Grant assumptions and registered provider bids

Affordable housing grant viability arguments turn on one number: the transfer value a registered provider will pay for the completed affordable homes. Grant raises that number, because a provider with grant can pay more and still make its own business plan work. So an appraisal that excludes grant shows worse viability and supports a smaller affordable offer, and an appraisal that assumes grant the applicant has not secured shows better viability and promises something that may not arrive.

Both versions get submitted. The defensible one sits between them, and it is built from dated written bids rather than from assumption.

Why grant changes the affordable transfer value

A registered provider calculates what it can pay from the rent or sales income the units will generate, less management and maintenance, discounted over the business plan period, with its cost of debt applied. Grant reduces the capital the provider has to raise, so the same income supports a higher purchase price.

The effect is largest on the lowest-income tenures. Social rent generates the least income and therefore the lowest transfer value without grant, sometimes low enough that a provider will not bid at all. Add grant and social rent becomes deliverable. Shared ownership, by contrast, generates a capital receipt on first tranche sale and can often work without grant.

One rule shapes everything else. Grant programmes operated through Homes England and, in London, the Greater London Authority generally apply an additionality test, so grant is not available simply to fund affordable homes that a planning obligation already requires. Where grant is used on a section 106 scheme it is normally because the scheme delivers more affordable homes than policy requires, or a deeper tenure than policy requires, such as social rent in place of affordable rent. Verify the current position in the relevant funding guidance before building it into an appraisal, because programme rules change between funding rounds.

Whether an appraisal should assume grant

The Planning Practice Guidance on viability expects every input to be evidenced and justified, and indicates that grant funding should be taken into account. That does not resolve the practical question, which is whether to assume grant that has not yet been awarded.

Three positions are defensible, in descending order of strength.

Grant is secured, with a funding agreement or an allocation confirmed in writing. Assume it, state the amount and attach the evidence.

Grant is bid for but not awarded, with a provider partner identified and a bid submitted. Run the appraisal both ways, present both, and propose a mechanism in the section 106 that deals with the outcome.

Grant might be available in principle. Do not assume it as income, and say why not. An appraisal that claims speculative grant to justify a policy-compliant offer creates an obligation the scheme may not be able to meet.

The mechanism matters more than the assumption. Where grant is assumed and not obtained, the section 106 needs either a review or a cascade, and our note on affordable housing review mechanisms in a section 106 sets out how those clauses are usually built.

Obtaining and evidencing provider bids

Bids are the evidence base, and an authority's reviewer will read them for signs that the exercise was designed to fail.

Approach at least three registered providers active in the area, and ask each for a written bid on an identical brief. The brief should state the unit mix by bedroom count and floor area, the tenure mix sought, the specification, the service charge regime, the expected programme and practical completion date, whether the units are being delivered under a planning obligation, and whether grant is assumed.

Then keep the correspondence. Bids, caveats, refusals and the reasons for refusal are all evidence, and a refusal to bid is often the most persuasive document in the pack. A provider writing that it will not acquire 11 flats spread through three cores in a block with a £2,400 service charge tells the authority something that no spreadsheet does.

Four weaknesses reviewers look for. A brief that bundles the affordable units into the least attractive part of the scheme. A mix weighted to unit types the local market does not want. Bids obtained from providers with no operating presence in the area. And bids more than six months old, which no longer reflect the cost of debt.

Attach the bids to the viability assessment as an appendix rather than summarising them, and give each one a reference in the appraisal's input schedule.

Tenure mix and its effect on price

Transfer values rise across the tenures in a fairly predictable order, and understanding that order lets you negotiate the mix rather than argue about the percentage.

That table explains why a tenure negotiation is sometimes more productive than a quantum negotiation. An authority that wants more affordable homes and an applicant that needs a higher transfer value can sometimes both move by shifting the mix towards shared ownership, provided the authority's policy allows it and the need evidence supports it.

Service charges deserve their own paragraph in the affordable housing statement. Providers discount bids heavily where the charge is high, where the affordable units share plant with the market units, or where there is no separate core, and those are design decisions taken long before the bid is sought.

Timing of bids against the application

Seek bids once the unit schedule is stable and before the viability appraisal is finalised, which usually means after the layout is fixed and before submission.

Too early and the bid is caveated into uselessness, because a provider cannot price a mix that may change. Too late and the appraisal has been written around an assumed value that the bids then contradict, which is worse than having no bids.

Refresh them if the application sits undetermined for a long period or if the scheme changes materially. A section 73 application on a consented scheme usually needs new bids, and whether the original obligations carry across is its own question, covered in our note on whether section 106 obligations carry over to a section 73 permission.

Conditions and obligations that follow

The appraisal's conclusion becomes contractual, and the drafting should mirror the assumptions.

Six provisions do the work. A definition of affordable housing tied to the national definition in force, so the obligation does not drift when policy changes. The tenure and unit mix, with the units identified on a plan. A transfer mechanism, including the price basis and the timing relative to practical completion. Nomination rights for the authority. Mortgagee protection provisions, without which many providers will not acquire. And a cascade setting out what happens if no registered provider acquires within a stated marketing period, whether that is an alternative tenure, a commuted sum or a further marketing exercise.

Where grant has been assumed, add a clause dealing with grant not being obtained, and a clawback where more grant is obtained than assumed. Authorities increasingly ask for the second as the price of accepting the first.

Where the authority disputes the figure

Expect the district valuer or an independent reviewer to ask for the full bid correspondence rather than the summary, to test the transfer values against benchmarks for the authority's area, and to question whether the marketing exercise reached enough providers.

Three responses work. Provide the correspondence unredacted, since redactions read as concealment. Explain the specification and the mix using what the providers themselves said about them, quoting the refusals. And offer a review mechanism rather than defending a single number to the last, because a review converts an argument about a forecast into a calculation on actual outcomes.

If the matter reaches appeal, the inputs get tested again from the beginning, as our piece on when an inspector reopens viability at appeal describes. An appraisal built on dated written bids survives that process. One built on a percentage of open market value taken from a textbook does not.

Enter your postcode on PlanScope to see which viability and affordable housing documents a scheme is likely to need, then send the drafts for professional review.

This is general guidance, not legal advice; check the position with your local planning authority or a qualified professional before relying on it. For specialist technical reports, qualified professional input may be required. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.