Agenda item

(The Director of Communities) To consider the attached report (CHB-015-2013/14).

(1)        That the report from CIH Consultancy on the options for funding an accelerated Council Housebuilding Programme and the associated implications be noted;

(2)        That, in accordance with its terms of appointment, the Council’s Development Agent, East Thames, be asked to update the Council’s Development Strategy, once the outcome of the Council’s bid to the HCA is known, taking account of any decisions made to accelerate the Housebuilding Programme and other relevant decisions made by the Cabinet Committee and Cabinet since the time the current Development Strategy was produced; and

(3)        That the outcome of any decisions to accelerate the Housebuilding Programme be included within the Council’s HRA Financial Plan 2014/15, when it is reviewed and updated at the end of Quarter 1 of 2014/15.

The Director of Communities presented a report to the Cabinet Committee. He advised that at the last meeting, the Cabinet Committee requested a report to this meeting on how an accelerated and extended Housebuilding Programme could be funded, and the associated implications.

The Council’s HRA Business Planning Consultant, Simon Smith from CIH Consultancy had produced a report on this issue, together with advice on the maximum amount for which HCA funding should be sought, in order to ensure that all 1-4-1 Receipts from Right to Buy sales are spent within the required 3 years of receipt and that none were passed on to the Government, with interest.

Simon Smith was in attendance to pre sent his report, annexed to the main report, and to answer members’ questions.

Based on the information within CIH Consultancy’s report, the recommendations set out at the commencement of the report had been formulated by the Director of Communities, most of which would require endorsement by the Cabinet.

Recommended:

(1)     That the report from CIH Consultancy on the options for funding an accelerated Council Housebuilding Programme and the associated implications be noted;        

(2)     That the following recommendations be made to the Cabinet:

(a)     That the Council seeks to increase the number of affordable homes developed in Phases 3-6 from 20 to 30 per year;

          (b)     That HCA funding be sought, initially, for Phase 2 of the Housebuilding Programme at Burton Road, Loughton for 40 homes - based on a 56-home development, with the remaining homes in Phase 2 being funded from 1-4-1 Receipts and the other resources made available within the HRA as a result of the other recommendations within the CIH Consultancy report;

          (c)     That further bids for HCA funding be made in future years for future phases of the Housebuilding Programme, should the amount of 1-4-1 Receipts be less than forecast within the CIH Consultancy report, provided that the receipt of such HCA funding would not result in any 1-4-1 Receipts having to be passed to the Government;

          (d)     That, as a policy, the minimum balance held in the HRA be reduced from £3 million to £2 million; 

          (e)     That the Council’s HRA Self-Financing Reserve be re-profiled, to release funds for the Housebuilding Programme in earlier years of the HRA Business Plan by increasing contributions to the Reserve in later years (closer to the HRA’s first PWLB loan maturing in 2021/22), whilst ensuring that sufficient resources have been accumulated within the Reserve to repay this first loan on maturity (subject to no further borrowing being undertaken to extend the Housebuilding Programme, as referred to in Recommendation 2(h) below);

          (f)      That 30% of the Council’s accruing HRA attributable debt balances be utilised to help fund the accelerated Housebuilding Programme;

          (g)     That the HRA’s contribution to the Housing Improvements and Service Enhancements Fund between 2019/20 – 2021/22 (Years 7-9) be reduced by a sufficient amount to enable Phases 2-6 of the Housebuilding Programme to be funded (currently estimated at a reduction of £2.09 million - £2.24 million per annum, from £3.87 million per annum to £1.63 million - £1.78 million per annum), which will be dependent on:

                   (i)      The outcome of the HCA funding bid;

                   (ii)     The amount of 1-4-1 Receipts received in 2014/15;

                                             (iii)     The receipt of any further financial contributions received as a result of Section 106 Agreements;

                   (iv)            Any property or land sales for which the Cabinet agrees the resultant receipt can be utilised to fund the Housebuilding Programme; and

                   (v)     Any adjustments that have to be made to the amount allocated to the Fund in the intervening period, due to unforeseen and un-budgeted reasons affecting the HRA.

(h)     That, in principle, the Council Housebuilding Programme be extended by a further 4 years to 10 years, after the current Years 3-6, with an additional 30 new affordable homes provided each year;

(i)      That no decisions be made now on the most appropriate way of funding an extended Housebuilding Programme, but that consideration be given at an appropriate time in the future - and before any commitments are made or expenditure incurred; and

(j)      That the purchase of properties from the open market and/or the provision of local authority grant(s) to one of the Council’s Preferred Housing Association Partners to fund affordable housing schemes in need of grant, continue to be kept as a contingency plan, should the amount of 1-4-1 Receipts still be in excess of the maximum amount that can be spent on the Housebuilding Programme, in order to avoid having to pass any 1-4-1 Receipts to the Government, with interest.

Decision:

(1)        That, in accordance with its terms of appointment, the Council’s Development Agent, East Thames, be asked to update the Council’s Development Strategy, once the outcome of the Council’s bid to the HCA was known, taking account of any decisions made to accelerate the Housebuilding Programme and other relevant decisions made by the Cabinet Committee and Cabinet since the time the current Development Strategy was produced; and

(2)        That the outcome of any decisions to accelerate the Housebuilding Programme be included within the Council’s HRA Financial Plan 2014/15, when it would be reviewed and updated at the end of Quarter 1 of 2014/15.

Reasons for the Decision:

A number of sites within the Council’s ownership have been identified as being potentially suitable for Council housebuilding.  The proposed number of new homes developed at Burton Road, Loughton was likely to be in excess of the numbers included within the HRA Business Plan.  Furthermore, as a result of the current high number of Right to Buy (RTB) sales being completed, there was a risk that not all of the “1-4-1 Receipts” (i.e. those that can be spent on new housebuilding, to replace those lost due to the RTB) will be able to be spent within the required 3 years of receipt.

Moreover, the Cabinet Committee had indicated its wish for the Council to bid for funding from the HCA’s forthcoming Affordable Homes Programme.  In any event, the need for affordable housing continues to increase, whilst Council homes are also being sold through the Right to Buy, so an accelerated Housebuilding Programme would be welcomed. 

Other Options Considered and Rejected:

 (a)  Not to accelerate or extend the Programme, or accelerate it at a different rate or extend it for a different period;

(b)   Not to seek HCA Investment Partner status or bid for HCA funding, or to bid for different number of homes or a different unit grant cost;

(c)   Not to re-profile the HRA Self-Financing Reserve;

(d)   Not to utilise 30% of the HRA attributable debt to help fund the Programme, or to utilise more or less of the attributable debt;

(e)   To reduce further the amount allocated by the HRA to the Housing Improvements and Service Enhancements Fund than proposed;

(f)    To borrow further loans from the PWLB, as an alternative to the proposed approaches for funding; and

(g)   Not to reduce the minimum HRA balances to less than £3 million.