It's a match: what strategic partnerships are and how they work

These discussions opened in early spring, with Homes England scheduling a series of round tables involving 90 different housing associations.

The response was clear, Ms Jacob says.

Associations were looking for a ‘whole programme’ approach – longer grant certainty, more flexibility on tenure and freedom to move flexibly when opportunities arose – rather than having to apply for specific grant for specific schemes. It was not the first time associations had taken this message to government, but this time, the response was different.

“I suppose at the meetings, we all thought: ‘Yeah, yeah, we have heard this all before,’” says Mark Henderson, chief executive of Home Group, which secured £85m for 2,400 homes in the first wave of deals. “But they came back to us the next day and said: ‘If you are interested, put a bid in in the next couple of weeks.’”

Within weeks, the first wave of housing associations interested in the model submitted their plans.

So how was this new model going to work? Unlike the current ‘continuous market engagement’ used under the Shared Ownership and Affordable Homes Programme (SOAHP), where grant is released project by project and rules about the mixture of tenure and location are tight, strategic partners will have more flexibility.

“To have the flexibility to just say: ‘These are the homes we can deliver for this much money,’ means we can be quite agile at responding to opportunities when they come up," jonathan Layzell, Stonewater

Instead, associations will state how many houses they will start over a five-year period and how much they estimate they will need to do so, as well as provide an indicative pipeline of tenure and location; after that, however, the rest will largely be up to them.

Jonathan Layzell, executive director of development at Stonewater, which in partnership with Guinness Partnership secured grant of £224m from the deals announced at the Budget, says: “To have the flexibility to just say: ‘These are the homes we can deliver for this much money,’ means we can be quite agile at responding to opportunities when they come up.”

Obligations are based around a full five-year programme of work, rather than each individual project. Housing associations are expected to provide at least 1,000 new homes by March 2022, increase housing starts by at least 25% and – in another major shift from programmes of recent years – include social rent.

Timelines do apply though: houses will have to be started by March 2022 and completed by March 2024. “We expect our partners to crack on,” Ms Jacob says.

Alan Yates, executive commercial director at Accord, a member of the five-strong Midlands-based Matrix Partnership, which secured £77m in the first announcement, says that flexibility around tenure is significant.

Matrix will get the same amount of grant per unit, irrespective of whether its shared ownership or social rent, and can be flexible about the mix of tenure on a project until its completion.

He says: “If you were to build shared ownership and the market collapsed and these were difficult to sell, you could in theory convert them to rent. On the flipside, you might see shared ownership going well and deliver some more.”

This flexibility emboldens associations to take on more risk: Matrix says that it has increased its development pipeline by nearly 250%, from 1,500 to 3,700 homes, as a result. It is a marked contrast to how shared ownership-obsessed George Osborne originally designed SOAHP, refusing to sanction conversions to rent – a major factor in the cool response of bidders.

The funding also encourages associations to tackle bigger and more complex projects, something the top levels of government are keen to see. Mr Layzell says Stonewater is already looking at sites of 150 and 200 homes – far bigger than its current schemes.

He says: “Longer-term funding allows you to take on a site that will take longer to unpick, but can start in 12, 18, 24 months for a good return on homes.”

Under traditional grant programmes, associations identify a scheme and apply for funding from Homes England. They get paid at three specific points: acquisition, start on site and completion of all homes.

Strategic partners, on the other hand, agree a spending profile for the five years at the start of the partnership, and set a chunk of grant and delivery targets for each year. Organisations can then draw down grant every quarter by evidencing the money they have spent on delivering their commitments. However, it isn’t a free-for-all: funding can be removed if those targets aren’t being met.

Ms Jacob says: “It will be a mature relationship and we will work with partners if we identify gaps. But absolutely, at the end of the day, if a partner isn’t delivering, we expect that overall number of homes to be built.”

She says Homes England will regularly monitor housing associations’ delivery and forecasts to ensure they are on track.

Ms Jacob is keen to stress that the programme is not just about grant – it is also about leveraging Homes England’s other capabilities.

She says: “We want partners to use our other levers. This could include loan facilities, cornerstone funding in different areas of our housing supply, market supply and PRS [private rented sector]. We can have discussions around land and putting our land into joint ventures as equity – there is a whole myriad of options.”

Mr Yates says Accord has already begun using Homes England to obtain access to land. It has set up a special project with the organisation and an unnamed landowner with a “significant amount of land” to build on sites that previously have been difficult to develop.

“Homes England can work with us to unlock these sites and bring them forward, which is a benefit to us, the landowner and Homes England,” he says.

Ms Jacob is keen to stress that the programme is not just about grant – it is also about leveraging Homes England’s other capabilities.

Ms Jacob expects to see the activity of its partners pick up over the next six months and says it is up to the partners to show the success of the scheme.

Mr Henderson says Home Group has already started work on sites and approved the recruitment of several development managers last week.

In September, Homes England opened bidding for wave two. The organisation is now in discussions with prospective partners and Inside Housing understands it could announce its choices before Christmas.

There will be more opportunities, too.

It published its five-year strategic plan earlier this month, listing the signing of new strategic partnerships as one of its main priorities for the next few years.

Homes England confirmed to Inside Housing that partners will also be able to see their partnership allocations increased, depending on their performance and the resources being available. It has already started work to try to increase flexibility in its other grant programme in how and when funding can be drawn down.

This new model looks, increasingly, like the future.