Transparency data

Levelling Up Home Building Fund: accounting officer assessment

Updated 30 October 2024

Background and context

One of the main aims of the Department for Levelling Up, Housing and Communities (DLUHC) is to deliver more, better quality and greener homes. The Levelling Up Home Building Fund (LUHBF) contributes to this aim by diversifying the housing market, helping small and medium sized firms to build more homes, encouraging growth in innovative techniques such as modern methods of construction (MMC) and supporting the government’s Levelling Up priorities, with the majority of delivery outside of London and the South East. The fund’s purpose is to:

• support access to finance (both loan and equity) for small and medium developers, building on the success and lessons of the existing Home Building Fund – Short Term Fund (HBF-STF),
• increase access to tailored lending facilities,
• support new entrants to build a track record and access finance, and
• provide further capability support and leverage private investment through partnerships with existing lenders.

LUHBF will support SMEs to build up to 42,400 homes, unlock housing capacity of c2,000 and unlock MMC capacity of c7,300, at an additionality rate of 30%. The interventions will therefore support the delivery of at least 51,700 homes in total. Loans are repaid over a maximum five-year term, and Homes England’s budget for this fund is agreed for this Spending Review period (until the end of 2024/25). The fund was launched in February 2022 and will run from 2022/23 until 2027/28, with repayments continuing until 2030/31.

Assessment against the Accounting Officer Standards

Regularity

The LUHBF is operated by Homes England on the Department’s behalf under existing legislative powers in the Housing and Regeneration Act 2008 (‘HRA 2008’ ). The Department’s power to fund Homes England by grant is laid out in Schedule 1 para 5 of this Act. The HRA 2008 gives Homes England broad powers to provide financial assistance, including in the form of investment, as well as general incidental powers to ‘do anything it considers appropriate for the purposes of its objects, or for purposes incidental to these purposes’, which are:

a) to improve the supply and quality of housing in England,

b) to secure the regeneration or development of land or infrastructure in England,

c) to support in other ways the creation, regeneration, or development of communities in England or their continued well-being, and

d) to contribute to the achievement of sustainable development and good design in England, with a view to meeting the needs of people living in England.

England in this definition excludes Greater London for which there is an existing delegation by the Greater London Authority which details how all commercial development loans from central government are to be administered in London.

A Full Business Case received approval from HM Treasury in November 2021 and DLUHC Ministers approved launch of the fund in January 2022. Funding, alongside appropriate delegation and authorities for the fund, were agreed as part of Spending Review 2020 and re-confirmed at Spending Review 2021.

Overall accountability lies with DLUHC, but the programme is run and managed by Homes England using their statutory powers as set out above. Homes England has a delegation to manage some loan applications, with larger projects and variations subject to both DLUHC and HM Treasury approval processes. Homes England do not hold a delegation for equity investments, which are all referred to DLUHC’s central governance process as well as to HM Treasury.

Propriety

The business case for LUHBF was approved by both DLUHC Investment Sub-Committee and HM Treasury. The fund is within the Government Major Projects Portfolio (GMPP), managed by the Infrastructure Projects Authority (IPA). Assessment and management of risk is underpinned by the Homes England Risk Management Framework, framework for credit risk, and Risk Taxonomy. The project approach to assurance is based on the standard Three Lines of Defence model.

Homes England will have SRO responsibility for the delivery of the fund . The SRO role will be supported by two Project Director roles, one for policy (to be carried out by a designated DLUHC Deputy Director) and one for delivery (a designated Homes England Director).

Value for money

The LUHBF operates financial transactions, with the long-run recovery rate after incorporating interest payments and fee income approximately 100%, resulting in a small net direct cost to the Exchequer - approximately zero if it were run across a full economic cycle. In normal circumstances a BCR calculation is therefore not possible, and as a result of having a positive Net Present Social Value (NPSV) of £1.082bn, the scheme represents high value for money. This assessment takes risk into account.

LUHBF used the Green Book method, Department for Transport Web Transport Analysis Guidance (WebTAG) and the DLUHC appraisal guide. Sensitivity testing was performed using Value for Money risks.

Feasibility

The LUHBF is the successor fund to the Home Building Fund – Short Term Fund (HBF-STF), which opened in 2016 and closed for applications in 2022. The operation of the HBF-STF has equipped Homes England with experience of managing such an intervention. Light touch evaluation of this fund, conducted in 2021, fed into the design of the LUHBF. The experience of Homes England in delivering complex deals in HBF-STF, and their regional teams in all areas of England, provide confidence that these changes are feasible to deliver. Homes England actively build a robust pipeline of deals to ensure full delivery of the fund outcomes and spend of the agreed budget. Ability to over-programme the pipeline to counter project attrition is partly conditioned by market conditions and SME appetite for Homes England funding. Activities designed to generate interest and maintain the pipeline, as well as the mix of subsequent transactions, will be subject to regular reporting to the Market Diversification Delivery Board.

Conclusion

As the accounting officer for DLUHC I considered this assessment of the Levelling-Up Home Building Fund. I have prepared this summary, which confirms that the programme has met the tests set out in Managing Public Money and outlines the key points which have informed my decisions to date. If any of these factors change materially during the lifetime of the programme, I undertake to provide 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

30 August 2022

Statement from the Homes England accounting officer

As accounting officer for Homes England, I am accountable to Jeremy Pocklington as Accounting Officer for the Department for the delivery of LU-HBF. Homes England has Senior Responsible Owner responsibility for the Fund and a dedicated delivery project director. I confirm that Homes England were commissioned to deliver this fund by the Department for Levelling Up, Housing and Communities on 3rd February 2022.

Peter Denton
Chief Executive Officer, Homes England