Grant Rates - Summary
In conjunction with TCI, Grant Rates are set for the various types of Mixed Funded developments for each TCI Cost Group. This takes into account a number of factors including:
- TCI Cost Group - unit cost of provision (taken as TCI);
- Management allowance (taken from rental income);
- Maintenance allowance (taken from rental income);
- Major Repairs Provision (taken from rental income);
- Rental income (Target Rent);
- Provision for voids/bad debts in rental income; and
- Private Finance Repayment Factor (taken from rental income to repay a Private Finance loan over a given period).
A Key Objective of the funding system is to achieve value for money in return for grant, and to ensure the correct level of grant is paid. Grant rates are an essential part of this system and are divided into TCI Cost Group areas (A to F) and unit types. Grant Rates represent the proportion of scheme costs that will be funded by any form of public subsidy including HAG. The definition of public subsidy in this context can be accessed at Public Sector Land and Public Subsidy. Where there are contributions of public subsidy to a scheme from sources other than HAG, the amount of HAG payable is reduced pound for pound.
Because of the different capital and revenue costs of different dwelling types, separate grant rates are published for a range of scheme types and/or client group. The gross TCI multiplier which is applied to a unit defines the dwelling type for grant rate purposes. Grant Rates can be modified on a scheme basis to reflect scheme type cost factors. Once the Grant percentage for the scheme has been established at Scheme Approval the proportion of approved costs to be met by NIHE (DPG) is set. The same percentage of Grant, therefore, will apply to any agreed cost-overruns in respect of non-tariff-funded schemes.
NIHE (DPG) has arrangements that allow the submission of schemes containing a combination of different Grant Rates within a single scheme. Consequently, such schemes have an overall scheme Grant Rate that will be used for the tranche calculation.
The process assumes that, over a given period, rental income will cover Management, Maintenance and Major Repair provision and pay-off the Private Finance loan. The Private Finance Repayment Factor is on a low-start/deferred interest basis and this evens out the costs over the given period. Unlike a conventional repayment loan, where the capital/interest repayments would generally be the same each year - assuming the interest rate remains the same - the Private Finance Repayment Factor assumes that yearly increases in rents will allow the repayments to increase by a corresponding percentage. For Examples of Loan Repayments (Per £1000 of Loan).