Transparency data

Housing Infrastructure Fund: accounting officer assessment for the Government Major Projects Portfolio

Updated 23 August 2021

Applies to England

Background and context

The Ministry of Housing, Communities and Local Government’s (MHCLG) Single Departmental Plan sets out the department’s objectives to:

• “deliver the homes the country needs,
• make the vision of a place you call home reality, and
• create strong communities, socially, economically and a sense of place.”

The Housing Infrastructure Fund (HIF) supports the government’s ambition to deliver 300,000 homes per annum, by providing up-front infrastructure to drive housing delivery. The Fund provides grant funding to local authorities on a competitive basis for physical infrastructure (such as roads, community facilities, utilities, and land assembly) which is needed to “unlock” new housing and which requires public funding to be delivered, (i.e. where there is a market failure).

Its purpose is to:

• Deliver new physical infrastructure to support new and existing communities;
• Make more land available for housing in high demand areas, resulting in new additional homes that otherwise would not have been built;
• Support ambitious local authorities who want to step up their plans for growth and make a meaningful difference to overall housing supply; and
• Enable local authorities to recycle the funding for other infrastructure projects, achieving more and delivering new homes in the future.

HIF is providing local authorities with £4.35 billion of infrastructure funding to unlock 326,000 homes in all regions of England by March 2028.

The Fund helps to solve three market failures preventing housing development:

• Insufficient value: Some infrastructure is very costly; unlocking a site may be more expensive than the value it will generate.
• Uncertainty: There may be cashflow issues, or benefits may be far into the future, making investment seem too high risk.
• Multiple sites: Some large infrastructure projects (e.g. large transport schemes) unlock a number of sites across a wide area. Individual site schemes may not be able to deliver such projects and remain viable, or there may be multiple scheme promoters/landowners, unwilling individually to invest if they think that others may take a ‘free ride” on their investment.

The Fund is divided into two streams:

• Marginal Viability Funding (MVF) for single/ lower tier local authorities (District Councils and Unitaries) - for a project’s final or missing piece of infrastructure funding, to unlock housing in the shorter term.
• Forward Funding (FF) for the upper tier of local authorities (Combined Authorities/Greater London Authority, County Councils and Unitaries) - for large, strategic and high-impact infrastructure projects that will unlock homes and build communities long into the future.

There are also three Housing Investment Grants (HIG), funded outside the programme. These fund large, strategic high-impact projects similar to FF projects.

Regularity

Grant payments for projects outside London are made under Section 19 of the Housing and Regeneration Act 2008. This provision allows Homes England, with the consent of the Secretary of State, to give financial assistance to any person, in any form and on such terms and conditions as Homes England consider appropriate.

Homes England cannot operate in London except under direction of the Mayor. Grant payments for projects inside London are made under Section 31 of the Local Government Act 2003. Section 31 provides sufficient legal powers, subject to consent of the Treasury (HMT), for a minister to pay a grant – to which conditions may be attached - to a local authority in England towards expenditure incurred or to be incurred by it.

HMT authorisation for the programme was provided through a letter from the Chief Secretary to the Treasury dated 3 June 2017. Approval for the funding of each project was provided in three stages – cross-government Investment Panel Approval, Secretary of State approval, and approval from the Chancellor of the Exchequer.

Propriety

Bids for the Housing Infrastructure Fund were invited from local authorities following an announcement by the then Secretary of State, via a published prospectus, and were assessed against the criteria in the prospectus by a cross-Government Investment Panel attended by MHCLG, Homes England, HMT, the Infrastructure Projects Authority (IPA), and the Department for Transport (DfT). Bids approved by this panel were then considered and approved by MHCLG and HMT ministers.

Homes England contracted with successful local authorities outside London. The Greater London Authority (GLA) contracted with London boroughs for MVF projects in London (in accordance with a Memorandum of Understanding between MHCLG and the GLA). For FF projects in London, MHCLG contracted directly with the public body delivering the project.

Appropriate conditions were attached to the contracts. Progress of these projects is regularly monitored by Homes England and the department in order to ensure that funds are being spent in line with the contractual terms and with the principles of Managing Public Money.

Value for money

All HIF bids were assessed against their value for money, deliverability and strategic approach to housing delivery. This ensured that each individual HIF project, as well as the whole programme, provides value for money. The cross-government Investment Panel (referred to above) assessed the projects. Benchmark land values were used for the smaller MVF projects (where there was a ‘soft’ cap of £10 million). FF projects (where there was a ‘soft’ cap of £250 million) had a much higher level of approval due to their larger size.

HIF used the Green Book method, DfT WEBTAG guidance and the MHCLG appraisal guide. Sensitivity testing was performed using VfM (value for money) risks. VfM testing is performed again on projects if any significant change to BCR (benefit-cost ratio) inputs occur. The next full update to BCR is expected when Green Book evaluation is complete.

For the smaller MVF projects, a BCR threshold of 1.0 was set.

For the larger FF projects, an additional Housing BCR threshold of 1.5 for the Overall threshold was set. All FF projects have met these minimum criteria, and rigorous sensitivity testing was performed to reassure that the thresholds were attainable despite any changes or project risks coming to fruition.

The programme’s latest BCR is 2.8, and this is subject to ongoing review to ensure maintenance of satisfactory VfM.

Feasibility

All projects within the programme were required to satisfy a deliverability assessment carried out by Homes England. These assessments were confirmed by the cross-government Investment Panel.

The programme follows Homes England’s project control framework, which ensures the programme has a high degree of compliance with the functional standard for government grants.

The scheme is part of the government Major Projects Portfolio and is subject to this additional assurance mandated by IPA. A Gate 0 Review was carried out by IPA in October 2020, and the programme received an Amber rating, which is what would be expected at this stage in an infrastructure programme of this size. A further Gate 0 review will be held in autumn 2021, and the feasibility of the programme will continue to be independently reviewed by the IPA through its lifetime.

Conclusion

As the accounting officer for MHCLG I considered this assessment of the Housing Infrastructure Fund, for which Treasury approved the full business case on 18 August 2018. I have prepared this summary to set out the key points which informed my decision. I am satisfied that the programme

• carries out the appropriate level of assurance and governance,
• is on track to deliver its objectives,
• is managed with consideration to the principles of value for money, and
• is feasible to deliver.

Therefore, I am satisfied that the programme is a good use of public resources.

If any of these factors change materially during the lifetime of this project, I undertake to prepare a revised summary, setting out my assessment of them. This summary will be published on the government’s website (gov.uk). Copies will be deposited in the Library of the House of Commons, and sent to the Comptroller and Auditor General and Treasury Officer of Accounts.

Jeremy Pocklington Accounting officer 12 July 2021