Future Approaches to Investment Deputy Chief Executive Housing Corporation Future Approaches to Investment Steven Douglas Deputy Chief Executive

2005/06 Outcomes Total: 36,386 completions against a target of 33,180; Affordable rent – 18,637 new homes against a target of at least 18,000, an extra 3.5%; Affordable Sale – 16,074 new homes against a target of at least 13,500, an extra 19%; Key Worker Living (within the Affordable Sale total overall) – 7,401 against a target of 5,722, an extra 29 %

Quantity and Quality into 06-08 Efficiency 3* SB Code Rural Supported Housing

Step-change in efficiency 06-08 (absolute reductions in grant)

Current Approaches: key drivers of value in bidding and assessment maximising competition, including through a mixed economy of providers. concentrating funding on the best developers of affordable housing, through Investment Partnering. placing value-for-grant at the heart of assessment, with new assessment tools such as the Grant Index. supporting and expecting best practice in supply chain management. levering in private finance, e.g. with expanded OMHB.

New Approaches to Programme Management 06-08 We have introduced a formal category of Reserve Schemes, separating scheme assessment decisions from programme management decisions. We have introduced payment through the lead partner, to encourage real partnership. We have introduced (following agreement of DCLG) a formal status of Pre-Allocation for starts beyond end March 08.

What the FATI working group has been telling us At the last meeting and in subsequent conversations members of the working group have made a number of suggestions: minimising the burden of bidding and programme management; avoiding duplicate requests for information and collecting only information which is used; emphasising the assessment of programmes and organisations, with a lighter touch evaluation of schemes; being open and transparent in funding decisions; offering longer funding commitments, in particular on strategic sites.

What the working group has been telling us (continued) offering more frequent points of access to funding, to align with the business models and land acquisition strategy of developing organisations; easing the substitution and addition of schemes during programme management; setting performance measures over the medium term, with some flexibility on annual delivery; increasing the flexibilities available to top performing organisations (with a corresponding clarity for demoting or penalising organisations not performing to standard;) removing unnecessary design and construction standards, with an overarching intention to bring equivalence between market and affordable housing.

Our vision for change We are responding to suggestions with proposals to reduce burdens and give additional flexibilities. Alongside these changes we will introduce stronger assessment of bidding organisations, and set high expectations for efficiency gains. We will rigorously assess candidate Partners, e.g. through the Value for Grant Comparator, removing Partner status if performance is weak. actively engage with Partners around their levels of debt, gearing and ability to service borrowing, and set expectations around the use of investment finance to fund development. set further, stretching targets for value-for-grant efficiency gains.

What we are proposing: streamlining We are already beginning to take forward a modernisation agenda. A review of Financial Workbooks, and amendment of our systems to collect FW data through IMS. A review of IMS coding to ensure all data collected is fit-for-purpose. A better defined procedure for bringing forward substitutions in-programme, supported by launch of the Programme Management module of the new IMS this autumn. A redefinition of the role of Corporation Lead Investor, including a focus on working with Partners to evolve their development and bidding strategies. A streamlining of design and quality standards.

What we are proposing: modernisation (1) We proposed to move to regular market engagements. We propose that a proportion of funding is allocated on a biennial basis, with remaining resources allocated through regular market engagements. For in-programme bids we will look for schemes ready for development, with guarantees of delivery (i.e. start on site) in the funding period. Since pre-development risk will be substantially reduced we will expect highly competitive pricing. We will need to agree an accountability framework with Government, with an emphasis on units delivered rather than allocations.

What we are proposing: modernisation (2) We propose to move to longer term funding on strategic sites, mainstreaming the pre-allocations concept. We propose that funding is committed for starts on sites up to 5 years in advance. The proportion of estimated future funding which can be committed in advance will be capped. Grant levels on future schemes will be capped – with our delivery partners bearing the risk of change.

What we are proposing: modernisation (3) We proposed to introduce a new form of relationship, Partnership Plus. This might offer: a longer programme (perhaps 3 years) renewed within that period. freedom for + Partners to make substitutions, within the parameters of targets reflecting national and regional policy priorities. We want to incentivise performance: we propose to design wide-ranging criteria, but with an emphasis on financial and supply chain efficiency.

What we are proposing: new ways to invest In the context of CSR 07, we are looking at new funding tools – picking up on innovative practice across our Fields - to make best use of resources and provide fit with the needs of those delivering to communities. We want your views on how these models might be developed to meet our joint needs and any examples of such ideas in practice.

What we are proposing: new ways to invest Corporation equity shares on schemes e.g. through the creation of project specific special purpose vehicles. Overage arrangements. Community land trusts; the Corporation might acquire land for a CLT or provide loan finance. Fixed term affordable housing, to draw in additional private finance Implementation of outcomes from the Shared Equity Task Force

What do you think of our proposals? Will they achieve the efficiency gains we are seeking? How can we engage the sector in change?