Agenda item - Council House Building Programme

(Housing Portfolio Holder) To consider the attached report from the Housing Scrutiny Panel (C-037-2011/12).

(1) That a suitably qualified organisation be appointed to provide a House Building Development Agency Service for the Council, including all development and project management services, and the provision of all professional building services, including (but not exclusively) architectural, employer’s agency, quantity surveying, cost consulting, planning supervision, engineering and surveying, but excluding works construction;

(2) That a Development Agent be appointed by the Cabinet:

(a) following a competitive tender process using the EU OJEU Restricted Procedure procurement process;

(b) based on the most economically advantageous tender (in terms of price and quality) received from at least five suitably qualified organisations, shortlisted through a Pre-Qualification Questionnaire (PQQ) process, in accordance with pre-determined evaluation criteria;

(c) based on criteria used for both the PQQ stage and Tender stage previously approved by the Cabinet, on the recommendation of the Housing Portfolio Holder;

(d) having regard to the agreed criteria and on the recommendation of a Selection Panel chaired by the Housing Portfolio Holder, and also comprising the Chairman of the Housing Scrutiny Panel, Director of Housing and Asst. Director of Housing (Property); and

(e) for a four-year period, with options to extend the contract for three further individual years;

(3) That the Essex Procurement Hub be requested to undertake the EU procurement process for the appointment of the Development Agent, on behalf of the Council;

(4) That a suitably experienced Housing Development consultant be appointed to undertake the appointment process for the Development Agent, in liaison with the Essex Procurement Hub, funded from within the existing resources of the Housing Revenue Account’s (HRA) Housing Feasibilities Budget;

(5) That, through the contract with the Development Agent, all the Development Agent’s consultants be required to provide the Council with collateral warranties, as a safeguard to enable the Council to take legal action against a consultant directly if problems arose in the future due to negligence;

(6) That the evaluation of PQQs and tenders be undertaken by the Housing Portfolio Holder, Officers and the Housing Development consultant, in accordance with the pre-determined and approved evaluation criteria;

(7) That the Housing Portfolio Holder be authorised to agree any other aspects of the appointment process for the Development Agent, not covered by this report or decisions;

(8) That, once the initial desktop development assessments of garage and other housing sites had been completed by Officers, and the HRA Financial Plan agreed, reports be submitted to the Cabinet on a proposed Council House Building Development Programme, based on the completion of around 20 new affordable homes per annum, and seeking approval to undertake development appraisals and seek planning permission for specific sites;

(9) That, once the Cabinet had approved the House Building Programme, further reports be submitted to the Cabinet on the required budgetary provision for the Housing Capital Programme;

(10) That, in the meantime, appropriate capital provision for the House Building Programme be included within the Indicative HRA Financial Plan, to be considered by the Cabinet at its meeting on 5 December 2011;

(11) That appropriate revenue provision be made within the HRA from 2012/13, to fund the associated revenue costs of the House Building Programme, including a budget for abortive fees for developments that did not proceed;

(12) That Affordable Rents (not Social Rents) be charged for the completed Council properties, in accordance with the Government’s Affordable Rents Framework, with rent levels to be charged for individual properties agreed as part of development appraisals;

(13) That all financial and development appraisals, any borrowing requirements and the required Housing Capital Programme funding for proposed “development packages” by the Council be approved by the Cabinet on an individual basis;

(14) That such development packages be funded from the following sources (with full details to be set out in the development appraisals for individual schemes approved by the Cabinet), on the basis that the Council House Building Programme was self-funded, without any financial support from the General Fund:

(a) HRA surpluses;

(b) Homes & Communities Agency (HCA) funding (where possible);

(c) Section 106 Agreement contributions from developers in lieu of on-site affordable housing provision;

(d) Borrowing (if necessary);

(e) Cross-subsidy from the sale of other development sites within the House Building Programme on the open market if necessary; and/or

(f) Capital receipts from future Right to Buy sales, if the Government introduced its recently-announced policy to increase discounts under the Right to Buy, and replace each property sold with a new affordable home;

(15) That, once the Development Agent had been appointed, a Development Strategy be formulated setting out the proposed approach to planning and delivering the House Building Programme, for adoption by the Cabinet;

(16) That a new part-time Senior Housing Officer (Development) post (18 hours per week) be established once the Development Agent had been appointed and appropriate budget provision made within the HRA for 2012/13 when the salary grade had been determined;

(17) That, once appointed, development partner status for the Council be sought by the selected Development Agent from the HCA, and the Pre-Qualification Questionnaire be completed on behalf of the Council; and

(18) That the appointed Development Agent be required to procure contractors to construct the properties within the development packages on behalf of the Council, in accordance with the Council’s Contract Standing Orders and EU procurement requirements (if necessary).

The report of the Housing Scrutiny Panel regarding the Council House Building Programme was presented on behalf of the Chairman of the Scrutiny Panel by Councillor D Stallan.

The Cabinet had previously agreed in principle that the Council should undertake a modest Council House Building Programme, and requested the Housing Scrutiny Panel to consider the detailed issues of implementing the Programme, and to make recommendations to the Cabinet accordingly.

The Cabinet was informed that the Council had a number of difficult-to-let garage sites and other sites that could be developed to provide an estimated 120 homes over a 6-year period. The proposed approach of the Housing Scrutiny Panel was to appoint an existing housing association, through a competitive tender process, to act as a Development Agent and provide all the required development and project management services - including the provision of all professional building services - rather than the Council employing its own professional team of staff. Development Appraisals for each of the identified sites would assess whether or not they had development potential, the costs and anticipated income. The rents charged for the new developments should be at the new “Affordable Rent” levels, which were up to 80% of market rent levels, but that the rent levels charged for individual properties should be agreed as part of development appraisals. This could result in rents of less than 80% being charged, depending on the viability of the schemes and the affordability of the rents.

It was acknowledged that grant funding from the Homes and Communities Agency (HCA) could be available in the future, but any shortfall in capital funding for developments should be met through the appropriate sources, including the sale of development sites on the open market if necessary, and that the Programme should be self-funded, without any financial support from the General Fund. The Housing Scrutiny Panel had suggested that a Development Strategy should be adopted by the Cabinet in the future, setting out the proposed approach to the House Building Programme, and that the Cabinet should also approve the budgetary requirements for the Housing Capital Programme. It was currently estimated that capital funding of around £2.5million per annum would be required for the construction of 20 properties each year, and that a Programme of 120 properties over 6 years would cost around £16million (including provision for inflation and additional costs).

The Scrutiny Panel had felt that a new part-time post would be required in due course, funded from the Housing Revenue Account, to resource the Council’s responsibility for the House Building Programme, for which some of the costs could be capitalised. A start on site for the first phase of the Programme was unlikely to take place until 2014, with completion in late 2014/15 – although this did have some benefits in terms of the Council’s ability to fund the Programme, and the possibility of obtaining grants from the HCA through any future National Housing Programme the Government might implement from 2015 onwards.

The Cabinet’s attention was drawn to the extensive list of alternative options that had been considered by the Scrutiny Panel, when compiling its recommendations, which was listed in the report.

The Housing Portfolio Holder thanked the Housing Scrutiny Panel for their report and outlined some minor changes to the Scrutiny Panel’s recommendations for the Cabinet to consider. The Portfolio Holder felt that all references to ‘housing association’ should be amended to ‘suitably qualified organisation’ so as not to unduly limit the tender process, and as a result Recommendation 2(b) within the Scrutiny Panel’s report would have to be deleted as it would be unlikely that a private organisation that was not a housing association would be an existing partner of the HCA. The Portfolio Holder also felt that the decisions outlined in Recommendation 2 of the report should be agreed by the Cabinet rather than just the Portfolio Holder, and that the Portfolio Holder should be involved in the evaluation of the Pre-Qualification Questionnaires and tenders, which would require an amendment to Recommendation 6.

The Director of Housing added that the vast majority of the HCA’s partners were housing associations, however some of the larger developers had recently been granted partner status in the last few weeks as well. The Cabinet welcomed the amendments suggested by the Housing Portfolio Holder. It was felt that the decision to appoint a Development Agent was of sufficient importance as a topic for discussion and decision by the Cabinet. The amendments suggested by the Housing Portfolio Holder were agreed.

In respect of the recommendations made by the Housing Scrutiny Panel, the Director of Housing stated that approximately 100 new affordable homes were expected to be built by housing associations within the District in the coming year, and the draft figures for the New Homes Bonus in 2012/13 produced by the Department of Communities and Local Government suggested that approximately half of all affordable homes built within Essex between October 2010 and October 2011 were situated in Epping Forest. With regards to the amount of financial contributions received or expected from Developers through Section 106 agreements in lieu of on-site affordable housing provision, the Director reported that £435,000 of such monies was committed to the Council’s Open Market Shared Ownership Scheme, and that the Council should receive a further £1.1million in Section 106 monies from various different development schemes. It was also noted that a further £800,000 had been offered for a development, which was currently the subject of a Planning Appeal.

The Planning & Technology Portfolio Holder reported that some pre-application discussions had taken place regarding new development on the Epping Forest/Harlow border, but no planning applications had yet been received. The Portfolio Holder undertook to inform Councillors if there were any further developments. The Cabinet agreed the recommendations of the Housing Scrutiny Panel, as amended by the Housing Portfolio Holder.

Decision: