Guidance

Applying uplift to grant recovery calculations

Published 30 June 2023

Applies to England

Revised May 2023

1: Homes England’s Principles: Sharing in market value uplift

Where a For Profit Registered Provider has benefitted from an uplift in market value following the disposal of part or the whole of a grant-funded property, Homes England will recover its share in the value of the uplift proportionate to the amount of original grant invested in relation to the scheme development costs.

Where a For Profit Registered Provider has acquired historically funded affordable housing from a Not-for-Profit Registered Provider, Homes England will share in any proportionate uplift compared to the open market value of the properties at the point of sale.

Where a For Profit Registered Provider has acquired historically funded affordable housing from another For Profit Registered Provider, and Homes England’s consent is given for the grant to be transferred, uplift will be applied from the original Attributable Total Scheme Costs incurred at practical completion to the date of the relevant event for recovery.

In all cases, the acquiring For Profit Registered Provider will pay uplift upon a future relevant event.

2: Uplift calculation

For Profit Registered Providers must notify Homes England no less than 14 days in advance of the anticipated occurrence of a relevant event triggering recovery of grant and uplift. Homes England will confirm the amount of grant to be recovered including uplift. For Profit Registered Providers must not place funds in their Recycled Capital Grant Fund until the amount of grant for recovery has been confirmed by Homes England.

For Profit Registered Providers must also notify Homes England of all staircasing relevant events, even those that do not result in a 100% disposal.

This guide includes two uplift calculation worked examples for a Shared Ownership staircasing event (worked example A) and a disposal of an Affordable Rent property (worked example B).

For Profit Registered Providers are asked to provide the following documentation with any uplift calculation:

• Historic Grant Notification form
• Calculation of grant to be recovered including uplift calculation workings
• Valuation showing the value of the whole property at the time of the disposal/staircasing event
• In a multiple unit scheme a breakdown of how the grant and total scheme costs have been apportioned between the units in the scheme
• For a Shared Ownership property a copy of the lease statement of particulars or completion statement showing the initial share purchased
• For a Shared Ownership property where there has been previous staircasing events a schedule of previous transactions and grant repaid at each staircasing event

3: Apportionment of grant and costs

For Profit Registered Providers must refer to the [Capital Funding Guide chapter 7] sections 4.1 and 4.2 (https://www.gov.uk/guidance/capital-funding-guide/7-grant-recovery) for full information on apportioning grant.

For the calculation of recoverable grant and uplift, grant must be apportioned using the same methodology as applied at practical completion. The final total scheme costs must also be apportioned using the same methodology as that used to apportion the grant.

Acceptable methods of grant and total scheme costs apportionment for individual shared ownership and affordable rent homes are the following:

• Floor area
• Equal division where properties are similar in size/type
• Market value of the units at practical completion of the scheme
• Rents as charged on first letting (only for affordable rent homes)

For Strategic Partnerships grant is attributed to a site at practical completion at the prescribed per unit grant rate within the Strategic Partnership Grant Agreement, according to tenure and geography. Strategic Partners can use one of the above methods to apportion the grant attributed to a site on a per unit basis as long as the total apportioned grant of all units is the same as the total grant attributed to the site in IMS.

4: Glossary of terms used in uplift calculator

• OMV = Open Market Value. This is the independently assessed market value of the whole unit at the time of disposal or staircasing
• ATSC = Attributed Total Scheme Costs. This is the final scheme cost input into IMS at practical completion apportioned between the units if a multiple unit scheme (please see above for acceptable methods of apportionment). ATSC must be apportioned using the same method as that used to apportion the grant. Homes England Strategic Partners should use the Total Costs input into the Completion phase costs and contributions screen apportioned between the units in that completion phase using one of the above methods of apportionment
• AG = Attributable Grant. This is the total amount of grant attributed to the unit apportioned in the same way as the final scheme cost (ATSC above)
• IEP = Initial Equity Proportion. This is the actual initial share purchased by the shared owner
• IV = Increase in Value. For a Shared Ownership unit this is the increase in value not attributable to the first tranche sold
• PS = Percentage Staircased. The additional percentage of equity purchased in this staircasing transaction
• PSP = Previous Staircasing Percentages. This is the total percentages staircased in previous staircasing transactions (after the first tranche sale)
• APU = Agency Proportion of Uplift. This is the proportion of the total value of the uplift that is payable to Homes England

5: Worked Examples

Worked example A – For Profit Registered Provider Shared Ownership staircasing event

At the time of first tranche sale the shared owner purchased a 40% share in the home and subsequently makes a staircasing purchase of a further 35% share of their home.

The first tranche sale of a Shared Ownership home is not a relevant event for grant recovery.

The unit received £20,000 apportioned grant and £140,000 of the apportioned scheme costs. The Open Market Value of the unit at the time of staircasing is £170,000.

Step 1

The first step the For Profit Registered Provider must take is to calculate the grant attributable to the share being purchased.

Grant attributable to the home = £20,000

Share sold at point of first tranche sale = 40%

The grant of £20,000 is therefore attributed to the provider’s 60% share

Additional share to be purchased = 35%

This is equivalent to 58.33% of the original 60% provider share (35% / 60%)

Recoverable grant = £11,666 (£20,000 x 58.33%)

Please note: the percentage in this example is rounded to 2 decimal points for ease of illustration, but providers are encouraged to use the unrounded percentage in their calculations.

Step 2

The second step is to calculate the Increase in Value.

If this is the first staircasing event after the first tranche sale then the following calculation will need to be used:

IV = (100% – IEP) x (OMV – ATSC)

If there have been previous staircasing events after the first tranche sale then the following calculation will need to be used:

IV = (100% – IEP – PSP) x (OMV – ATSC)

Where:

• IV = Increase in Value
• OMV = Open Market Value
• ATSC = Attributable Total Scheme Costs
• IEP = Initial Equity Proportion
• PSP = Previous Staircasing Percentages

Worked example:

Open Market Value	= £170,000
Attributable Total Scheme Costs	= £140,000
Initial Equity Proportion	= 40%
Increase in Value	= (100% – 40%) x (£170,000 – £140,000)
	= 60% x £30,000
	= £18,000

Step 3

The third step is to take the Increase in Value and calculate the Agency’s Proportion of this.

If this is the first staircasing event after the first tranche sale then the following calculation will need to be used:

APU = (AG / ((100% – IEP) x ATSC)) x (IV x PS)

If there has been previous staircasing events after the first tranche sale then then following calculation will need to be used:

APU = (AG / ((100% – IEP – PSP) x ATSC)) x (IV x PS)

Where:

• APU = Agency’s Proportion of Uplift
• AG = Attributable Grant
• IEP = Initial Equity Proportion
• ATSC = Attributable Total Scheme Costs
• IV = Increase in Value
• PSP = Previous Staircasing Percentages
• PS = Percentage Staircased

To aid understanding we have broken the workings of this example into two stages.

Worked example:

Attributable Grant	= £20,000
Initial Equity Proportion	= 40%
Attributable Total Scheme Costs	= £140,000
Increase in Value (as calculated above)	= £18,000
Percentage Staircased	= 35%
Agency’s Proportion stage 1	= (AG / ((100% - IEP) x ATSC))
	= (£20,000 / ((100% – 40%) x £140,000))
	= (£20,000 / ((60%) x £140,000))
	= £20,000 / £84,000
	= 23.81%
Agency’s Proportion stage 2	= 23.81% x (IV x PS)
	= 23.81% x (£18,000 x 35%)
	= 23.81% x £6,300
	= £1,500.03

Please note: the percentage in this example is rounded to 2 decimal points for ease of illustration, but providers are recommended to use the unrounded percentage in their calculations.

Step 4

The fourth step is to add the Agency’s Proportion of Uplift onto the recoverable grant from step 1.

APU + recoverable grant = £1,500.03 + £11,666 = £13,166.03

Total recoverable grant and uplift payable to Homes England = £13,166.03

Worked example B – For Profit Registered Provider Affordable Rent disposal

A For Profit Registered Provider has an Affordable Rent scheme and is disposing of one unit, a relevant event triggering recovery of grant and uplift.

The unit received £20,000 apportioned grant and £100,000 of the apportioned scheme costs. The open market value of the unit at the time of disposal is £175,000.

Step 1

The For Profit Registered Provider must first calculate the Increase in Value

This is calculated using the following formula:

IV = OMV – ATSC

Where:

• IV = Increase in Value
• OMV = Open Market Value
• ATSC = Attributable Total Scheme Costs

Worked example:

Open Market Value	= £175,000
Attributable Total Scheme Costs	= £100,000
Increase in Value	= £175,000 – £100,000
	= £75,000

Step 2

The second step is to take the Increase in Value and calculate the Agency’s Proportion of this.

The Agency’s Proportion is calculated using the proportion of grant as a percentage of total scheme costs using the following formula:

APU = (AG / ATSC) x IV)

Where:

• APU = Agency’s Proportion of Uplift
• AG = Attributable Grant
• ATSC = Attributable Total Scheme Costs
• IV = Increase in Value

To aid understanding in this example we have broken the workings of this example into two stages.

Worked example:

Attributable Grant	= £20,000
Attributable Total Scheme Costs	= £100,000
Increase in Value (as calculated above)	= £75,000
Agency’s Proportion of Uplift Stage 1	= AG / ATSC
	= £20,000 / £100,000
	= 20%
Agency’s Proportion of Uplift Stage 2	= 20% x IV
	= 20% x £75,000
	= £15,000

Step 3

The third step is to add the Agency’s Proportion of Uplift onto the Attributable Grant:

APU + Attributable Grant = £15,000 + £20,000 = £35,000

Total original grant and uplift to be recycled or repaid to Homes England = £35,000

For Profit Registered Providers are asked to note if there has been a previous recovery event on this unit for a change of tenure then the attributable grant figure should be minus that previous recovery amount.

6: Treatment of Recoverable Grant

Once Homes England has confirmed the amount of grant for repayment, For Profit Registered Providers can choose to either repay or recycle the amounts confirmed. If repayment is preferred, this should be highlighted on the notification form and an invoice will be raised. Should recycling be the preferred option, then the amount must be placed in the Recycled Capital Grant Fund and spent on priority or permitted uses within 3 years. Interest is applied to amounts in the fund as specified in the Capital Funding Guide.