MD2761 Delegation of the Affordable Homes Guarantee Scheme 2020

1.1 The Affordable Homes Guarantee Scheme 2020 (“the Scheme”) is a new £3bn guarantee programme announced by the-then Chancellor of the Exchequer in March 2019. The Scheme’s objective is to support the delivery of new affordable housing to contribute to meeting overall housing delivery targets, and meeting the requirements of those whose needs are not met by the market. It provides access to long-term, low cost loans for RPs. The loans are funded by bonds issued in the capital markets which are guaranteed by MHCLG, creating a pricing benefit which is passed on to RPs in the form of lower interest costs. Loans will operate for up to a maximum term of 30 years.

1.2 The Scheme will be open for new applications from spring 2021 for a period of three years from the go-live date. Loans provided will be managed until their maturity. The size of the programme may be increased by MHCLG depending on demand from Registered Providers.

1.3 The Scheme will be operated as a Concession by ARA Venn, who were selected after a public procurement exercise, which did not involve the GLA. The Concession will be managed by Homes England on behalf of MHCLG. Homes England will be responsible for appraising capital raising and loan (and associated guarantee) proposals from ARA Venn in order to make recommendations to MHCLG on whether or not to provide loans, raise capital and/or issue guarantees accordingly. This will include making recommendations in respect of applications from RPs operating within London. Homes England will also maintain oversight on the management of the loan portfolio by ARA Venn and make decisions or provide recommendations to MHCLG in respect of matters arising during the life of the loans.

1.4 RPs will be eligible to apply for the scheme alongside seeking grant funding through the Homes for Londoners: Affordable Homes Programme(s).

Decision

1.5 This decision seeks approval to authorise Homes England to exercise the GLA’s powers under sections 30 and 34 of the GLA Act as Homes England considers necessary or expedient for the purposes of undertaking or continuing all or any of the activities specified in the Instrument of Delegation (attached at Annex A) for the following activities. To:

i. appraise applications received by 31 March 2024 for loans from RPs who intend to operate within London, and make recommendations to MHCLG on whether such loans are acceptable and whether a guarantee should be issued;

ii. appraise the scheme delivery partner, ARA Venn’s, proposals in relation to funding of the loans in the capital markets; and

iii. manage the loans until 31 March 2054 or full repayment, whichever is the later.

1.6 By virtue of the Localism Act 2011 from 1 April 2012 Homes England's powers to operate in Greater London ended, and from this date the GLA has undertaken Homes England's former role in the capital using its new powers in relation to land and social housing contained in Part 7A of the GLA Act, and its general and subsidiary powers under sections 30 and 34 of that Act, which are exercisable by the Mayor.

1.7 Homes England is responsible for administering the Scheme in England. GLA and Homes England officers view is that, on grounds of efficiency and consistency, Homes England should administer the Scheme in London, including assessing applications from RPs who intend to operate in London and overseeing management of loans provided. Homes England is the sole body responsible for the management of the concession award to ARA Venn to operate the loan guarantees. There are not considered to be any tangible benefits to the Mayor or to bidders to the Scheme that would arise if the GLA and Homes England were to co-manage the concession award to ARA Venn.

1.8 The role of Homes England, as detailed at 1.5-1.7, will primarily be to make commercial assessments that loans be awarded to organisations in a manner that is financially prudent, and is justifiable on the basis of the creditworthiness of the recipient organisation. The design of the Scheme is such that it does not provide an opportunity for policy requirements to be set, and so if the GLA were to co-manage the concession to ARA Venn, there would be no substantive opportunity for the Mayor to promote his strategic housing priorities through involvement in the Scheme. MHCLG have not provided any guarantees on how administration costs for the Scheme will be funded, and it is not clear how administration of the programme would be funded within the GLA’s existing resources, if the GLA were to co-manage the concession to ARA Venn.

1.9 In view of the above, and given that Homes England does not have the legal power to operate in London, the Mayor is asked to authorise Homes England to exercise such of the GLA's powers under sections 30 and 34 of the GLA Act accordingly, upon the basis and upon the terms and conditions set out in the Instrument of Delegation attached at Appendix A. This decision will enable Homes England to administer the Scheme in London.

2.1 As announced by the Government, the Scheme will provide loans to support the delivery of new affordable housing to contribute to meeting overall housing delivery targets and meeting the requirements of those whose needs are not met by the market, including homes for social rent and affordable home ownership.

2.2 Granting the delegation for Homes England to assess loan applications from and oversee management of loans provided to RPs operating within London is expected to enable the smooth and efficient running of the scheme and ensure consistency in access to finance across England.

3.1 The public sector equality duty requires the identification and evaluation of the likely potential impacts, both positive and negative, of this decision on those with protected characteristics (age, disability, gender reassignment, pregnancy and maternity, race, gender, religion or belief, sexual orientation) and to set out how the organisation is addressing the duty. The granting of the delegation in this decision is not expected to have any impacts on individuals with protected characteristics. In addition, Homes England is subject to the public sector equality duty and, where relevant, is required to give consideration to that duty in future activities and decisions pursuant to this delegation.

Key risks

4.1 Homes England will be carrying out the activities and functions specified in the Instrument of Delegations on behalf of the GLA. This means that the GLA is, in law, legally responsible (and potentially liable) in respect of the discharge of these activities and functions. This risk is expected to be mitigated by the fact that all loan recipients will be registered with the Regulator of Social Housing and are therefore expected to be of sound creditworthiness. Homes England will be making recommendations regarding loans and guarantees in line with their role as a public authority, with a duty to act in a financially prudent way with appropriate use of public resources. Their recommendations will be approved by MHCLG and issued and managed by a third party, ARA Venn.

Links to strategies and Mayoral and corporate priorities

4.2 The programmes delegated in this decision are relevant to the Mayoral priority to support the supply of affordable housing in London, in particular supporting the development of more homes for social rent. RPs receiving loans through the Scheme will be eligible to apply for grant funding under the Homes for Londoners: Affordable Homes Programme(s). Any such applications would need to meet the terms of the Mayor’s programmes.

Impact assessments and consultation

4.3 No consultation has been carried out specifically in relation to the scheme, which was announced by HM Treasury and MHCLG. GLA officers have consulted with officers from Homes England in relation to arrangements for the administration of the Scheme that are the subject of this Mayoral Decision.

Declaration of interests

4.4 There are no conflicts of interest to note for any of the officers involved in the drafting or clearance of this decision form.

5.1 This decision requests approval for the Mayor to delegate appraisal of applications to access the Affordable Homes Guarantee Scheme 2020 until 2054 from Registered Providers and make recommendations to MHCLG on whether the loans are acceptable and whether to issue a guarantee.

5.2 There are no direct financial consequences from this decision. There are no known direct costs to the GLA arising from it.

6.1 Section 30 of the Greater London Authority Act 1999 (“the GLA Act”) allows the Mayor, acting on behalf of the GLA, and after appropriate consultation, to do anything which the Mayor considers will further the promotion of economic development and wealth creation, social development or the improvement of the environment within Greater London. This MD indicates that the relevant purposes in this case are the promotion of economic and social development in Greater London, which will be achieved by administering the Scheme to contribute to meeting overall housing delivery targets and meeting the requirements of those whose needs are not met by the market, including homes for social rent and affordable home ownership. Previously the GLA was prohibited from using these general powers to incur expenditure in relation to housing. This prohibition was removed by section 186 of the Localism Act 2011, which came into force on 1 April 2012.

6.2 Section 32 of the GLA Act provides that the power under section 30 is exercisable only after consultation with such bodies or persons as the GLA considers appropriate in the particular case. Paragraph 4.3 above notes that GLA officers have consulted with Homes England in relation to arrangements for the administration of the Schemes that are subject of this Mayoral Decision.

6.3 Section 33 of the GLA Act requires the GLA, when exercising a section 30 power, to make appropriate arrangements with a view to securing that there is due regard to the principle that there should be equality of opportunity for all people. In addition, section 149 of the Equality Act 2010 requires that GLA and the Mayor have due regard to the need to eliminate unlawful discrimination, harassment and victimisation as well as to advance equality of opportunity and foster good relations between people who share a protected characteristic and those who do not. Homes England is also subject to statutory duties under the Equality Act 2010. Paragraph 3.3 above identifies that the granting of the delegation in this decision is not expected to have any impacts on individuals with protected characteristics, and that Homes England is subject to the public sector equality duty.

6.4 Section 34 of the GLA Act provides a further power for the Mayor to do anything which is calculated to facilitate, or is conducive or incidental to, the exercise of any of his functions (including his functions under section 30).

Delegation to Homes England

6.5 Homes England’s objects are specified in the Housing and Regeneration Act 2008 (“the HRA 2008”) and include improving the supply and quality of housing in England and securing the regeneration or redevelopment of land or infrastructure in England. The HRA 2008 provides that Homes England may do anything it considers appropriate for the purposes of its objects or for purposes incidental to those purposes.

6.6 Homes England’s powers in the HRA 2008 used to cover the whole of England including Greater London. From 1 April 2012 Homes England’s powers in Greater London were devolved to GLA under the Localism Act 2011. As a consequence, Homes England no longer has the legal power to operate in Greater London and its property, rights and liabilities in Greater London were transferred to the GLA by statutory transfer scheme.

6.7 Sections 38(1) and (2) of the GLA Act allow the Mayor to authorise Homes England to exercise his functions under the Act, including those contained in sections 30 and 34. It is therefore necessary that the Mayor delegates his powers under sections 30 and 34 to Homes England to enable Homes England to carry on the activities specified in this MD in Greater London.

6.8 Section 38(3) of the GLA Act requires that Homes England must consent in writing to the delegation. Homes England have informally consented to the delegations and will, in due course, be providing formal written consent to the Mayor.

6.9 Section 38(7) of the GLA Act gives Homes England the power to exercise any functions delegated to it by the Mayor pursuant to section 38, whether or not Homes England would otherwise have had that power and irrespective of the nature of that function.

6.10 Section 38(10) of the GLA Act requires such delegations to be in writing. The proposed Instrument of Delegation is attached as Appendix A. The Mayor may impose conditions on any delegations under section 38(1) and a number of conditions have been included in the delegation.

6.11 The powers contained in sections 30 and 34 of the GLA Act, which are to be delegated to Homes England, are sufficient to enable Homes England to do all things it considers necessary or expedient to undertake the activities specified in the Instrument of Delegation at Appendix A.