Glossary of terms

Affordability
The price of housing (whether for rent or sale) in relation to local incomes.  The usual benchmark is 30-35% of lower quartile household incomes.

Affordable housing
Social rented and intermediate housing, provided to specified eligible households whose needs are not met by the market.

Affordable rent
Rented housing provided by RPs of social housing, that has the same characteristics as social rented housing except that it is outside the National Rent Regime, but is subject to other rent controls that require it to be offered to eligible households at a rent of up to 80% of local market rents.

Asset Cover
This is a test to determine an organisation’s ability to cover its debt obligations with its assets, after all its liabilities have been met.

Balance sheet
The Assets and Liabilities of an organisation.

Best consideration
This is usually thought of as the maximum amount of cash that can be realised by selling land or property.  The consideration can also be the achievement of policy objectives, e.g. the development of affordable housing available to local people, to which the local authority has nomination rights.

Build Costs
The costs of construction of a development – usually the amount paid to the building contractor; this should not be confused with the total development cost (also called total scheme cost), which also includes the cost of purchasing the land, and any on-costs of development.

Building Fund
A financial provision that is built up over a number of years to meet the costs of replacing components when they become obsolete e.g. boilers, windows, roofs.

Cash flow
This can be for the development period or for the full appraisal term.  For the development period, it comprises any income (from grants, deposits from purchasers and sales receipts), less the costs of site acquisition, build costs  and on-costs.  For the full appraisal term, it comprises the income (from rents and service charges) & expenditure (on maintenance and management) through the life of a development.  This cash flow may be discounted for appraisal purposes.

Cross subsidy
Profits from one part of a scheme (e.g. housing for market value sale) used to meet losses on another part (e.g. social rented)

Development costs
The full costs of development, including site acquisition, build costs (see above) and on-costs (see below).

Design & Build
A procurement method whereby the building contractor is responsible not only for building the development, but also some or all of its design.

Discount rate
The annual rate at which costs and income are discounted to bring future costs and income to a present value.  This is also used as a risk management tool:  the higher the risk, the higher the discount rate and thus the lower the present value.

Discounted cash flow
The income (from rents and service charges) & expenditure (on maintenance and management) through the life of a development, discounted by application of the discount rate.

HomeBuy
The government brand for affordable home ownership schemes outside of London and covers a suite of low cost home ownership products designed to help social tenants and others in priority need to purchase a suitable home.  In London, a similar suite of schemes is known as First Step.

They offer a form of tenure whereby the purchaser buys a proportion of the equity of the property (usually 25-75%) and rents the balance at a subsidised rent (typically 2.75% pa of the un-bought equity); there is also a shared equity option (see below).

Income & Expenditure account
The annual accounting for all income, expenditure and depreciation of the assets of an organisation.

Intermediate affordable housing
Housing at prices and rents above those of social rent, but below market price or rents.  These can include shared equity products (e.g. HomeBuy), other low cost homes for sale and intermediate rent.

Interest Cover
This measures if an organisation can meet its interest obligations out of nett income.

Intermediate (market) rent
Housing let at rents between social rent levels, and full market levels.  Typically intermediate rent levels are around 70% of full market levels.

Loan to Value percentage or ratio
The proportion of the Security Value (see below) that is represented by the amount of the loan.

Maintenance costs
Expenditure on the property during its life, to keep it in good condition.  This may be either reactive (e.g. repairing a broken window – also known as repairs), or cyclical (e.g. re-painting).

Major Repairs Provision/Fund (MRP): see Building Fund

Management costs
Direct expenditure on staff costs associated with letting, rent collection, etc., plus overheads such as property insurance.

Market rent
Rented housing let at the maximum rent level that can be achieved in the local market.

Mutual Home Ownership
A tenure model developed by CDS Cooperatives.

The National Rent Regime
The National Rent Regime is based on a formula that generates “target rents”, with reference to local house prices and local earnings.  The objective is for those target rents to be affordable for people in low paid employment or dependent entirely on state benefits.  Target rents can increase at no more than RPI +0.5% per annum thereafter.

Nett Present Value (NPV)
The result of a discounted cash flow, bringing together the present values of income and expenditure through an appraisal period.

Nomination Rights
The ability of a local authority to nominate a household to be granted the tenancy of an available rented housing unit. 

On-costs
Expenditure in addition to land acquisition and build costs, including professional fees, statutory fees & charges, finance charges during the development period, sales costs, etc.

Off the Shelf
A development method where newly-completed houses are purchased from a developer

PPS3: Planning Policy Statement 3
Housing (PPS3) underpins the delivery of the Government’s strategic housing policy objectives and aims to “ensure that everyone has the opportunity to live in a decent home, which they can afford in a community where they want to live”.

Procurement method
The contractual arrangements used to develop the scheme.

Profit & Loss account: see Income & Expenditure account

Registered Provider (RP)
A provider of social rented housing registered with the Tenant Services Authority, the regulator – another name for a housing association.

Registered Social Landlord (RSL)
The term Registered Provider superseded this in 2010.

Repair: see maintenance

Section 106 Agreement
An agreement under Section 106 of the Town and Country Planning Act 1990.  Such agreements represent a charge on the land for which planning permission is granted, which imposes obligations on both the current and any future owners of that land. 

Security value or valuation
The value that a lender considers the property to be worth in the event that the borrower defaults on their loan repayments.  It is usually somewhat below market value, to reflect the costs of repossession and sale.

Shared equity
A form of discounted sale where the purchaser buys at a percentage of the open market value.  They then hold the property either for a limited period (typically 5-10 years) after which they have to pay the balance; or until they sell the house.  The discount is secured by a second charge (i.e. ranking after the mortgage lender’s security).

Shared ownership: see HomeBuy

Social rent
Housing for which guideline target rents are determined through the National Rent Regime.

Traditional procurement
The procurement method where an architect or surveyor designs all aspects of a development, and a building contractor builds it to those detailed designs.

Turnkey: see Off the Shelf.

Void or voids provision
When a rented property is empty and thus generating nor rental income.

With Contractor’s Design: see Design & Build

Works costs: see Build Costs