The Affordable Homes Programme under the NAO microscope: the main criticisms

Poorly defined targets

In total, there is a 32,000-home shortfall in the expected number of homes to be delivered in comparison to the published targets across the 2016 and 2021 programmes.

Drilling down into the data, the spending watchdog found that DLUHC set targets that it could not meet. In discussions with the Treasury, it was agreed that the 2016 programme would deliver nearly twice the number of new homes for ownership than its original proposal of 75,000.

DLUHC publicly committed to deliver 153,000 homes, including 145,000 for ownership, at a cost £4.7bn. But it told the spending watchdog that “with hindsight, it could not deliver the original aims of the 2016 programme, although at the time it did not seek a ministerial direction on the grounds of feasibility”.

The report finds that while the programme focused on the number of new homes that it wants landlords to deliver within a fixed budget, there are few targets based on wider factors such as quality, size and environmental standards.

Instead, the scheme relies on existing building regulations and standards as well as planning permission to determine these factors.

While the 2021 programme specified what type of tenure it wants associations to deliver, and in January 2022 set out 17 additional outcomes, including reduced fuel poverty and creation of mixed communities, it did not fully define or quantify these outcomes or what would constitute success.

On a slightly more positive note, the NAO’s analysis of the department’s intended benefits found that the 2016 programme will achieve 96% of its target for housing starts, but some of these homes will not be completed until 2032.

Homes England and the GLA will collectively achieve 241,000 starts, compared with a published target to deliver 250,000 starts by March 2023. Of these, it forecasts 219,000 homes will complete by March 2025, with the remaining 22,000 homes, all in London, to be completed by March 2032.

However, the 2021 programme is expected to miss its target of delivering 180,000 homes, as the NAO forecasts that 157,000 new homes will be complete. This iteration of the scheme also included sub-targets for supported accommodation and the delivery of homes in rural areas.

Current estimates by the NAO identify “a medium level of risk” that the 2021 programme will not meet a target of delivering 10% supported homes. This is because funding has been allocated for 8,471 new supported homes out of a target of between 12,200 and 13,000.

In a similar vein, there is a “high risk” that the same target for rural homes will also be missed as there is allocated funding for just 7,439 new rural homes.

Much of this should not come as a surprise, though, as Inside Housing reported in July that the government’s housing agency failed to hit any of its housing delivery targets in 2021-22, according to its own annual performance report.

Homes England in part blamed labour and material shortages and “challenges in the planning system” for the missed targets last year, and the NAO highlights similar risks in its report.

Inadequate business case and oversight

These challenges are all too familiar across the sector, and despite their impact on targets, the report reveals that the agency did not follow best practice when producing its business case. More worryingly, it declared that the bidding processes in the first two rounds of the AHP were not open or objective.

In 2018, to help it meet revised delivery targets, Homes England introduced strategic (multi-site) bidding under the Strategic Partnership Programme. For this scheme, the body used less formal processes, with no objective scoring system and it selectively invited housing providers to bid.

The process under the 2021 programme was improved to what the NAO described as a more “robust” approach, with an objective scoring and assessment system.

Improvements in DLUHC’s business case were also made for the latest version. However, oddly, this came after ministers had already decided to continue with a grant programme, determined funding levels and set delivery targets.

Contrary to Treasury guidance, it did not consider any alternatives to a grant programme and did not sufficiently consider delivery risks or whether it had adequate arrangements to oversee the programme.

Evaluation is usually a key component in delivering any programme, yet the government has not, and will not, look at the 2016 scheme. Instead, Homes England expects to publish its own evaluation later this year. An interim update on the 2021 programme is expected next year, with a final report at the end of 2027.

Early oversight of the GLA during the 2015 and 2016 programmes was also a key concern for the NAO. It found that City Hall lacked information on its spending and found that after a spending review, it had failed to spend £1.8bn of the funding committed for the period.

It was accepted by DLUHC that these payments were a basic error of programme management, caused by a lack of understanding between itself and the GLA about when funding should be transferred. A programme has since been agreed to spend this money.  

The GLA said the money was not an underspend an will be drawn down by the end of this financial year, and that it has always administered the programme according to the terms agreed with the government.

However, more worrying is the revelation that the GLA had not signed any contracts with housing providers under the 2021 programme until DLUHC intervened. This meant the GLA had not achieved any housing starts through the 2021-26 programme, as at the end of March this year.

The spending watchdog says the government has accepted that it needs to improve its governance and oversight of the programme and make improvements around data and performance reporting, and deliver a more consistent approach to forecasting housing starts, completions and spending.

Lack of co-ordinated vision

It may come as a surprise to many in the sector that under the AHP, the NAO found a lack of strong incentives for landlords to deliver affordable homes in areas of highest housing need or the most unaffordable areas.

The report says that currently DLUHC does not specify how many affordable homes are needed in different areas and instead uses a formula to assess how many homes in total each area needs. The consequence of this is that there is not a strong match between the areas of high housing need and the areas where associations are delivering affordable homes under the programme.

Furthermore, landlords are currently delivering fewer homes in more unaffordable areas. This is measured by the difference between local house prices and wages.

The NAO also scrutinises the programme’s ability to deliver cross-government benefits in relation to housing benefit spend, for example, reducing the number of people in temporary accommodation and adult social care.

When the AHP was designed, however, it did not include savings in temporary accommodation or adult social care costs from providing supported housing in its economic modelling.

Additional modelling on delivering social rent homes in London found significant savings in future housing benefit costs. Over a 60-year period in the capital, savings in forecast housing benefit spend exceed the grant funding needed to deliver a new home for social rent.

By comparison, five of the other eight English regions, delivering a new home for social rent increases the forecast future housing benefit cost. This is because there are more households on the social housing waiting list that have more than one person living in them who are eligible for benefits. If that household splits, as a result of being offered a newly built socially rented home, the housing benefits bill will go up.

Finally, despite many landlords setting out retrofit strategies to help meet net zero carbon by 2050, DLUHC has not used the AHP to advance these objectives. Homes England did not include any specific targets relating to reducing emissions for the 2021 programme and instead relies on planning regulations to advance progress in this area.

The GLA, by contrast, specified that all developments of 10 or more homes under the 2021 programme must be net zero carbon and improve air quality.

Room to improve

The spending watchdog concludes that despite improvements made to the AHP since 2015, it does not expect the programme to hit its targets. Even if it does, the scheme’s poor design means homes may not be built where they are needed most.

The NAO says the programme needs to be more ambitious and has outlined a number of recommendations.

It suggests that before the end of this year, DLUHC should develop internal contingency plans in response to risks, such as rising construction costs and a lack of bids from housing providers to deliver rural housing, to ensure it can fully meet objectives under the 2021 programme.

The NAO also call for more transparency and improved oversight, and advises the government to consider what information it needs to improve its understanding of housing needs in local areas so it can use this information to better target areas for new housing.

The government should do this before the next iteration of the AHP.

A review of the programme’s targets and sub-targets is also recommended, to help clarify how the scheme is contributing to wider government objectives, such as net zero and savings for other departments and local government.