HART Credit Executive Summary

Housing and Regeneration Tax Cut
Executive Summary

1. What is the HART Credit?

The Housing And Regeneration Tax Credit (HART Credit) is a proposed new financial tool – capitated, allocated, and competed for – to fund financing gaps in affordable housing and urban regeneration schemes throughout Britain.

2. The need

Affordable housing or urban regeneration schemes always have a funding gap: costs greater than economic value upon completion. Existing tools are limited and cannot meet demand. Further, they are inflexible, hard to deploy in concert with large-scale schemes, and require government to commit capital up front (hence, take development risk).

3. Overall goal of a HART Credit

Stimulate private investment that engages the local community and is a catalyst for neighbourhood renewal throughout the nation, targeting (a) neighbourhood renewal areas, and (b) areas of affordable housing shortage.

4. Eligible properties

Residential (homeownership, shared ownership, rental), retail, and mixed-use.
Small property owners (SPO) are also eligible for occupant-owner renovation.

5. How it works

The HART Credit is a direct, pound-for-pound reduction of tax payable.
It may be claimed only upon successful completion of the properties/flats.
Allocations of future HART Credit may be reserved through regional allocators.
HART Credit allocations are factored (sold for cash to investors) to create capital.
HART Credit equity used to close funding gaps (or, in high-value markets, to buy ongoing residential affordability)

6. Significant programme benefits

Government pays for performance; development risk transferred to private sector.
Market competition and market forces determine HART Credit price.
Best properties are selected through competition.
Spurs regionality and additionality.
Government expenditure reliable (capitated, allocated).

7. Programme elements and volume

£5.00 per capita (£250m in England) increasing annually by RPI.
Allocated regionally via competitions for the best properties (according to scoring criteria published for consultation).
Expected to fund ±90 schemes annually.
Delivery over three years as a percentage of Total Development Cost
Homeownership, 17% x 3 years; rental/ retail, 25% x 3 years. (Bonus multiplier for historic buildings to counterbalance increased development cost.)

8. Expected programme beneficiaries and benefits

Neighbourhoods— Stimulates revitalisation.
Local government— New resource, flexible new tool.
Central government— Risk shifted to private sector. More rates intake when things improve.
Housing Corporation— Improved property and expanded affordability.
Sponsors— They can assemble capital more reliably.
Sub-market renters— Affordability expands, properties are improved.
Existing owners in impacted areas— They can reinvest, gain tax benefits.
Early-entrant buyers in impacted areas— Take early risk, gain upside.
Local economic stakeholders— interested in the neighbourhood.
English Heritage— Historic properties improved.

9. Key milestones

6/02: Liverpool Symposium endorses tax credits as urban regeneration vehicle.
1/03: Concept papers published for discussion.
5/03: Pilot scheme approved for 1-2 markets (using HART Credit proxy via HMRF).
11/03: Treasury consultation paper published.
3/04: Ground broken on pilot programme construction.
11/04: Draft legislation published.
2005: On the statute books (enacted, Royal Assent)
2006: Program goes live (FY 07)

10. Point of contact

Andrea Titterington, Maritime Housing, Ltd., atitterington@maritime.org.uk