The government’s Housing Streamlined Subsidy Scheme (Scheme) laid before Parliament on 14 April offers a materially simpler and faster way for public authorities to subsidise housing delivery while retaining legal certainty under the Subsidy Control Act 2022. In theory either house of parliament could resolve not to consent to this Scheme within 40 days of it being laid, though that is unlikely. Used correctly, the scheme can provide a subsidy compliant route for authorities to provide funding for both affordable and mixed tenure housing without carrying out a standalone assessment.
Why it matters
Providing public authorities comply with the conditions of this Scheme they will not be required to conduct individual subsidy assessments against the subsidy control principles or refer subsidies to the Subsidy Advice Unit, significantly reducing the effort, delay and complexity which might otherwise be required. This will support a wide range of subsidy forms, including grant, loans, guarantees and equity. It goes without saying that authorities will need to comply with other statutory rules in respect of their vires when providing such subsidy.
This flexibility should assist authorities in responding quickly to viability issues and accelerating housing delivery. It does not, however, remove the need for careful structuring or evidencing. In particular, to the extent that the authority designates the relevant financial assistance as a Service in the Public Economic Interest (SPEI) the other rules applicable to such SPEI must be complied with (e.g. entry into a legally binding agreement to flow down the relevant monitoring and clawback requirements).
Used in combination with other devolved powers and flexibilities being afforded to local authorities, such as Integrated Settlements under the English Devolution and Community Empowerment Act, the Scheme provides another powerful tool to enable authorities to meet their local housing need quickly and effectively.
Eligibility and limits
The Scheme operates through two strands:
- Strand 1 – projects delivering social and affordable housing only
- Strand 2 – projects of any tenure mix, including 100% market housing schemes
Strand 1 benefits from materially greater flexibility.
Eligible costs
Eligible costs are defined exhaustively but extremely widely, covering all costs directly related to the provision of housing. These heads of expenditure are slightly broader for Strand 1 including an additional category of works to existing buildings. Examples of eligible costs include:
- acquisition of interests in delivery vehicles or joint ventures (where strictly necessary);
- on and off site infrastructure, including section 106 works where they widen or accelerate delivery;
- placemaking and community facilities; and
- costs of converting buildings for social or affordable housing use.
Caps and subsidy intensity
Awards cannot exceed the viability gap (see further below) and are subject to two limits, with the lower applying:
- a maximum award of £75 million per project; and
- a maximum subsidy ratio of:
- 80% (social and affordable housing); or
- 50% (mixed or market housing).
The maximum amount and the subsidy ratio is to be calculated taking into account all subsidies received by the same recipient in the last 3 financial years for substantially the same purpose under the Scheme. There is some flexibility across multi phase projects, but artificial splitting of sites or phases to avoid caps is expressly prohibited.
Evidencing compliance
Authorities may fund only the viability gap. The gap must not arise due to delay or other factors attributable to the beneficiary.
The public authority will be required to undertake a viability assessment. In practice the potential recipient/beneficiary should be asked to produce a viability appraisal to enable the public authority to interrogate it. It is essential that the appraisal takes into account:
- all eligible costs and revenues;
- a reasonable profit; and
- any other subsidies received by the beneficiary (including those received outside of the Housing Streamlined Scheme) in the previous three financial years for the same project.
The guidance allows discretion on format of the assessment , but robust evidence is required, and use of external advisers will often be prudent where subsidy levels are high or margins are tight.
Recovery
Authorities must have effective clawback mechanisms where housing delivery is not achieved or is materially delayed. In practice, this will require a binding agreement to be entered into between the authority and the beneficiary which identifies the policy objective and includes clear and robust delivery milestones, monitoring obligations and recovery provisions where the subsidy is greater than required or is misused. Such provisions will not be dissimilar to what we would ordinarily expect in a grant agreement funding housing provision.
Bottom line
The Housing Streamlined Route is a welcome and powerful tool that should materially ease the provision of housing subsidy and free authorities to focus on delivery rather than process.
However, the legal protection it offers is conditional. Careful eligibility analysis, disciplined viability evidence and robust recovery provisions remain essential to managing risk.
