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Smell the coffee – or you’ll be toast
Income, costs and reserves of Approved Housing Bodies
FINANCE
John O'Connor
Senior Associate Consultant, Campbell Tickell, and formerly Chair, Commission on Housing
John O'Connor
Senior Consultant, Campbell Tickell
Issue 80 | October 2025
Approved Housing Bodies (AHBs) operate in an increasingly complex and financially demanding environment. Their core purpose of providing quality homes and services to tenants and communities is challenged by the dual pressures of funding new housing supply and maintaining existing stock. These financial demands are compounded by growing regulatory and governance requirements.
Overview of funding schemes
AHBs rely on a range of funding schemes, each with varying degrees of financial viability. Currently, the most sustainable model for general needs social housing is the Payment and Availability Agreement (P&A) combined with the Capital Advance Leasing Facility (CALF) loan. Other schemes, such as CAS and CLSS (closed for new funding), offer limited viability and are often cross-subsidised by income from P&A arrangements.
The main funding schemes are:
- P&A with CALF: Primary scheme for general needs housing, with most capital finance sourced from the Housing Finance Agency (HFA) along with CALF. This is essentially a cost-based model for social housing.
- CAS (Capital Assistance Scheme): Up to full capital grant funding for supported housing, including homes for older persons and homeless households. Tenants may qualify for a RAS payment to meet the cost rent set by the AHB.
- Social Housing Leasing Scheme: Long-term leasing (20-25 years) from private owners or from NARPS.
- Leasing/Service Level Agreements: Various arrangements for management of social housing on behalf of local authorities, including unsold affordable housing.
- CLSS (Capital Loan & Subsidy Scheme): Ceased for new delivery around 2012 but still relevant for existing housing stock. An annual management and maintenance allowance is paid to the AHB, although the amount per property is considered to be low.
Strategic reviews
Growing medium-size and larger AHBs are advised to conduct annual reviews of their housing portfolios, focusing on:
- The breakdown of housing by funding scheme. This is required for annual returns to the AHB Regulator.
- Viability of housing portfolio under each funding scheme.
- Income from tenant rents, allowances and surplus from P&A.
- Expenditure on direct management and maintenance.
- Adequacy of services provided to tenants under each funding arrangement.
- Sufficiency of reserves including for cyclical maintenance, planned replacement and CALF liabilities.
The Housing Commission recommended that rents under CLSS, CAS, and local authority housing should be set at levels that ensure long-term viability. Achieving this may require substantial government subsidies for certain tenants.
Cost Rental and CREL
AHBs also deliver Cost Rental housing, where rents are based on the cost of provision and maintenance and sourced from the tenants only. Under the Cost Rental Equity Loan (CREL) scheme, homes are designated as Cost Rental for a minimum of 40 years (50 years for AHBs). AHBs can access combined support of up to 55% of the cost of the capital cost of providing Cost Rental housing. This is made up of:
- up to 35% of the cost through CREL
- a non-repayable equity grant of up to 20%
This is coupled with finance borrowed commercially, normally from the Housing Finance Agency.
Confronting the challenges
AHBs must remain committed to their core purpose: supporting communities through provision of quality housing and services. However, the current imbalance of income between the various funding schemes has seen a growing reliance on P&A income to subsidise other schemes and could raise serious concerns. This approach may offer short-term relief but risks long-term sustainability.
This will likely be one of the key issues in the forthcoming strategic review of the AHB sector. Any solution will require AHBs to have a detailed knowledge of any funding deficits on each of their homes to robustly support the case for whatever additional investment is sought. The challenge for government will be to secure the additional funding required to meet the needs of existing housing stock in the context of increasing targets for new delivery. It’s time for both the government and AHBs to confront these challenges head-on. As the saying goes: “Smell the coffee – or you’ll be toast.”
“The challenge for government will be to secure the additional funding required to meet the needs of existing housing stock in the context of increasing targets for new delivery.”
