Affordable Homes Guarantee Scheme 2020 (AHGS20)

Description

Lot 1: Since the award of the concession, a more hostile macro-economic environment and a growing and urgent need for RPs to address decarbonisation and decency issues resulted in RPs deprioritising delivery of new affordable homes in favour of investment in existing assets. By allowing lower-cost scheme funding to be split between new development (with a minimum of 50% of each loan to be used for this purpose) and decarbonisation and remediation, RPs are now incentivised to carry on developing while simultaneously addressing issues with their existing stock, rather than pausing or significantly cutting back on development. The modifications to the concession agreement were therefore necessary to achieve the scheme's primary objective of providing lower cost debt to enable RPs to develop more homes than they would otherwise have done in circumstances where for both economic and technical reasons as described further below it is not possible to change the concessionaire in order to facilitate the Tranche B lending. The Department required changes to be made to the Scheme Rules so as to broaden the range of delivery undertakings which may be eligible for funding (referred to as "Scheme Expansion"), to include improvements relating to energy efficiency and housing decency as well as the construction of new-build and additional affordable housing. Those improvements will be facilitated via 'Tranche B' loans (while an amount equal to 'Tranche A' loans must continue to be spent on the delivery of new affordable housing). Changes were also made to the concession agreement to clarify or in some cases modify the current rules of the scheme, to ensure it remains accessible to a broad range of RPs whose business plans incorporate a degree of new development (referred to as "Scheme Acceleration"). As part of the Scheme Expansion and Scheme Acceleration, consequential changes have been made to the concession agreement and programme documentation (as more particularly described in section VII.2.1 below). This included an increase to the Cumulative Guarantee Amount to £6bn and an extension to the application window to April 2026. In respect of the increase to the Cumulative Guarantee Amount and the extension of the guarantee application period, the concession agreement contained provisions contemplating these particular modifications (clauses 3.1 and 7.2 respectively). To that end, the Department's view was that such modifications are justified on the basis that they are compliant with the requirements of Regulation 43(1)(a) of the CCRs. In respect of the remaining modifications referred to elsewhere within this notice, the Department viewed that such changes are justified on the basis that they are compliant with the requirements of Regulation 43(1)(b) of the CCRs for the reasons set out below.