Housing Associations have a number of development options available for the provision of either new build or existing dwellings for social housing for rent.
Acquisition and Works – is an arrangement whereby the Association acquires land or property and commissions the construction of new dwellings. New build dwellings generally must meet the design requirements contained in Design Standards Guide and, on completion, must have a ‘structural’ life expectancy of at least 60 years and comply with all Statutory Requirements on completion of the construction works.
Design & Build (Competitive Tendering) - is an arrangement whereby an Association produces a detailed brief and then advertises for suitable Design and Build contractors to apply for inclusion on a select list to be asked to tender. The contractors are responsible for undertaking or developing the design – either in-house or by appointing consultants to undertake this task – and for the construction of the property.
As for Acquisition and Works, new build dwellings generally must meet the design requirements contained in Design Standards Guide and, on completion, must have a ‘structural’ life expectancy of at least 60 years and comply with all Statutory Requirements on completion of the construction works.
Design & Build Package Deals - is an arrangement where the land is owned by a contractor/ developer who will only sell on condition that the Association contracts with the contractor/ developer for the design and construction of the new dwellings. Important - this type of arrangement is in breach of EU Procurement regulations and, therefore, is not acceptable.
Off-the-Shelf Schemes - consist of newly constructed properties, offered on the open market by a contractor/developer for a fixed price on the basis of a single conveyancing contract (a purchase contract). Properties acquired in this way are for first-time occupation by Housing Associations or have been occupied privately for period(s) not exceeding 12 months from completion and need to meet fully the Association’s requirements as they stand – especially as the opportunity for changes will be limited by Statutory Approvals already obtained, and by the need to avoid any nugatory works and costs.
Associations must recognise that Off-the-Shelf schemes are ‘purchase contracts’ of a ‘standard product’. This contract may have Special Circumstances annexed thereto requiring the vendor to provide legal or technical documentation to the Association which may facilitate, amongst other things, future property management, for example, documentation relating to Title, statutory approvals, drawings, specifications, health and safety files or the like. Special Conditions placed on the purchase contract by associations may require the vendor to carry out minor ancillary works to the dwellings. No additional allowances will be available to the Association in relation to the cost of any minor ancillary works; consequently such costs should be set against the 'on-cost' allowance due to the association.
For more see Forms within this guide
- TA1 Explanatory notes
- NT1 Explanatory notes
Examples can include: window and door specification, kitchen fittings, socket outlet provision etc. During the construction stage, the Association should, under no circumstances, engage a Clerk of Works (COW) to regularly monitor the quality of work. Where works costs exceed the level to be accommodated through on-cost allowances the Association must amend the scheme type and appropriate TCI allowances accordingly.
Works Only (new Build) - involve the development of land already in the Association’s ownership and for which no acquisition costs (other than legal charges) apply. Development costs are assessed against the TCI particular to works only (new build) scheme.
Acquisition and Works (Rehabilitation) - is where existing dwellings are purchased and require substantial repair and improvement, conversion or extension for social housing for rent use. The total works cost of each unit should exceed £10,000 (excluding VAT). Existing dwellings generally must meet the design requirements contained in Design Standards Guide and, on completion, have a ‘structural’ life expectancy of at least 30 years and comply with all Statutory Requirements on completion of the construction works.
Works Only (Rehabilitation) - is similar to Acquisition and Works (Rehab), but where the Association contracts for the construction works only, and involves the development of property already in the Association’s ownership which has hitherto been unimproved. For example, this scheme type would apply in the case of 'gifted' or donated property. Development costs are assessed against the TCI particular to works only (rehab) schemes.
Rehabilitation ‘works only’ to a previously HAG funded scheme should be dealt with under the association’s major repairs programme.
Re-Improvement Schemes - are a category of ‘works only’ rehabilitation to Association owned property.
Definition of Re-improvement Schemes - Improvement is generally defined as “providing something that was not there before”. Improvement works to properties requiring substantial improvement and repair may be eligible for grant aid. However to be eligible the works must normally involve:
- a major redefining of the layout and/or
- a fundamental change in the accommodation and
- where the size, layout and type of the existing accommodation is no longer suitable for the purpose originally intended
Examples of improvements can include: alterations to the dwelling/ block to provide additional/ reduced/ adequate dwelling/ communal space, or conversion of a dwelling or dwellings, or communal space to provide additional dwelling units.
N.B. Works to the property may be either improvement and repair, or conversion and repair, but not repairs only. Like-for-like replacements, repairs and maintenance type works are not eligible for grant-aid.
In deciding whether individual items in a comprehensive scheme are eligible for grant-aid, the “providing something that was not there before” test must FIRST be applied.
As an example, re-roofing a defective tiled or slated roof is a ‘repair’ and does not qualify for grant-aid. However, if part of the re-roofing involves the first-time provision of an underlay of roofing felt, all the associated work would qualify for grant. Similarly, replacing defective plaster would not normally qualify for grant, unless disturbed due to the necessary installation of a damp-proof course or other waterproof treatment, or necessary thermal insulation provision.
Re-improvement Schemes Eligibility Criteria - In order to be considered for grant-aid, the property must fulfil ALL of the following eligibility criteria:
- be in the ownership of the Association and
- have been - at some time in the past - the subject of some form of grant or subsidy (grant or otherwise) for construction, rehabilitation or conversion and
- eequire substantial improvement and repair (see definition above).
Re-improvement Schemes Eligible Repair Works - Subject to meeting the definition and eligibility criteria, the following repair works can only be considered for grant if being carried out in association with ‘improvements’ or as part of a comprehensive re-improvement scheme:
- first-time major changes to the building fabric to provide adequate weatherproofing, waterproofing, thermal or sound insulation to modern standards and/or
- first-time installation of necessary fire precautions – including structural alterations, fire compartmentation, fire exits, smoke/ heat detectors and fire alarms/sounders, front and rear access ramps, lifts, stairs, central heating, electrical services etc
Permitted Timescales for funding Re-improvements - A re-improvement scheme will not normally be approved less than 15 years after the date of Practical Completion of the original scheme in the case of rehabilitation projects, and not less than 30 years after the date of Practical Completion of the original scheme in the case of new build projects. However, re-improvement schemes may be approved within shorter timescales in cases where the condition of the property is such that it is extremely difficult to let or it is causing a serious health risk to tenants.
Additionally, in the case of existing Supported Housing schemes, early re-investment may also be considered where there is a housing need for additional units to meet the needs of the current client group. This exception can apply where the only feasible design solution available is to provide the additional units as an integral part of the existing scheme rather than as a separate new build extension.
The housing need must be supported by a robust business case approved and prioritised by the relevant Area Supporting People Partnership. The business case should demonstrate the value for money efficiencies in capital and/or revenue costs delivered by the re-improvement option as compared to other options. Only those works deemed essential to the provision of the additional units will be considered for grant aid.
The Association’s delivery of its maintenance responsibilities, as set out in the Housing Maintenance Guide, will be subject to consideration when assessing the reasonability of such requests. In such cases, the TCI will normally be reduced on a pro rata basis to the 15 or 30 year rule. In re-improvement schemes normally a rent increase is required to service the Private Finance element.
Re-improvement Standards - The improvement or conversion works carried out in a re-improvement scheme should, where practicable, bring the property up to current design and construction standards, having regard to the Department's Design and Procurement requirements (see Design Standards Guide and Procurement). The Association should attempt wherever possible to re-improve entire buildings rather than individual units within them. However in the case of blocks of flats and houses converted into flats, it may not always be possible to re-improve the whole property because of the problems of gaining vacant possession. Exceptionally therefore it will be acceptable for individual flats or parts of buildings to be re-improved separately where necessary.
Existing Satisfactory Purchases (ESPs) - The purchase of ESP’s can be a useful method of procurement in areas of high need where the opportunity to develop is very limited. The Existing Satisfactory Purchase (ESP) Multiplier is used where existing satisfactory dwellings are purchased, following inspection, from the property market and have been occupied as a residence for at least 12 months from completion. The conditions of these dwellings must be such that they do not require full rehabilitation, but may require a degree of repair/ checks/ upgrading to bring them up to an acceptable standard for letting. In order to meet the criteria for definition as an Existing Satisfactory Purchase the estimated repair/ checks/ upgrading must not exceed £10,000. The maximum expenditure on checks, repairs and upgrading for ESP's remains at £10,000. If an Association needs to spend over this they must progress the scheme as an Acquisition and Works rather than an ESP.
The £7,500 is the amount of money included in the TCI calculation for the checks, repairs and upgrading work. Tariff schemes get the £7,500 included in TCI regardless of whether it spends £1 or £9,999 is spent. A non-tariff scheme gets the actual money it has spent, subject to the assessment of qualifying costs and the specified ESP cost limit.
In comparing costs for TCI purposes qualifying costs include:
- purchase price
- repair/checks/upgrading works (up to £10,000)
- VAT on repair/checks/upgrading works and
- ESP on-cost, on purchase price, works and VAT
In looking for suitable dwellings to acquire Associations need to ensure that such dwellings are in good condition and meet satisfactory standards. The dwellings need not meet new build standards, but generally must provide satisfactory accommodation, services, safety etc. Although it is not essential to meet all the design requirements contained in Design Standards Guide, it is essential that the condition and the suitability of the accommodation will fully meet the needs of the people to be housed. For more information on ESP Design Issues.
Procurement - In arranging for the repairs/checks/upgrading works to be undertaken Associations are reminded that the method of procuring the repairs/checks/upgrading works must comply with the requirements of Procurement.
Practical Completion - Associations are reminded that the actual cost of undertaking the repairs / checks / upgrading must be identified prior to application to the NIHE (DPG) for project approval, and must be on a ‘firm’ price basis as there is no provision for adjustment upwards on the application for the final Tranche. Cost overruns will not be funded.
Grant is paid in 2 Tranches, at Acquisition and Practical Completion stages, in accordance with Claiming Payment.
An authorised statement of the repair/checks/upgrading works completed showing the actual costs is required to be submitted to support the practical completion claim. The authorised statement should take the form of a table/list on Association headed paper showing each address, an itemised complete list of repairs for each individual property with associated costs beside each individual item. The full works costs for each property must be individually totalled to equal full amount paid to contractor in respect of that dwelling and finally, signed by an authorised signatory for the association. All works must be declared. The total cost of works carried out to all dwellings in the scheme must tally with the information provided on the GP2 form. This statement is then submitted to NIHE (DPG) along with the completed GA1 payment request form. See Forms within this guide and Claiming Payment for details. All relevant invoices must be retained on the association’s file for inspection as required.
N.B. The practical completion tranche can only be paid once the acquisition has completed and any works have been carried out.
N.B Grant payable will be adjusted downwards where costs come in under the approved amount. Where actual works costs exceed the £10,000 ESP threshold the scheme must be re-approved as a rehabilitation Acquisition & Works project.
More information: Band 1 ESP