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If you are using this scheme to provide awards of subsidy, you must inform the Subsidy Control Unit – email: scu@gov.wales.

Wales

�ʶ�����Affordable Housing Delivery

Powers of the �ʶ����� Ministers which allow the �ʶ�����to support local authorities and registered social landlords are contained in:

• Section 58A of the Government of Wales Act 2006
• Section 60 of the Government of Wales Act 2006
• Section 126 of the Housing Grants, Construction and Regeneration Act 1996
• Section 18(1) of the Housing Act 1996
• Sections 1 and 2 of the National Health Service (Wales) Act 2006
• Section 79(1), 127 and 128 of the Housing Associations Act 1985

The specific policy objective of this scheme is provide the minimum subsidy intervention necessary through loan and grant funding to increase the provision of affordable housing.

Increasing the provision of affordable housing is a key element within the �ʶ����� Government’s Programme for Government commitment to make our cities, towns and villages even better places in which to live and work.

It will contribute to the target of providing 20,000 low carbon homes for rent in the social sector in this term of government and any subsequent target set by future governments.

It will also provide a positive impact on the Well-being of Future Generations (Wales) Act 2015, specifically contributing towards a healthy and more equal Wales. This is demonstrated by the clear health benefits of having a good quality home which is affordable, sustainable, and located in a safe environment.

In achieving the above the scheme will:

• support the increase of supply of good quality affordable homes
• work towards ending homelessness and enabling the move on from temporary accommodation, and
• support the increase in supply of housing to meet the needs of people with support and care needs.

The purpose of the scheme is to support the provision of affordable housing which includes the following tenures and specific needs:

Tenure

• Social Housing (at Social Rent)
• Social Housing (not at Social Rent)
• Intermediate Rent
• Shared Ownership

Need

• General Needs
• Mortgage Rescue
• Older Persons
• Extra care for older persons
• Supported housing - Domestic Violence, Substance Misuse, Ex Offenders, Homelessness, Learning Disabilities, Mental Health, Physical Disabilities Refugees, Substance Misuse, Young Vulnerable or other client groups agreed by �ʶ����� Government

Type of Activity

• The acquisition of land to build affordable homes
• Building of affordable homes including the demolition and rebuild of existing LA and RSL stock.
• The acquisition of homes from the open market or from private developers.
• The acquisition and development of non-domestic buildings e.g. offices, hotels, care homes, student accommodation into affordable housing
• The use of modular accommodation on land that is be used on a meanwhile basis (i.e. earmarked for future development)
• Bring existing LA & RSL void properties back into use

�ʶ����� Government

Local authorities, health boards and 3^rd sector organisations in Wales and registered social landlords (RSLs) registered with �ʶ����� Government.

All schemes in receipt of �ʶ�����grant or loans for affordable housing must:

• be located in Wales and be developed in line with the strategic housing priorities of the local authority.
• comply with the relevant design, energy and maintenance standards issued by �ʶ����� Government
• comply with the �ʶ�����policies for Social and Intermediate Rent where applicable.
• comply with the relevant �ʶ�����guidance for each scheme activity.
• have all necessary statutory approvals in place, e.g. planning, SAB, Building Regulations, etc.
• have all the necessary insurances, contractor performance bonds, warranty premiums in place.
• comply with all funding arrangements from private lenders or the PWLB.
• comply with the current regulatory standards for RSLs in Wales as set out in the regulatory framework.

Terms and conditions specific to individual activities are listed in the attached schedules:

• Schedule 1: Grant for the building of affordable homes including the purchase of land, the demolition and rebuild of existing LA and RSL stock.
• Schedule 2: Grant for the purchase of homes from the open market or from private developers.
• Schedule 3: Grant for the purchase and development of non-domestic buildings, e.g. offices, hotels, care homes, student accommodation, pubs, etc. into affordable housing.
• Schedule 4: Grant for the use of modular accommodation on land that is be used on a meanwhile basis (i.e. earmarked for future development).
• Schedule 5: Grant to bring void properties back into use.
• Schedule 6: Loans to purchase land for the development of affordable housing.
• Schedule 7: Registered Social Landlord loans.

• Housing sector in Wales
• Construction sector

1 December 2024 to 31 March 2031.

Up to £5,533,500,000 (Five billion, five hundred thirty-three million five hundred pounds) over the lifetime of the scheme.

Support is provided through either direct grant or loan funding.

Subsidies are calculated to ensure that the minimum level of compensation/funding is provided to local authorities and registered social landlords to provide affordable housing. The bases for calculation of subsidy is specific to individual activities and are listed in the attached schedules.

£30 million

Standards

• All newbuild self-contained properties must comply with �ʶ����� Development Quality Requirements (WDQR 2021).
• For new build shared accommodation, combinations of the �ʶ����� Development Quality Requirements (WDQR 2021), �ʶ����� Housing Quality Standards 2023 (WHQS) and the Transitional Accommodation Capital Programme (TACP), are applied in accordance with the specific requirements of the client group.
• �ʶ�����technical scrutiny processes ensure that designs reflect client’s needs on a scheme-by-scheme basis. Wherever possible, homes must be designed to new build general needs standards and in so far as it is practicable to do so, allow for independent living.
• All self- contained homes to be managed and maintained to comply with �ʶ����� Housing Quality Standards (WHQS 2023).

Rent policy

• All grant funded properties for general needs or older persons must comply with �ʶ�����Rent policy.
• All grant funded properties for intermediate rent must comply with �ʶ�����Intermediate Rent policy.

Subsidy calculation

• Grants are calculated using the Standard Viability Model (“SVM”). The SVM is a net present model that demonstrates the funding gap, i.e. the level of grant required to break even. The SVM includes assumptions on rental income and rental uplifts and the costs of managing and maintaining properties.
• Each scheme receives the amount of grant required to bridge the funding gap between the rents over the life of the project and development/maintenance costs, subject to a 70% grant rate cap. The cap be increased to 75%, if sufficient justification is provided by the LA/RSL that the scheme is unviable at the capped rate.

Maximum subsidy allowable

• The maximum subsidy allowable is £30 million.

Clawback requirements

Where properties are sold, the grant must either be recycled into the RCG fund or repaid to �ʶ����� Government.

Standards

• All existing properties for sale on the open market or off the shelf properties purchased from developers must comply with �ʶ����� Housing Quality Standards (WHQS 2023) as a minimum.
• Where homes are unable to meet WHQS 2023, they can only be developed under �ʶ�����minimum standards. They can be used for a minimum of 5 years and a maximum of 10 years and then are required to be sold.
• For shared accommodation, combinations of the �ʶ����� Development Quality Requirements (WDQR 2021), �ʶ����� Housing Quality Standards 2023 (WHQS) and the Transitional Accommodation Capital Programme (TACP), are applied in accordance with the specific requirements of the client group. 

Rent policy

• All grant funded properties for general needs or older persons must comply with �ʶ�����Rent policy.
• All grant funded properties for intermediate rent must comply with �ʶ�����Intermediate Rent policy.

Subsidy calculation

• Grants are calculated using the Standard Viability Model (“SVM”). The SVM is a net present value model that demonstrates the funding gap, i.e. the level of grant required to break even.  The SVM includes assumptions on rental income and rental uplifts and the costs of managing and maintaining properties.
• Each scheme receives the amount of grant required to bridge the funding gap between the rents over the life of the project and development/maintenance costs, subject to a 70% grant rate cap. The cap be increased to 75%, if sufficient justification is provided by the LA/RSL/Health Board/3^rd sector organisation that the scheme is unviable at the capped rate. 

Maximum subsidy allowable

• The maximum subsidy allowable per property is £1.5 million.

Clawback requirements

• Where properties are sold, the grant must either be recycled into the RCG fund or repaid to �ʶ����� Government.

Standards

• All properties must comply with �ʶ����� Development Quality Requirements (WDQR 2021) or WHQS 2023 as a minimum.
• Where buildings are unable to meet WHQS 2023, they can only be developed under �ʶ�����minimum standards. They can be used for a minimum of 5 years and a maximum of 10 years and then are required to be sold.
• For shared accommodation, combinations of the �ʶ����� Development Quality Requirements (WDQR 2021), �ʶ����� Housing Quality Standards 2023 (WHQS) and the Transitional Accommodation Capital Programme (TACP), are applied in accordance with the specific requirements of the client group.

Rent policy

• All grant funded properties for general needs or older persons must comply with �ʶ�����Rent policy.
• All grant funded properties for intermediate rent must comply with �ʶ�����Intermediate Rent policy.

Subsidy calculation

• Grants are calculated using the Standard Viability Model (“SVM”). The SVM is a net present model that demonstrates the funding gap, i.e. the level of grant required to break even. The SVM includes assumptions on rental income and rental uplifts and the costs of managing and maintaining properties.
• Each scheme receives the amount of grant required to bridge the funding gap between the rents over the life of the project and development/maintenance costs, subject to a 70% grant rate cap. The cap be increased to 75%, if sufficient justification is provided by the LA/RSL / Health Boards (HB) / Third Sector organisations (TSO) that the scheme is unviable at the capped rate.

Maximum subsidy allowable

• The maximum subsidy allowable is £30 million.

Clawback requirements

• Where properties are sold, the grant must either be recycled into the RCG fund or repaid to �ʶ����� Government.

Standards

• All properties must �ʶ�����Minimum Standards if intended for meanwhile use only and be capable of being transferred from site to site.
• If homes are to be switched from meanwhile use to permanent use at a future date, it must be demonstrated that the outcome proposal can be re-modelled to meet WDQR 2021.

Rent policy

• All grant funded properties for general needs must comply with �ʶ�����Rent policy.

Subsidy calculation

• Grants are calculated using the Standard Viability Model (“SVM”). The SVM is a net present model that demonstrates the funding gap, i.e. the level of grant required to break even.  The SVM includes assumptions on rental income and rental uplifts and the costs of managing and maintaining properties.
• Each scheme receives the amount of grant required to bridge the funding gap between the rents over the life of the project and development/maintenance costs, subject to a 70% grant rate cap. The cap be increased to 75%, if sufficient justification is provided by the LA/RSL that the scheme is unviable at the capped rate.

Maximum subsidy allowable

• The maximum subsidy allowable is £30 million.

Clawback requirements

• Where properties are sold, the grant must either be recycled into the RCG fund or repaid to �ʶ����� Government.

Standards

• All void properties must comply with �ʶ����� Housing Quality Standards (WHQS 2023) as a minimum.

Rent policy

• All grant funded properties for general needs persons must comply with �ʶ�����rent policy.

Subsidy calculation

• Up to 80% of the costs of the improvement works can be claimed, recognising that in many cases these properties have been empty for a considerable period and require major investment to bring back into use quickly

Maximum subsidy allowable

• The maximum subsidy allowable is £1 million.

Clawback requirements

• Where properties are sold, the grant must either be recycled into the RCG fund or repaid to �ʶ����� Government.

Standards

• Any affordable housing that is delivered on land supported by the loan scheme and is seeking to be funded by a relevant �ʶ�����grant programme must meet the standards of that grant programme.

Rent policy

• All future grant funded properties developed for general needs or older persons must comply with �ʶ�����rent policy.
• All future grant funded properties developed for intermediate rent must comply with �ʶ�����Intermediate rent policy.

Subsidy calculation

• With regards to borrowing funds for affordable housing there is a market failure. There is no active market in Government lending for social housing i.e. RSL's cannot go to other sources of lending with comparable terms, i.e. lower interest rates for social outcomes. As a result, a below market interest rate is applied in respect of the loan or proportion of the loan, which is to develop affordable housing under the Service of Public Economic Interest exemption.
• As this is loan funding, the interest foregone is the subsidy. In order to determine an appropriate interest rate, the HMT guidance included in the Public Expenditure Statement (PES) is considered. This is the rate to be used when there is no active or similar market for funding these types of schemes. As evidenced above, this market failure results from it being too costly for a social landlord to bring forward schemes which meet the �ʶ����� Government’s quality standards for social housing.
• When a loan is subject to a market level interest charge, such as for the development of market housing, it will be calculated either by applying the rate provided in the or by way of benchmarking against commercial providers that offer short term debt to the RSL sector in line with paragraph 15.73 of the . This same rate is used to calculate the interest foregone or subsidy for loans for affordable housing.
• Loans are provided on the basis of a 5 to 10 year term in order that the subsidy can be calculated at the point of award.
• A RICS or District Valuer valuation is required in support of the land acquisition / loan value. The SVM is not used to determine the loan value a Land for Housing application may receive. However, as the SVM calculates the likely eligible grant allowable for a scheme when/if submitted for grant funding, it may be used by the RSL to ensure viability prior to proceeding with a loan for land acquisition under the Land for Housing scheme.

Maximum subsidy allowable

• The maximum subsidy allowable is £4.2 million.

Clawback requirements

• Loans (or a proportion of the loan) are repayable on:
  • receipt of any �ʶ�����grant for the development of market housing and / or affordable housing on the land
  • disposal of any part of the land.
• Should the above not occur the entire loan must be repaid on the earliest of:
  • the issue of a certificate of practical completion in respect of the last unit in the housing development on the land; the end of the loan term.

Standards

• Any affordable housing that is supported and delivered using the loan scheme and is seeking to be funded by a relevant �ʶ�����grant programme must meet the standards of that grant programme.

Rent policy

• All future grant funded properties developed for general needs or older persons must comply with �ʶ�����Rent policy.
• All future grant funded properties developed for intermediate rent must comply with �ʶ�����Intermediate Rent policy.

Subsidy calculation

• With regards to borrowing funds for affordable housing there is a market failure. There is no active market in Government lending for social housing i.e. RSL's cannot go to other sources of lending with comparable terms i.e. lower interest rates for social outcomes. As a result, a below market interest rate is applied in respect of the loan or proportion of the loan, which is to develop affordable housing under the Service of Public Economic Interest exemption.
• As this is loan funding, the interest foregone is the subsidy. In order to determine an appropriate interest rate, the HMT guidance included in the Public Expenditure Statement (PES) is considered. This is the rate to be used when there is no active or similar market for funding these types of schemes. As evidenced above, this market failure results from it being too costly for a social landlord to bring forward schemes which meet the �ʶ����� Government’s quality standards for Social Housing.
• When a loan is subject to a market level interest charge, such as for the development of market housing, it will be calculated either by applying the rate provided in the  or by way of benchmarking against commercial providers that offer debt to the RSL sector in line with paragraph 15.73 of the . This same rate is used to calculate the interest foregone or subsidy for loans for affordable housing.
• Loans are provided on the basis of up to 30 year term in order that the subsidy can be calculated at the point of award.
• The SVM is not applied to RSL Development loans. We specify that any units delivered through our loans are funded exclusively with loan subsidies, allowing for up to 100% of the costs to be covered. When assessing a loan application, we ensure value for money, by considering both the principal loan amount and the subsidy interest rate differential.

Maximum subsidy allowable

• The maximum subsidy allowable is £10 million.

Clawback requirements

• The loans will be repaid as a bullet repayment on the maturity date and interest will be charged annually and recycled back into Housing programmes.