Intermediate Rent Funding Competition - Clarifications

Intermediate Rent Funding competition

The Department for Communities is offering funding to support the delivery of 300 new Intermediate Rent homes, and is seeking to work with an organisation (or multiple organisations working as one) who will act as the Intermediate Rent Operator. The Operator will also let these homes to eligible tenants in line with the Intermediate Rent policy.

Funding is available in the form of a long-term low interest Financial Transactions Capital (FTC) loan and the Department is now inviting interested parties to apply for this funding and to set out how they will deliver the homes.

As outlined in the application form, applicants are required to provide a range of information, within the responses to the four selection criteria scored on the basis outlined in the form. Applicants should use the responses to the selection criteria to outline their proposed approach.

A page limit for each answer in the application form has been set to assist the scoring panel when scoring applications and to ensure fairness and consistency for applicants. Applicants should be factual, succinct, and clear in completing an application, and abide by the page limits listed. Applicants are limited in their response to not exceed the page limits stated. The page limits stated include narrative text, tables, flowcharts, organograms, infographics, or diagrams submitted in response to the relevant criterion.

Applicants may supplement their responses to the selection criteria with additional ancillary or supplementary documents (including those listed or, for example, a sample policy / tenant handbook) which illustrate the information supplied in the response. The response to the criteria must fully detail how an applicant meets the criteria without relying on supplementary documents.

Ancillary or supplementary documents are intended to illustrate the information supplied in the application and must not be used to extend responses.

Documents such as existing policies or Terms of Reference, for example, may be appended as a supporting document. Where such documents are referred to within an applicant’s response to a criterion, supporting documents do not count towards the page limits stated. Where an applicant exceeds the page limits for any criteria only the part of their response which falls within the page limit is considered as part of the assessment, rather than their entire response being disqualified.

Tie break

In order to create a merit order list, it may be necessary to use a tie break to determine the merit order of any applicants with the same overall score. Where applications achieve the same overall score, the tie break situation will be broken by identifying the applicant which received the highest marks for the following criteria, in order of priority, until the tie is broken:

If when applying the tie breaker, a clear result is identified (i.e. the tie breaker score differentiates the applicant who has the same score for the initial evaluation of applicants), the process will be terminated at that step

Calculation of weighted scores

A worked example has been provided below based on an applicant scoring 25 points on each of the four criteria and a total score of 100. The applicant’s score is multiplied by the weighting to give a weighted score. In this scenario the applicant would achieve a total score of 175 after weighting has been applied.

Social value

The Intermediate Rent scheme is designed to provide applicants with maximum flexibility in how they propose to achieve delivery. As set out in paragraphs 38 to 41 of the application guidance, social value is an important element to be considered and incorporated where public expenditure occurs. Social value can be delivered in a range of ways including via construction and through service delivery. The Operator should seek to deliver social value outcomes in the construction and / or operational phases regardless of whether or not they are required to abide by public procurement requirements. Where there is limited or no construction dimension to delivery, social value may be incorporated in the operational phases through, for example, the delivery of property and tenancy management services.

The Social value website provides information on delivering social value obligations on public contracts and provides contractors with resources to help connect them with broker organisations who may be able to assist in the delivery of their social consideration obligation.

Procurement

Paragraphs 42 and 43 of the Intermediate Rent application guidance sets out the arrangements regarding procurement. As it is not known, at competition stage, who the Operator will be or whether the public procurement legislation applies to them, the guidance indicates that applicants will wish to seek advice regarding any implications arising for them.

Eligibility criteria

Track record

The application guidance indicates that applicants need to set out their track record in delivering housing (see paragraphs 18 and 21). Track record can relate to the provision of housing (build or acquisition) and/or the letting of homes (including property and tenancy management). Track record can therefore relate to either or both of those tasks and can relate to any tenure of housing.

A proven track record (of five years or more), can be an indicator of likely future performance in the delivery of providing rented accommodation. It will be important that applicant organisation(s) can demonstrate collective experience/established track record of delivering housing, both in terms of delivering properties to an acceptable standard and in relation to acting as a landlord and all that entails. Information required in the application includes evidence of how the organisation/partnership/consortium is constituted, audited accounts, and details of track record of delivering and managing housing in relation to NI housing market.

Where an applicant is unable to fulfil the criteria in relation to track record, they need to consider partnering with another organisation who can fulfil it. The application form provides further information on how applicants can demonstrate they have the required experience.

Private sector entity

In order to be awarded Financial Transactions Capital funding the Operator must be classified as a private sector entity. Housing Associations and their subsidiaries are, for example, classified in the private sector (under the European System of Accounts 2010).

Reserves

Paragraph 126 of the application guidance sets out the requirements that applicants must meet regarding the holding of reserves.

Applicants must provide evidence, in the form of a bank statement, of reserves equivalent to six months operating costs or, where not available, the organisation’s reserves policy will be examined as part of the application assessment process. It will be necessary for the Operator to establish 6 months of reserves in advance of a formal award of funding and applicants must commit to fulfil that requirement in advance of any funding award.

The Department acknowledges that not all applicants, particularly newly established entities, will have such reserves in place at the time of application and the application guidance (page 11) sets out the requirements applicants should meet in such circumstances.

Applicants applying via a newly formed company should provide evidence that they have access to sufficient reserves (this may be via a parent company for example) to cover six months operating costs for the delivery of Intermediate Rent scheme only. If successful, the required level of reserves must be transferred to the newly established entity as a condition of award.

Applicants applying as an existing company with other business activities which would sit alongside their Intermediate Rent proposal should demonstrate that they hold sufficient reserves for 6 months of operating costs for both their existing business and Intermediate Rent to ensure that they have sufficient cash for all their activities and that the Intermediate Rent undertaking would not pose a risk to their other activities or lead to cross-subsidisation by Intermediate Rent cashflows.

Timescales

The table at paragraph 126 of the application guidance provides an indicative timescale for the competition process.

The Department is keen to see Intermediate Rent homes delivered without unnecessary delay and will endeavour to progress this stage as expediently as possible. The stages following the identification of the highest scoring applicant will see an intensive and iterative process, and both parties will have a role in ensuring that this stage completes as soon as is practicable Therefore, it may be possible for the award of funding to proceed ahead of the indicative date of April 2026.

Intermediate Rent Competition and the Social Housing Development Programme

The Intermediate Rent scheme is a standalone scheme and is not connected to other funding arrangements provided by the Department or the NI Executive, including the Social Housing Development Programme. The timescales, targets, and funding for the Intermediate Rent Competition are detailed in the application guidance and application form.

The funding available for the delivery of Intermediate Rent will be a long-term low-interest Financial Transactions Capital (FTC) loan. This funding model has been designed in order to minimise competition for Capital budget, including that available for the Social Housing Development Programme (SHDP).

All public expenditure must be supported by an approved business case. Once the highest scoring applicant has been identified through the Intermediate Rent Funding Competition, the Department will progress with the development of a robust and fully evidenced business case, based on the applicant’s proposal.

Annex C (page 57) of the application guidance provides more detail on the funding package financial assumptions.

Delivery

Delivery proposals

Applicants should set out, as described in the application form, how they propose to deliver the required 300 Intermediate Rent units as part of their application. This should include specific or indicative locations, unit types, sizes, and delivery routes, where known or under consideration.

Cashflow projections should represent all the costs and income involved in delivery and operation (whether known or estimated) across the 25 year control period.

For those who are including pipeline projects within their applications, such as planned acquisitions or planning applications already in train which are eligible for funding, they should outline the details of these and any additional delivery they plan to meet the requirements. Details on what constitutes acceptable pipeline are set out at paragraphs 157 and 158 of the application guidance.

For some applicants, delivery may be more notional at application stage and their plans for delivery in terms of number of units, size and type within proposed locations may be outlined in general terms.

Delivery requirements

The Intermediate Rent competition has been designed to permit applicants for the role of Operator as much flexibility as possible in relation to delivery route, locations, dwelling types / size etc. As a result, it is not possible to be prescriptive around specific cost information as this can vary by location, unit type / size and so on. Annex C (page 57) of the application guidance provides the Department’s working assumptions, at time of writing, in relation to estimates of costs and funding requirements which applicants may find useful in drafting their cost proposals. The Operator will be required to provide valuations regarding the properties delivered through the scheme.

Applicants for the role of Operator are required to submit their financial projections as part of their application on a competitive basis based on their experience and taking into consideration potential fluctuations in the market, cost of construction etc. The proposals therein will be scrutinised and will form the basis for the offer of funding. Paragraph 94 of the application guidance also makes clear that there is no facility in the scheme for cost overruns.

In order to ensure adequate probity in the use of public expenditure the Department will require any valuations to be conducted by an independent qualified valuer which could include the District Valuer of Land and Property Services.

Development and delivery

Intermediate Rent units may be delivered via a range of delivery routes including new build, acquisition (e.g. Off The Shelf (OTS)), conversion or rehabilitation and should do so in compliance with the “Homes for Intermediate Rent Design Standards”. While opportunities may be presented to the Operator to purchase properties, the Operator will not be compelled to acquire and operate these properties as Intermediate Rent homes and the decisions as to how the Operator will deliver the required dwellings will rest with them. There is potential that the Operator may, separate to the scheme, contract to operate or manage such properties and, again, this will be a decision for the Operator, taking account of legislative and policy requirements.

Under this scheme the qualifying capital development costs which may be met via the Department’s funding and the Operator’s contribution are set out on page 21 to 23 of the application guidance document. It is a decision for each applicant how they would provide their contribution should they be selected to act as Operator. Paragraph 94 of the application guidance also makes clear that there is no facility in the scheme for cost overruns. Capital grant is not available to contribute to the costs of delivery of Intermediate Rent homes.

Financial assessment

DfC has worked with the Strategic Investment Board to develop a funding model and identify the anticipated income and expenditure involved in delivery and operation over the course of the 25-year loan term. Having identified the expected maximum expenditure for a range of delivery scenarios DfC will consider how the applications received compare with our projections. Value for money is a key driver and the assessment process will take this into consideration when examining and scoring the cost proposals submitted by applicants.

Applicants are encouraged to maximise value for money to the public sector by delivering efficiently and cost-effectively and by leveraging private funding where possible. The Application Guidance indicates that DfC requires the Operator to make a contribution of a ‘minimum of 15% of qualifying development costs (via reserves or equity and / or debt finance), 100% operating costs including any set-up costs and any non-qualifying costs’.

In assessing the relevant criteria, the assessment panel will consider the value for money within proposals rather than seeking delivery at the lowest cost. Viability and sustainability of the scheme proposed will be important considerations in scoring. The number of units developed, size, type, location, and delivery route will all be taken into consideration in determining value for money rather than simply, for example, awarding a higher score to applicants who require the least amount of loan funding.

In applying an interest rate to the loan, DfC is seeking to cover the administration costs associated with the loan. DfC has made certain assumptions based on estimated delivery costs / locations which indicate that interest at a rate of up to 1% is likely to be necessary to meet the cost of administering the loan. Applicants’ proposals for the payment of interest will not feature separately as part of the assessment of the application however the assessment panel will consider the total financial projections associated with a proposed scheme which will be impacted to a degree by the approach to the payment of interest.

Land costs are eligible development costs and land may form an element of the Operator’s contribution. As the Department’s funding will be drawn down over the development period, applicants will wish to consider, as part of their cashflow planning, how they will access development finance to ensure delivery. Development costs cover three key elements: Acquisition, Works, and On-costs associated with development. Full details of this can be found at paragraph 56 in the application guidance.

There are multiple delivery routes, unit types/sizes, and locations possible, some of which may be more economical to deliver than others but would have trade-offs in terms of longevity and depreciation for example. The application form provides more detail on the type of costs which should be included in applicants cost proposals, how these should be set out and the scoring and weighting criteria used as part of the assessment.

Criterion 3 in the application form indicates that applicants should include a cashflow forecast spanning the expected 25-year loan term. The application should reflect full construction and operational costs and incomes adjusted for inflation and inclusive of irrecoverable VAT, separately reflecting those costs which are eligible for Intermediate Rent funding and those which do not qualify. All costs including upkeep, maintenance and replacement of fixtures and fitting should be factored into the cashflow projections submitted as part of the application.

The Department will work closely with the Operator to agree how the funding will be drawn down as part of the due diligence process ahead of any funding award.

Retention of units

Paragraphs 52 and 99 to 101 of the application guidance, and criterion 4 in the application form, provide a steer to applicants on the future of the units supported once the control period has expired. The Operator is required to retain the units as Intermediate housing for rent for a minimum of 25 years and is strongly encouraged to retain the units as affordable housing thereafter.

In considering how they propose to deliver on the requirements associated with funding, applicants are asked to set out their intentions when it comes to retaining or disposing of the units delivered using Government funding at the end of the 25-year term. It is understood that circumstances can evolve over time. The Department will therefore work with the Operator to agree the arrangements where the Operator seeks to dispose of some or all of the units, based around their proposed delivery model, and this will be kept under review by both parties.

Applicants should detail their assumptions regarding their retention and/or exit intentions for the units delivered following the control period (the period units must remain as Intermediate Rent housing). This may include retaining the homes as Intermediate Rent housing, retaining the properties as another form of affordable housing, or selling some or all of the properties to repay the loan.

To encourage applicants to retain properties as affordable housing, the Department may specify that any profit arising from such a disposal will be shared with the Department. As proposals around retention or disposal are unique to each application, it would not yet be possible to comment how, for example, any profits arising from any disposal might be apportioned.

It is understood that it is difficult to specify at the outset what outcomes an Operator may experience across and at the end of a 25-year point and so the specific conditions regarding unit retention arrangements will be agreed in advance with the highest scoring applicant and kept under review. More information on the repayment of the loan and the control period can be found in the application guidance in paragraph 62.

Potential future funding

The competition seeks to award funding to support an initial phase seeking the delivery of 300 Intermediate Rent homes in Northern Ireland over a 5-year development period. As this is a new product, using a novel funding stream, it is important to test the concept before committing to future schemes. An evaluation of the scheme will take place after three years of development, and this will determine the design of future schemes and funding opportunities going forward.

Regulation

Applicants for funding to act as Intermediate Rent Operator can come from a range of organisations, and this may include (for example) a private subsidiary associated with a Registered Housing Association. Registered Housing Associations are responsible for ensuring compliance with the requirements operated by the Housing Regulator. If, on conclusion of the competition, a subsidiary associated with a Registered Housing Association was to become Intermediate Rent Operator then any matters in relation to regulatory compliance would be matter for the ‘parent’ Housing Association. Where applicable, applicants may wish to seek advice from the Housing Regulator, to ensure that any arrangements they plan to put in place remain complaint.

Operational delivery

Rent setting

Intermediate Rents must be set at a discount of at least 20% on average local market private rents, at the time of letting, for a similar property type and size. Applicants’ proposals should reflect how they intend to meet this policy requirement. Maximising affordability for tenants, while important, must be balanced against ensuring the scheme is viable and affordable to deliver long-term. The assessment will, in deriving a score, consider the total financial projections within an application which can deliver a viable and sustainable scheme.

While it is desirable that rents are as affordable as possible for tenants, there may be limitations when it comes to setting rents with reference to Local Housing Allowance (LHA) levels and this is reflected within the policy. It will be for applicants to consider viability and affordability when estimating rents.

Page 13 of the Intermediate Rent policy outlines how Intermediate Rents must be set.

The Northern Ireland Housing Executive now regularly publishes a report detailing a summary of average weekly private sector market rents figures to assist with the setting of rents for Intermediate Rent properties and other sources of information to support rent setting are outlined in the policy.

Anyone seeking to develop or set rent for Intermediate Rent units should refer to this range of materials and additionally seek confirmation, at time of planning, development and letting, of local average market rents for similar type / size of dwelling from a suitably qualified professional. Evidence should be retained and may be requested by the Department, or by Councils where the dwellings relate to a planning obligation.

Rates

Domestic rates will be applicable to Intermediate Rent properties and should be taken into consideration as part of proposal costing alongside any necessary service charges. It is not anticipated that any reduction in rates would be applicable. Some tenants may be able to access rate relief depending on their circumstances.

In calculating potential rent charges within proposals, the rent cost should incorporate any services charges applicable and, if rates are a separate cost, it should be clearly detailed. Any additional service charges or other charges (such as domestic rates) not covered by the rent, should be considered as part of tenants’ ability to pay rent determination as a household should not normally pay more than 30% of their net income on rent costs.

The Department will work with the Operator to monitor compliance with the policy, including when it comes to the setting and uprating of rents. Applicants are encouraged to consider a range of costs associated with delivery, including domestic rates. The funding arrangements have been designed to maximise flexibility for applicants in making proposals for delivery within the parameters outlined. Paragraph 70 of the policy outlines how domestic rates may be dealt with, and allows flexibility for these to be paid by the landlord or the tenant, mindful of the LPS guidance regarding rates on rented properties. Applicants should endeavour to outline in their proposal their indicative approach to responsibility for domestic rates on the properties they plan to deliver.

Finish and furnishings

As set out in the policy and ‘Homes for Intermediate Rent Design Standards’ documents, homes for Intermediate Rent whether newly built, renovated / rehabilitated, converted, or existing purchases, are expected to be delivered to a turn-key finish, and it is not necessary to provide additional furnishings.

Internal decoration should be provided to all units as part of a turn-key finish. This includes emulsion to ceilings and walls, floor coverings and window coverings fitted alongside provision for curtain rails in main living room and bedrooms. Kitchen white goods should also be included. Applicants should refer to the above documents for further detail on requirements.