Affordable Housing Supply Programme: process and procedures MHDGN 2022/02

Annex E: Cost over-runs

As detailed earlier, projects receiving funding through the Affordable Housing Supply Programme will be considered for additional grant in relation to unforeseeable and unavoidable cost over-runs which may be identified following tender approval.

RSLs, RSL subsidiaries, local authorities and local authority arms-length external organisations must demonstrate to the grant provider’s satisfaction that the additional costs have not resulted from their deliberate actions.  And that they were unforeseeable. 

Ordinarily, all information necessary to evidence the reasons for the cost over-run and to assess the request should be submitted through the HARP system at project completion stage – this information should be submitted earlier however, with the agreement of the grant provider, if the cost over-run is (a) of a significant nature and (b) affecting the deliverability of the project.  The information submitted to the grant provider should include confirmation from a senior local authority official that the local authority is aware of the impact of the cost over-run on its local programme given that the grant funding of any approved cost over-runs will be met from the Resource Planning Assumption for that local authority area.

The grant provider will take the final decision on whether cost over-run requests are acceptable based on the evidence provided.

Unforeseeable and unavoidable cost over-runs which are below £20,000 or 1% of the works cost, whichever is lower, will not normally be considered eligible for additional grant funding.  

If accepted, additional capital costs above the minimum threshold amount specified above will normally be funded in full for new supply shared equity projects[1], and normally in the same ‘Affordable Housing Supply Programme grant : total cost’ ratio as that approved at tender stage for social rented projects and mid-market rented projects.