 to 2021 as set out in the Programme Management chapter of this guide.
7.1.2 Housing outputs delivered through a Strategic Partnership Grant Agreement will be subject to Compliance Audit in the usual way and will use the existing SOAHP 2016 to 2021 arrangements. However, as the details of the units will not be known until Practical Completion, Compliance Audit will only be applicable to completed units.
7.2 Statement of Grant Usage and annual financial audit
7.2.1 A Statement of Grant Usage (SoGU) must be submitted by each Grant Recipient to Homes England no later than 30 April each year.
7.2.2 The annual SoGU will be produced in IMS to be submitted by the Chief Finance Officer (CFO) who will certify that the statement is supported by a sample audit carried out by an external auditor.
7.2.3 The SoGU will be used to inform and support the annual reconciliation (i.e. look back on activity and look forward on forecasts) by confirming details of the grant received and attributed, This will include details of Development Expenditure incurred in quarter 4 of the preceding financial year and the associated grant claim to be made in quarter 1 (i.e. the accrual) .
7.2.4 A financial audit should be undertaken by an external auditor on a sample of schemes within the Grant Recipient’s programme prior to the CFO signing the SoGU. The SoGU will provide assurance that the correct procedures and financial records of Development Expenditure are in place in respect of making grant claims. The SoGU will confirm that the attribution of grant for completed units so that the Development Expenditure and grant draw down submitted in IMS can be taken as an accurate record of the relevant development activity (quarterly and annually) and that grant has been claimed in line with requirements within the Grant Funding Agreement.
8. Grant Recovery
8.1 General
8.1.1 The main provisions of The Recovery of Capital Grants and Recycled Capital Grant Fund General Determination 2017 and the Grant Recovery chapter apply to Strategic Partnerships. Please see this Grant Recovery chapter of this guide for further details.
8.1.2 Partners should also refer to their Strategic Partnership Grant Agreement which sets out additional criteria.
8.2 End of Programme Reconciliation
8.2.1 The annual reconciliation at the end of the Grant Recipient’s programme will take account of total grant paid against Housing Outputs delivered. Where there have been changes to the delivery profile that result in grant payments being higher than the attributed grant amount Homes England will be entitled to recover the unattributed sum.