MD2707 Homes for Londoners: Affordable Homes Programme 2021-26

1.1. Tackling the housing crisis is one of the Mayor’s top priorities, as the historic under-delivery of new affordable housing in the city has meant that many Londoners cannot afford a decent home to rent or buy. The Mayor has devolved investment powers from the Government for administering capital funding and supporting the delivery of new affordable homes in London.

1.2. The Mayor has successfully secured £4bn of funding from the Government over the period 2021-2029, with new homes to be started between 2021 and 2026. The Mayor is asked to approve receipt of this funding from Government. The conditions of this funding imposed by Government are detailed in section 1 of this document and summarised in Appendix 1 to this decision, and will form the basis of a Memorandum of Understanding. Of the total settlement, the main £3bn settlement will be available from 2021, with the requirement that completions are achieved by March 2028. A further £1bn will be deployed to support longer-term delivery, and will be available from 2021, with the requirement that completions are achieved by March 2029.

1.3. In return, the Government has asked the Mayor to commit to supporting delivery of at least 35,000 affordable housing starts in Greater London between April 2021 and March 2026.

1.4. Funding Guidance will be published which sets out the parameters of the programme and how housing providers can bid for funding through it.

Proposed composition of the London Affordable Homes Programme 2021-26

1.5. This decision form summarises the high-level composition of the London Affordable Homes Programme 2021-26, which is outlined in detail in the Funding Guidance, attached as Appendix 2.

1.6. The primary affordable housing tenures to be funded through the Programme are:

• Social rent;

• London Living Rent; and

• Shared ownership.

1.7. Government requires 47 per cent of the homes delivered through the programme to be for affordable home ownership tenures, i.e. London Living Rent and shared ownership. The GLA will aim to deliver the remainder of the homes as social rent.

Social rent homes

1.8. Social rent homes are intended to help low-income households, typically nominated by London boroughs, in housing need and who may struggle to secure or sustain housing on the open market. Rent levels for new social rent homes will be set according to a formula based on property values and local earnings. This is set out in the Regulator for Social Housing’s Rent Standard.

1.9. With some exceptions (including council homes and supported housing), the Government requires that all social rent homes delivered through the programme have the Right to Shared Ownership attached. To be eligible for the Right to Shared Ownership tenants must have been a social tenant for at least three years and resident in their current property for at least 12 months; not be subject to bankruptcy proceedings; demonstrate that they can afford and sustain homeownership; and have an income less than £90,000.

London Living Rent

1.10. London Living Rent (LLR) is an intermediate affordable housing tenure with a London-specific rent introduced by the Mayor that will help, through sub-market rents on time-limited tenancies, households save for a deposit to buy their own home. Rents are based on one-third of the estimated median gross household income for the local borough, varied by up to 20 per cent in line with ward-level house prices, and capped to reflect the maximum affordability for an eligible household. Providers of LLR homes funded through the Affordable Housing Programme (AHP) 2021-26 will be required to offer tenants the opportunity to buy the LLR home on a shared ownership basis during their tenancy and within ten years. Finally, the benchmark rents also vary based on the number of bedrooms within the home. The Mayor expects providers to offer LLR as part of their intermediate housing offer.

Shared ownership

1.11. Shared ownership is a tenure that allows a home buyer to purchase a share in a new home, and pay a rent on the remaining unsold share of the home, which for homes delivered with GLA grant must be set in accordance with the requirements of the GLA Capital Funding Guide . Shared ownership homes funded through the programme will comply with the Government’s new model of Shared Ownership. This must offer an initial starting share of 10 per cent and allow owners to staircase in increments of 1 per cent. In addition, the provider will remain responsible for repairs and maintenance for the first ten years after completion. The Government will consult further on the technical details of the new model of Shared Ownership. It is understood that the Government will have concluded the technical consultation and confirmed the terms of the new model of Shared Ownership by March 2021.

Supported and specialist housing

1.12. The Mayor will continue to fund a variety of supported and specialist housing, to enable care, support or supervision to be provided alongside accommodation to help people live independently. Schemes can include specialist housing for a range of Londoners including older people, accommodation for people moving on from hostels or domestic violence refuges, Gypsy and Traveller sites and for those who are homeless or at risk of being made homeless. Under the terms of the settlement, 10 per cent of the homes delivered through the programme should be supported and specialist housing. In some instances, supported and specialist housing may be funded at affordable rent levels, rather than the primary tenures outlined at 1.6.

Modern methods of construction (MMC)

1.13. The GLA wants to use the Affordable Homes Programme to increase the amount of development brought forward, which utilises MMC. Providers will be expected to maximise and report their use of MMC to the GLA throughout the life of the programme.

Equality, Diversity and Inclusion (EDI)

1.14. London is a diverse city and thrives when all Londoners are able to participate fully in employment opportunities and their communities. Providers will be expected to promote EDI across their own organisations and in the communities where they create and maintain homes. In order to receive funding all providers will be required to commit to minimum standards including implementing a zero-tolerance approach to all forms of discrimination, harassment and bullying. Providers will also be contractually required to produce an action plan setting out how they intend to go further to promote EDI across three themes of: “Organisational equality, diversity and fairness”, “Sustainable and diverse supply chains”, and “Working together with Londoners”. Providers will be encouraged to prioritise adherence to the Good Work Standard within their action plans.

Building safety

1.15. The tragic fire at Grenfell Tower was a stark reminder that too many Londoners cannot be assured that their homes are safe. To improve building standards in new homes, the AHP will require providers to commit to higher standards of building safety through compliance with five mandatory building safety standards set out in the Funding Guidance.

Better design and environmental standards

1.16. The Mayor expects that homes delivered with funding through the AHP should meet the aspirations of Londoners and that includes meeting minimum design standards. The GLA recognises that many developments already incorporate high standards and support ambitions to make London a carbon neutral city by 2030. All partners will be required to meet 15 minimum standards of design and sustainability to ensure that homes built through the AHP meet a core of expectations set out in the London Plan. This will align the Mayor’s planning and funding powers.

1.17. The selected criteria will help increase the sustainability of housing within London, including by reducing carbon emissions during construction and use and working to improve air quality. By monitoring the environmental performance of completed homes, the Mayor can recognise and promote best practice within the housebuilding industry. As well as reducing whole life-cycle costs, investing in good quality, sustainable buildings will advance equality of opportunity by helping to mitigate against fuel poverty and improving the physical and mental health of Londoners.

Council delivery

1.18. The Mayor’s priority is to increase the number of social rent homes across London. To do this the GLA has been seeking to support councils’ development capacity so that they can resume their role as major providers of social housing. Councils will be encouraged to apply for funding through the new programme.

1.19. Funding is not the only necessary condition for a resurgence of London council building. The GLA has also identified barriers around land availability and skills and capacity. The programme will directly tackle the latter by assessing providers for their willingness to deliver skills development partnerships with councils. These will create secondment opportunities offering benefits for both partners.

Further conditions required by the Government

1.20. In addition to the above, there are a number of conditions that the GLA must agree to in order to receive funding. These are as follows:

• the GLA will not be able to count ‘nil grant’ homes towards the programme target;

• the GLA will no longer offer the ‘developer-led’ route set out in the Affordable Homes Programme 2016-2021; and

• funding will only be available to replace homes demolished as part of estate regeneration in exceptional circumstances, where homes are deemed to have become obsolete.

1.21. ‘Nil grant’ homes are those delivered through providers’ wider development programmes which are not directly supported by grant from the GLA. The GLA currently supports developers to increase the number of affordable homes on each site through the ‘developer-led’ route. These changes have been made by the Government in order to focus the Affordable Homes Programme 2021-26 more directly on additionality within the overall housing stock, rather than on additionality of affordable homes, and to improve transparency of reporting.

1.22. No more than 10 per cent of homes funded through the programme can be existing homes brought forward for affordable housing. The majority must be used for new build to increase the overall size of London’s housing stock.

Funding routes and assessment process

1.23. The GLA will invite bids against the totality of the AHP fund and will determine whether it is allocated against the £1bn Long Term Strategic Partnership element of the settlement, with completions up to March 2029, or the general settlement, to deliver completions up to March 2028. Bidders will not be required to formally select a funding pot but will need to specify the expected completion date for their proposals when bidding to enable the GLA to balance the number and value of allocations against each element of the programme (i.e., the £1bn Long Term Strategic Partnership element and the £3bn main settlement) appropriately.

1.24. The GLA will allocate funding to partners through a competitive bidding process. Bids will be assessed in line with a framework agreed with MHCLG. Allocations for long-term strategic projects will only be confirmed after consultation with the Secretary of State for Housing, Communities and Local Government.

Updating the Appendix to the London Housing Strategy

1.25. Section 333A(2)(d) of the Greater London Authority Act 1999 requires the London Housing Strategy to include a statement of the Mayor’s spending proposals for the “relevant period.” In the Appendix to that strategy, the relevant period is “taken to mean April 2015 to March 2022, which is the period during which Government has made allocations to fund the [existing] affordable housing programme.” That Appendix notes that “it will be updated and published on the GLA’s website to reflect future allocations of funding.” The allocation to the GLA of the affordable housing funding that is the subject of this Mayoral Decision is a funding allocation that needs to be reflected in the Appendix to the London Housing Strategy, and the Mayor is asked to approve this.

Governance and Decision Making for the 2021-26 AHP

1.26. The ‘Mayoral Decision Making in the GLA’ document (the Scheme of Delegation) sets out specific decision-making arrangements for the Affordable Homes Programme 2016-21. A Mayoral Decision (MD) is required to establish the scope of the overall programme, but decisions on individual allocations within that funding envelope and scope are delegated to the Executive Director of Housing and Land without the need for further Decision Forms, including for those decisions committing expenditure to a value that would normally require Mayoral approval. Section 19 of the Scheme of Delegation sets this out in more detail including exceptions and caveats. This process recognises the scale of the funding and the number of agreements to be entered into, ensuring that decisions can be made in a timely manner, reflecting the needs of partners’ business practices and reducing the risk of the GLA failing to deliver against the target.

1.27. Officers consider that the same considerations still apply and it is therefore recommended the Mayor apply this delegation to the 2021-2026 programme as per the wording at Appendix 4. The delegation has been adjusted only so as to reflect that it may be exercised by either the Executive Director of Housing and Land or the Interim Deputy Executive Director of Housing and Land. This will apply to the 2016-21 (now 2023) programme also.

1.28. To reflect the seniority and responsibilities of the Interim Deputy Executive Director of Housing and Land, and to ensure that the postholder can make Director decisions within the Housing and Land directorate, the Mayor is also invited to add the post to the list of Corporate Directors within the Scheme of Delegation. Again, this change is reflected at Appendix 4.

Extension of the AHP 2016-21

1.29. The new programme will run alongside the existing Affordable Homes Programme, which required starts to be achieved by March 2022 (further to MD2282). The impact of the Coronavirus pandemic and wider economic uncertainty has affected construction. Following lobbying by the GLA the Secretary of State has agreed to a request to extend the programme to allow starts on site until March 2023 in line with issues noted across the country. Current governance and decision-making arrangements for the 2016-21 programme will continue to apply. This will enable providers to continue to deliver new homes in line with commitments made in the Affordable Homes Programme 2016-21, mitigating the risk that delays to construction caused by the pandemic mean that homes are not started prior to the deadline. The GLA will work closely with providers to ensure that the overlap between the two programmes is managed effectively. The GLA will deliver 82,000 homes between 2021-29 across the two programmes.

2.1. The Mayor has successfully secured £4bn of funding from the Government over the period 2021-26. In return, the Mayor commits to supporting the delivery of at least 35,000 affordable housing starts in London between April 2021 and March 2026.

2.2. This will make a significant contribution towards London’s requirements for affordable housing. However, the quantum of funding offered by the Government and tenure restrictions that apply mean the programme will not fully meet London’s evidenced need. Research by the GLA and G15 group of housing associations demonstrated that London would require £4.9bn of funding a year over the next ten years in order to meet this need.

2.3. Nevertheless, the provision of affordable housing will help improve affordability for Londoners, including those on the lowest incomes, help to reduce overcrowding and homelessness and help make London a city where people on all incomes can live and thrive.

3.1. The London Affordable Homes Programme 2021-26 will increase the number of affordable homes in London, in turn helping to implement the current policies set out in the current London Housing Strategy. Groups with protected characteristics stand to benefit from an increase in affordable housing where they are disproportionately over-represented in markers of housing need. In particular Black, Asian and Minority Ethnic (BME) groups are disproportionately likely to experience poverty and associated housing constraints. These groups will therefore benefit from an increased supply of social housing particularly homes at social rents.

3.2. People with disabilities are also likely to benefit from the provision of supported and specialist accommodation. Increasing the supply of supported and specialist housing will help ensure those with specialist needs get the support they need. Provision of specialist domestic violence accommodation will benefit women who are more likely to be victims of domestic violence.

3.3. Older people are less likely to benefit from the homes in the programme supporting homeownership, as they are less likely to be eligible for a mortgage or meet the eligibility requirements of a rent to buy tenure. However, they will benefit from provision of social rent and an increased supply of supported accommodation where this is targeted at older age groups. The GLA has not otherwise identified ways that groups with protected characteristics will be adversely affected by these policies.

3.4. The five mandatory building safety requirements in the AHP will improve resident experience across a range of tenures by giving residents the assurance that their homes are built to high building safety standards, addressing concerns and reducing resident stress. This benefit can be attributed to residents of both rented and intermediate tenures. The benefits of the policy are expected to particularly affect those who are older or less mobile, as it will afford greater protections for those most vulnerable in a fire.

3.5. The introduction of new design and sustainability criteria will provide effective ways to ensure that all affordable homes funded by the Mayor are high-quality and improve resident experience. A new focus on design quality also addresses issues raised throughout the Covid-19 pandemic, which highlighted that poor-quality homes can attribute to worse health outcomes and reduced quality of life, particularly amongst BME and lower income households.

3.6. The requirement that providers promote Equality, Diversity and Inclusion within their business, supply chains, and communities (as set out in paragraph 2.10 above) will further ensure that funding supports positive outcomes for people with protected characteristics. The GLA will assess the equalities impact of bids as part of the allocation review process, to enable greater oversight of the equalities impact of funding decisions.

3.7. The delivery of the London Affordable Homes Programme 2021-26 will help to implement the objectives of the Mayor’s Equality, Diversity and Inclusion Strategy, Inclusive London. It will deliver against his commitment to make London a great place to live, where all Londoners have a good quality home at a price they can afford.

3.8. A full equality impact assessment has been conducted on the impact of the proposed London Affordable Homes Programme 2021-26, which will be published alongside the Funding Guidance. It is attached to this document as Appendix 3. The GLA will use this to ensure that deployment of the Affordable Homes Programme 2021-26 is in line with the public sector equality duty.

Key risks and issues

4.1. Risk: The programme is not deliverable and the GLA is unable to allocate its funding and does not meet its contractual targets agreed with Government, resulting in the Mayor returning unused funding to Government, leading to an undersupply of new affordable homes in London.

Mitigation: The GLA has secured a target and funding settlement which seeks to recognise the current economic outlook and the challenges facing providers of affordable housing. The GLA will endeavour to but does not expect to allocate all of its funding through the initial bidding round. Housing and Land Area Teams will work with providers to ensure that schemes come forward throughout the programme. Robust programme management arrangements will be put in place to ensure that providers deliver their commitments, including working with providers to identify replacement schemes if projects slip or fall out of the programme completely.

4.2. Risk: The homes funded through this programme do not meet the needs of Londoners.

Mitigation: All projects funded through the programme require planning permission and should therefore adhere to London Plan requirements on tenure mix, design, size and typology. At least half of the homes delivered through the programme will be for social rent; for which there is the most pressing demand in London. The GLA has also ensured that it can continue to deliver London Living Rent as a homeownership product. This provides a more affordable intermediate tenure for households who are yet to save for a deposit or secure a mortgage.

4.3. Risk: The GLA fails to comply with state aid regulations when allocating funding through this programme.

Mitigation: Both the Funding Guidance and terms of the funding agreements will set out terms to ensure the GLA complies with state aid regulations including, for example, monitoring requirements. It is proposed that there will be a requirement for bi-annual monitoring returns under this programme.

4.4. Risk: The policy priorities set out by both the GLA and the Government are too onerous to be deliverable and partners are unable to satisfy requirements

Mitigation: In developing contractual requirements the GLA has carefully considered the impact of the totality of the new requirements against the market conditions facing partners. Consultation with housing associations, London boroughs and other stakeholders suggest that the requirements will be well-received by partners. It is possible that providers are unwilling to bid until they have had the opportunity to review the new form of shared ownership lease, the final structure and timescale for which are in the Government’s control. The GLA will communicate as clearly as possible with providers to encourage them to bid and mitigate the potential impact of this risk.

Links to Mayoral strategies

4.5. In the London Housing Strategy, the Mayor acknowledges the affordability constraints in London and sets out his commitment to tackling the housing crisis through greater provision of genuinely affordable housing. It affirms the need for supply of homes at social rent, London Living Rent and shared ownership. This programme will enable providers to access funding to deliver these affordable housing tenures.

4.6. The Mayor’s Equality Diversity and Inclusion Strategy sets out an aspiration to ensure all Londoners have a good quality home at a price they can afford, and recognises that increasing the supply of genuinely affordable homes will help those particularly affected by London’s housing crisis. Distributing the AHP funding is a major tool that the Mayor has to directly increase the number of affordable homes in London.

Consultation and conflicts of interest

4.7. GLA officers have engaged with providers, including London boroughs, in the drawing up of the Funding Guidance for the new programme and have also consulted with community representatives through the London Housing Panel and Citizens UK. The funding settlement has been agreed following extensive negotiation with the Government.

4.8. There are no conflicts of interest to note from any of the officers involved in the drafting or clearance of this decision form.

5.1. This decision seeks approval of the receipt of £4bn of Affordable Housing Grant from MHCLG to fund 35,000 affordable homes completing in the period 2021 to 2029. The funds will be allocated to:

• Homes available for social rent;

• London Living Rent; and

• Shared ownership.

5.2. Funding will be allocated to housing providers following a competitive bidding process. Allocations will be subject to further decisions under the delegated authority.

5.3. The funding to the GLA is subject to further conditions from the Government as set out in section 1 above.

5.4. The funds received are capital in nature. The costs of administering this fund are to be met from interest receipts generated from the recovery of unutilised or recycled affordable housing grant.

6.1. Section 30 of the Greater London Authority Act 1999 (as amended) (“GLA Act”) gives the Mayor a general power to do anything which he considers will further one or more of the principal purposes of the GLA. The principal purposes, as set out in section 30(2), are: (a) promoting economic development and wealth creation in Greater London; (b) promoting social development in Greater London; and (c) promoting the improvement of the environment in Greater London.

6.2. Given the above, the GLA’s housing and regeneration functions contained in Part 7A of the GLA Act and section 34 of that Act, which allows the Mayor to do anything which is calculated to facilitate, or is conducive or incidental to, the exercise of any of his functions (including his functions under section 30), and section 333A(3)(b), (4) and (10), the GLA is empowered to receive funding from the Government and provide financial assistance for the purpose of the recipient providing affordable housing.

6.3. In determining whether or how to exercise the power conferred by section 30(1) of the GLA Act, the Mayor must:

(i) have regard to the effect that these decisions will have on the health of persons in Greater London, health inequalities between persons living in Greater London, the achievement of sustainable development in the United Kingdom and climate change and its consequences (sections 30(3-5) of the GLA Act; and

(ii) pay due regard to the principle that there should be equality of opportunity for all people (section 33 of the GLA Act).

6.4. In taking the decisions requested, the Mayor must also have due regard to the Public Sector Equality Duty; namely the need to eliminate discrimination, harassment, victimisation and any other conduct prohibited by the Equality Act 2010, and to advance equality of opportunity and foster good relations between persons who share a relevant protected characteristic (race, disability, gender, age, sexual orientation, religion or belief, pregnancy and maternity and gender reassignment) and persons who do not (section 149 of the Equality Act 2010). These matters will also need to be taken into account when preparing the Funding Guidance and when assessing specific bids for funding proposals and entering into funding agreements.

6.5. In respect of paragraphs 6.3 and 6.4, the Mayor should have regard to section 3 above.

6.6. In addition to the above, where the Mayor is proposing to use the power conferred in section 30(1) of the GLA Act, the Mayor must consider consulting in accordance with section 32 of the GLA Act (see section 4.7 above). The Mayor will need to consult in accordance with section 32 of the GLA Act, as appropriate, prior to entering into any funding agreements.

6.7. Where funding is to be granted by the GLA for the provision of low cost rental accommodation, it should be noted that sections 31 to 36 of the Housing and Regeneration Act 2008 (as amended by section 333ZE of the GLA Act) will apply. This includes a requirement upon the GLA to impose a condition ensuring that a registered provider of social housing is the landlord when the accommodation is made available for rent.

6.8. The award of GLA funding under this programme is not a payment for services and is not therefore subject to the requirements of the Public Contracts Regulations 2015. This notwithstanding, the GLA is still subject to the overarching duties of fairness and transparency. Officers must ensure that the funding is distributed fairly, transparently, in accordance with the GLA’s equalities duties and in a manner which affords value for money in accordance with the GLA’s Contracts and Funding Code.

6.9. Legal advice should be sought on the forms of funding agreement to be used for this funding programme, including advice as to any state aid requirements, and no commitment to fund should be made before the relevant funding agreement is entered into.

6.10. This decision asks the Mayor to approve the Appendix to the London Housing Strategy being updated to reflect the allocation to the GLA of the above affordable housing funding. This is to comply with the requirements of section 333A(2)(d) of the Greater London Authority Act 1999, as is noted in section 1 above. The Appendix can be updated without consulting any other body. The changes will not constitute material revisions to the strategy and furthermore will simply reflect the funding allocation to the GLA negotiated and agreed with Government, and which cannot therefore be changed by any outside consultation.

6.11. Section 38 of the GLA Act provides that any function exercisable on behalf of the Authority by the Mayor, shall also be exercisable by, amongst others, any member of staff of the Authority, if or to the extent that the Mayor authorises and subject to any conditions imposed by the Mayor. The Mayor may make the delegation as set out in paragraph 1.26 – 1.28, and make the amendments to paragraph 19 of the Mayoral Decision Making framework as set out in Appendix 4.