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The Assistant Director for Place and Client Services submitted a report a copy of which had been circulated to each Member.
Greg Edwards addressed Cabinet pursuant to the provisions of Meetings General Procedure Rule 5(1) to express his support for the 100 Homes Project. There was a national and local housing crisis. Due to barriers imposed by the government, Councils could not build sufficient social housing to meet housing need. This was an excellent scheme that would facilitate the provision of housing to vulnerable residents.
Councillor Pearson attended and with the consent of the Chairman addressed the Cabinet to support the 100 Homes Project. There were 3000 people on the housing needs register, so whilst this scheme was welcomed, it would not address the overall need. The Cabinet should do all it could to seek an assurance from central government that Councils would be permitted to build social housing themselves. This was the only way to meet the housing need on the scale required.
Councillor Fox, Portfolio Holder for Housing, introduced the report. This was one of a number of schemes through which the Council was seeking to address housing need. This was a particularly innovative scheme which worked around the constraints that central government imposed on local authorities. The properties would be managed by Colchester Borough Homes, which would ensure they were maintained to a good standard. As the properties would not be funded via the Housing Revenue Account, they would not be subject to Right to Buy which was a further advantage.
RESOLVED that:-
(a) The addition to the capital programme for the acquisition of approximately 100 local homes at market rates be approved
(b) It be agreed to assist with the setting up of a new charity whose charitable aim will be to work to reduce homelessness in Colchester and the approval of any associated expenditure, which will be fully recovered, be delegated to the Assistant Director for Place and Client Services.
(c) The Council enter into a limited liability partnership (LLP) with the new charity “Hollytree’s Homes” for the purpose of managing genuinely affordable local homes.
(d) The long-term leasing of the acquired homes to the limited liability partnership for a minimum of 80 years be approved.
(e) The granting of up to £2 million of retained right to buy receipts, affordable new homes bonus and affordable housing commuted sums to the limited liability partnership to use to increase designated affordable housing for borough residents be approved.
(f) Initial rent levels for the homes, as dictated by the lease with the limited liability partnership, be no more than the Local Housing Allowance to ensure that they are genuinely affordable for local residents.
(g) Authority be delegated to the Chief Finance Officer/section 151 Officer, in consultation with the Portfolio Holder for Business and Resources, to finalise the funding arrangements that will enable the limited liability partnership to obtain its long leasehold interest.
REASONS
There are currently just under 3,000 households on the Council’s Housing Register seeking affordable housing. The Council continues to seek new and innovative ways to increase the supply of affordable housing and provide good quality, affordable and stable homes for Colchester’s residents who are in housing need.
The use of a charity led LLP enables the Council to maximise the use of retained Right to Buy receipts, affordable housing new homes bonus and commuted sums to secure far more affordable homes than just using this funding on its own and to do so at pace. The proposed lease solution ensures that the homes remain genuinely affordable and are offered on a longer-term basis than other solutions to provide households with greater future certainty and security. The lease structure also ensures that the Council retains the freehold or long leasehold interest in the homes and can benefit from any future capital appreciation or additional revenue income.
By matching the future repayment of the funding of the acquisition of the homes to expected rental income profile, the LLP is being financed in the most cost effective way. This funding will come via an institutional investor with a lower initial cost that increases by inflation over the duration of the agreement.
The lease and funding structure will enable a small financial surplus to be generated by the LLP which will flow back to the Council as rent under the lease. This surplus will contribute to funding front line services for Colchester residents.
ALTERNATIVE OPTIONS
The Council could do nothing however, as detailed in section 5 of the report, with rising homelessness pressures resulting in reduced lifetime outcomes for the affected households and the financial impact for the Council, this is not considered a realistic option.
The Council could extend its own acquisition programme within the Housing Revenue Account (HRA). However, this would require additional borrowing within the HRA, along with subsidy from other sources such as Right to Buy receipts. This would need to be justified by a business case under the prudential borrowing regime. Any solution delivered in the HRA can potentially be affected by central government policy regarding rent levels, tenancy types and changes to the right to buy rules. The LLP solution, as it is not constrained by central government rent policies, offers much greater future flexibility on the use of the homes and rent levels.
The Council could set up a community benefit society (CBS) or a wholly owned company (in addition to the existing wholly owned companies the council has setup). Both of these have been explored and discounted because the CBS model would see the CBS take ownership of the assets meaning it benefits from any increases in the value of the homes and that the Council would not have any mechanism to control the use of the assets or rent levels in the longer term. The wholly owned company model has been discounted because the Council has already undertaken significant borrowing to then on-lend to its companies and any additional borrowing would further expose the Council; as any new company would be wholly owned it would not be able to benefit from the subsidies available such Right to Buy receipts that the Council can make available and improve the viability of the model. It would also be a less tax efficient model than the LLP, reducing the financial benefit that can be achieved.