Housing Development Strategy - Report - Page 13
Development considerations
Viability and affordability
To ensure that we can continue to fund the development of Council housing it is important that each scheme has been properly assessed for viability.
There must be an acceptable relationship between the cost of delivering the housing, taking all costs into account, and the rental income we will
receive. It is necessary to ensure that the impact of each scheme on the HRA Business Plan is calculated and properly understood. The cumulative
effect of the development programme must be affordable in the context of the wider HRA Business Plan.
Government policy for affordable housing sets out that the capital cost of affordable housing should largely be met from the rental income it generates.
Capital grants to support new building have reduced and the rent charge, set at an ‘affordable rent’ level, is expected to generate our income. Every
new development will be let at an ‘Affordable Rent’ to assist with the financial viability of the scheme. The aim will also be to ensure that rents fall within
Local Housing Allowance levels and larger dwellings in high value areas remain affordable considering the limitations of the welfare system.
Viability and risk
Each project will be assessed to ensure it meets the following criteria:
•
That it meets the aims of this Development Strategy and the HRA Business Plan.
•
That its financial viability is fully assessed and that the basis on which it can proceed is properly
understood.
•
That it has been adequately risk assessed. Building homes involves significant risks. It will rarely be
possible to eliminate risk though it can be assessed and managed. A high level risk assessment will be
carried out ensuring that proposals have a strategic fit with this and other related strategies, particularly
in respect to viability. Our corporate risk management processes will be used to mitigate the risk.
The critera for determining viability considers:
•
An expectation that an assessment is based on a 25-30 year life of the asset but we will always give
consideration to the need for the type of housing and the impact such a development could have on
the local community and economy. These factors could extend the assessment period to a time that
politically is regarded as appropriate;•
•
That all costs and expenses applicable to the scheme, internal or external, should be fully accounted
for and charged to the scheme.
Schemes will be evaluated on the basis that they can be considered financially viable if all the viability
parameters are achieved at an Affordable Rent level. Those projects that meet this test will be recommended
to our Cabinet to progress. Each project will be developed in accordance with the Council’s rules.
13
Our Actions
14 - To develop a
scheme viability
assessment process
to be applied to
all proposed new
developments in
the district.
