Developers are to receive a massive funding boost after the European Commission (EC) ruled to allow state aid for housing schemes.
The move will enable the government to use a new funding programme, which will provide up to 60% of the up-front costs for residential developments that would otherwise be unviable.
The programme forms part of the government’s package of proposals to resolve the housing crisis, which were announced by John Prescott last month.
The government hopes to use it as a tool to build more than 200,000 homes, mainly in London and the South East.
It will replace the previous gap funding scheme, which allowed only a minimal amount of cash to go to mixed-use projects with less than 50% housing and located in designated “assisted areas”.
Higher grants aimed at residential schemes had been declared illegal under the European Union State Aid policies.
Under the new scheme any residential development built on brownfield sites and in an area of housing shortage will be eligible for funding, which will be channelled through the RDAs.
However, the scheme limits grants to private housing developments, and will not apply to rented homes.
The limitation has been criticised by the RICS as having some “holes” still to be addressed.
Gordon Hood, head of urban grant regeneration at King Sturge, said: “This scheme should be of great use to areas of market failure, mostly in the North and Midlands, where house prices are too low to persuade developers to build and where one or two subsidised schemes could increase the prospects for the entire area.”
He added: “In areas of high demand, the funding may subsidise key workers, either through grants to developers or directly to purchasers.
“However, I would question whether there are sufficient government resources available here to make a real difference.”
EGi News 02/08/02
