Total Cost Indicators (TCI) - Summary

Background on TCI area/cost bands

In 1998 the Department introduced ‘benchmark’ TCI area / cost bands for all social housing, including Design and Build by Competitive Tendering (CT) schemes, funded or part funded by HAG to optimise value for money within a limited budget.

TCI are used to achieve value for money in the provision of social housing by registered Housing Associations, and to ensure that the appropriate level of grant is paid.

Composition of TCI

TCI are 'all-in', forecast outturn unit costs and include three main cost elements:

acquisition (or land) element
works cost element
on-cost element
Breakdown of TCI component cost elements - Table A

Setting of TCI levels

TCI are based on a combination of information on land and property costs supplied by Land & Property Services in its Spring and Autumn reports and scheme cost data produced by monitoring approved schemes. Account is also taken of statutory requirements, including new forms of Government Tax levies and other costs that will increase the cost of construction works.

TCI are normally reviewed twice yearly by the Department and are subject to consultation with the Northern Ireland Federation of Housing Associations (NIFHA).

TCI form the basis of the Department’s capital funding approach, and are divided into unit types and Cost Group areas on a City / District Council basis.

TCI represent the basis for a cost evaluation of HAG funded units. TCI are also used to calculate the maximum level of grant or other public subsidy payable.

Further details on this inter-relationship between TCI and grant levels are given in the Grant Rate Guidance Notes.

Use of TCI benchmark floor area bands

the Department always encourages Associations to provide as high a standard as possible; however, the ‘benchmark’ TCI area bands selected must provide satisfactory dwelling areas for a given (optimum) occupancy and at the same time ensure a more equitable distribution of HAG to all Associations;
Associations must proceed on the basis that if a dwelling area falls within the stated ‘benchmark’ TCI area/cost band for the optimum occupancy (see above) the proposals will generally be acceptable to the NIHE (DPG);

Where an Association wishes to:

Build to a higher TCI floor area band - a reasoned case for the HAG has to be provided at the earliest possible opportunity. NIHE (DPG) will look at each case on its merits and a delay in obtaining a decision should be expected. The Association will be responsible for any additional HAG costs for an area band above the ‘benchmark’ TCI area band;
Build to a lower TCI floor area band - NIHE (DPG) will need to be satisfied that the proposals will provide acceptable housing provision. If not, the proposals will be rejected. In acceptable cases, HAG will be based on the actual TCI area band achieved (Note: Area is to be measured in accordance with the Total Cost Indicators base table). The accommodation is normally provided in self-contained bungalow, house, flat or maisonette form, but for singles can be in ‘shared’ dwelling form;

For more guidance on space standards for units by dwelling type:

Restricted user organisations only - Please refer to the TCI Floor Area Bands / Cost Groups Tables applicable to self-contained and shared General Needs accommodation and any special design features.

To go direct to guidance on measuring floor area and space exclusions:

Explanatory notes for Measuring Unit Floor Area (TCI Base Table)

Key and supplementary multipliers

Key and Supplementary Multipliers are applied to the base TCI figures to allow for scheme variations as outlined in the multiplier tables. Thus, there is a relationship between the base ‘norm’ cost of a unit and its unit type.

A series of key multipliers adjust the costs for different types of procurement including new build, off-the-shelf, rehabilitation and existing satisfactory purchases.

A series of supplementary multipliers further adjust the costs for the scheme type including housing for the elderly, supported housing, single storey, wheelchair etc.

Publication of updates

Updates to TCI and accompanying grant rates are published as close as possible to the beginning of each financial year to have the benefit of the most up-to-date historic data on development costs. They include the 'average' or 'norm' unit cost of housing on a City/District Council Area basis.

Schemes exceeding TCI

Where the Scheme Cost Index exceeds the 100% TCI benchmark, such schemes are subject to additional scrutiny to identify the underlying reason for higher costs and to confirm that the proposals represent value for money. In such cases, the Association must give detailed reasons explaining why the Scheme Cost Index exceeds the 100% TCI benchmark. This applies both to Tariff & Non-Tariff funded schemes.

Schemes with a Scheme Cost Index between 100% and 130% may be considered for approval only where a strong, evidence-based case is presented by the Association.

Schemes with a Scheme Cost Index over 130% per cent do not normally represent value for money and will only be considered for approval in the most exceptional circumstances, with the agreement of the Head of Development Services.

Associations seeking approval for schemes that exceed TCI are advised to contact NIHE (DPG) at the earliest possible opportunity.

Tariff funding

From 1st April 2010 all Housing Associations moved to a Tariff funded arrangement (i.e. TCI times Grant Rate) and funding is awarded on this basis.

NIHE (DPG) reserves the right to seek approval from NIHE Chief Executive’s Business Committee, to remove from Tariff, any scheme or schemes, the viability and / or deliverability of which would be adversely affected by remaining in Tariff.

Adjustments

The principle of Tariff funding is that Associations gain financially on some schemes which in turn subsidises more expensive schemes. The Department funds and NIHE (DPG) manages the Social Housing Development Programme on this basis. Each Association is expected to maximise its development activities utilising the Tariff- funding model.

NIHE (DPG) intends to use Adjustments as a control mechanism to deal with situations where grant may be revised upwards or downwards consistent with the Tariff-funding approach which allows grant paid to an Association to be capped at the cost of delivering the scheme.

NIHE (DPG) will monitor scheme submissions and Tranche payment claims to identify cases where it would be appropriate to cap grant payments.

Where Associations have not adequately or reasonably investigated site conditions prior to site purchase, an Adjustment will not normally be available.

Associations should note that adjustments do not apply to Existing Satisfactory Purchases (ESP), Rehabs, Off the Shelf purchases (OTS) or Design & Build schemes and adjustments (to enhance Grant) will not be considered for Tariff schemes after start-on-site stage.

It should be noted that in exceptional circumstances, where the housing requirements of clients with Complex Needs can only be met via the Special Purchase of an existing dwelling by a nominated housing association, NIHE (DPG) may consider the award of a Grant Adjustment in order to ensure that the acquisition and delivery of a suitable dwelling is economically viable for the nominated housing association.

In circumstances where an association considers that a scheme proposal will not be deliverable without additional grant, it is that association’s responsibility to submit a request seeking an Adjustment as part of the Application for Project Approval. To facilitate effective budget management, such requests must be submitted at the earliest opportunity. The request for an Adjustment must include information and evidence that supports the rationale for additional grant, including a detailed and itemised cost breakdown.

Similar arrangements would also apply in circumstances where the housing requirements of clients with Complex Needs can only be met via the Special Purchase of an existing dwelling by a nominated housing association.

Adjustment – Grant enhancement

The approach to the assessment of Adjustments (to enhance grant) is as follows:

Scheme proposals with a Scheme Cost Index between 100% and 110% will receive no additional Grant funding, other than in the most exceptional circumstances.
Scheme proposals with a Scheme Cost Index between 110% and 130% will be considered for an Adjustment (subject to submission of a formal request for additional funding by a housing association as part of its Application for Project Approval). Such requests will be considered in the context of Land Cost and Abnormal Works Costs, within the following parameters;

Land Cost:

In circumstances where Land Cost is a contributing factor to a high Scheme Cost Index, the housing association seeking an Adjustment is required to supply a standard, independent RICS Valuer’s Red Book valuation. In order to verify the land costs submitted by the association, however, DPG will also commission a valuation from the Department of Finance’s Land & Property Services (LPS) unit. Such a valuation will only be sought when there is a variation of >10% between the TCI Allowance for Land, and the housing association’s independent valuation, subject to a de-minimis level of £25k.

It should be noted that when a DPG-commissioned LPS valuation does not fully reflect the Association’s valuation, the Adjustment amount will be calculated using the LPS valuation.

If the LPS valuation supports the housing association’s independent valuation, DPG will consider awarding a funding Adjustment to reduce the Scheme Cost Index to no lower than 110%, other than in exceptional circumstances. [In cases of this type, the Adjustment would cover the difference between the notional TCI Allowance for Land, and the housing association’s independent valuation / or the DPG-commissioned LPS valuation, whichever is lower].

It should also be noted, however, that funding adjustments relating to Abnormal Works Costs will only be considered after Land Cost issues (where applicable) have been addressed and will only be awarded to reduce the Scheme Cost Index to no lower than 110%.

Abnormal Works Costs:

In circumstances where an Adjustment has already been awarded (to address high Land Cost) and the SCI remains >110%, or where Abnormal Works Costs are the sole factor contributing to a high Scheme Cost Index, DPG will consider awarding an Adjustment in respect of Abnormal works costs to reduce the Scheme Cost Index to no lower than 110%.

Associations seeking an Adjustment to address Abnormal Works Costs must submit a detailed cost breakdown showing the high cost Abnormal items. The cost breakdown should also be accompanied by a 1:200 scale Site Layout drawing, clearly indicating the nature, location and extent of Abnormal works affecting the scheme.

A report prepared by an independent Consultant or Technical Agent, confirming that the scheme represents value for money, must also be provided. It is essential that these pieces of information are presented as part of the Application for Project Approval, in order to facilitate a timely assessment of the Adjustment request. DPG will review the supporting information and determine the extent to which of these Abnormal items will be eligible for additional funding via an Adjustment.

It should be noted that Adjustment requests will not be considered where the extent of the grant enhancement is less than £25k.
Schemes with a Scheme Cost Index >130% do not normally represent value for money and will only be considered for approval (and the award of an Adjustment where this is requested by an association) in the most exceptional circumstances, with the agreement of the Head of Development Services. Scheme proposals exceeding this threshold must submit the same suite of cost-related information and supporting rationale as is required for schemes in the 110% to 130% range.

Associations seeking approval (and an Adjustment) for schemes with a Scheme Cost Index >130% will normally receive additional funding only between 110% and the 130% upper limit. Schemes exceeding this threshold may be approved, without necessarily receiving additional grant funding beyond 130%.

Adjustment – Grant capping / reduction & recovery

(Guidance valid at the date of Scheme Approval continues to apply)

Grant may be capped or reduced in the following circumstances:

Where Grant exceeds the Qualifying Scheme Costs
Where the Final Works account is substantially (>30%) below the Approved works costs.
Where the Scheme Cost Index is lower than 90%.

It should be noted that in circumstances where Grant recovery is required, such action will not be taken unless the recovery amount is >£25k.

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