Section: Housing Finance
New Rules on Grant Recovery and RCGF
New rules on grant recovery and use of Recycled Capital Grant (RCGF) were announced with the publication of the Housing Corporation's Prospectus for the 2008-11 National Affordable Housing Programme (NAHP).
Grant recovery is the process by which the Corporation recovers some or all of its investment when a house funded by the Corporation for affordable home ownership is sold.
Housing associations have the option to use the Recycled Capital Grant Fund (RCGF) regime, with recovered amounts held in the fund for re-investment within three years. RCGF was the subject of a public consultation held earlier this year. The results of this review, detailed within the NAHP Prospectus, are summarised below:
New Build HomeBuy
The Corporation has decided in principle to make a link-to-value for future deposits to the RCGF, where the Corporation's funding represents 25% or more of the total capital costs.
Implementation will be postponed and the Corporation is challenging the sector to show that it can deliver value by exceeding agreed efficiency targets and improving affordability by offering lower rents and providing larger numbers of small share sales.
If the sector responds to this challenge, the Corporation will further postpone detailed implementation.
Open Market HomeBuy
The Corporation intends in principle to make a link-to-value for RCGF deposits. The Corporation will hold back on implementation until outcome of the Shared Equity Competition.
If the Corporation receives offers through the Shared Equity Competition that provide better value for the Housing Corporation or for purchasers than a straightforward link to value, then the Corporation will choose this alternative option.
Other changes to be implemented following the review include aligning the use of RCGF more closely with regional housing strategies, allowing the use of RCGF for land purchase, and allowing - in some circumstances - associations to transfer RCGF balances between regions.
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