[Report of the Director for Planning, Regeneration and Development. To be introduced by the Cabinet member for Housing , Regeneration and Planning.] Following Cabinet's approval in November 2015 to proceed with an OJEU competitive dialogue process (which commenced in January 2016), to approve the recommendation for a preferred bidder with whom the Council will form the Haringey Development Vehicle as a joint venture, subject to further negotiation and a final decision to create the HDV later in 2017.
Minutes:
The Cabinet Member for Housing, Regeneration and Planning introduced the report which set out the outcome of the Competitive Dialogue procurement process under the Public Contracts Regulations 2015 to procure an investment and development partner with which to establish the Haringey Development Vehicle (‘HDV).
The Cabinet Member provided some context to this procurement decision which was the desperate need for housing both locally and nationally. He further highlighted the strategic analysis demonstrating the need for different types of housing to deal with the housing crisis. The Cabinet was committed to not managing decline and was not simply going to accept the effects of the housing crisis but wanted to build new homes and also improve existing Council housing together with providing good employment opportunities for residents.
It was also important to consider the financial ability of the Council to build the large number of homes needed given the government had withdrawn £160 million from the Council and restricted how the Council spends housing money. It was evident, when considering all other London boroughs positions, that there was not any money for Councils to build a significant number of homes without support.
Members and officers had worked hard, through the Future Housing Review to bring forward options, for increasing housing in the borough. This group had considered a range or working models to increase the availability of housing such as wholly owned Council companies which were actually building fewer homes. They also considered other standard models but as the Council owned land on the housing sites, the Haringey Development Vehicle option offered the better option for the development .This model also ensured the Council could have a share of the profits and be able to reinvest this in community facilities and existing housing whilst maintaining control over the development.
Cabinet’s consideration of the Haringey Development Vehicle had started in February 2015 and the procurement process instigated by Cabinet in November 2015. The Cabinet Member felt that this had been a good thorough process, resulting in a strong preferred bidder coming forward.
If the bidder was approved, there would follow a five month process to finalise the final agreement on the terms of the Haringey Development Vehicle. The Cabinet Member reiterated that he would be working hard to get a good deal for residents during this 5 month period.
The Leader invited questions from Members and the following issues were raised:
The following information was provided in response by the Cabinet Member for Housing, Regeneration and Planning:
There were 13 items put forward for negotiation with the preferred partner, prior to establishment of the Haringey Development Vehicle, by Councillor Bevan, and the Cabinet Member for Housing, Regeneration and Planning agreed to take the following issues forward :
The Cabinet Member for Housing, Regeneration and Planning continued to respond to the questions as follows:
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The Leader invited Cabinet Members asked to put forward their questions.
A question was raised in relation to the involvement of the trade union in the process. The Cabinet Member advised that trade unions would be engaged in the next 5 months where the Council would be clearer on the TUPE position. However, the anticipated number posts likely to tuped transferred would be low.
The Cabinet Member for Communities discussed meeting the aspirations of families and the people part of the regeneration. The Cabinet Member for Housing, Regeneration and Planning, advised that given the press coverage and mis -information, it was important to be honest with residents on Council estates and realise that the decent homes impact was minimal and did not solve the type of long term construction problems of some estates. It was evident that a solution was needed to satisfy ambitions of local people including: providing new homes and jobs, a firm commitment on skills, apprenticeships, increase of GP surgeries, more community facilities. Also, through master planning, providing more green and play space, and children centres. Schools would continue to be engaged with about the Haringey Development Vehicle, also offered the opportunity to build a new school in Northumberland Park.
Cabinet agreed families need more facilities and better homes and would work hard with Councillors and residents on examining what people want in their areas and what the Haringey Development Vehicle should be considering.
The Cabinet Member for Economic Development, Social Inclusion and Sustainability enquired about: the potential homes to be built by the Haringey Development Vehicle, the criteria included for social dividend, as the place where people live was important to them, in terms of having an opportunity to work. In response, it was noted that a minimum of 6000 homes could be provided by the Haringey Development Vehicle, but the hope was to increase this number when looking in further detail at sites.
Unless the Council worked with partners then they would only be able to build a small number of homes when thousands were needed. So without a partner the process would be slower with no control on what happened and not a share of profits. The Council would remain guardians of land setting out the clear dividend to be achieved to invest in housing and social schemes.
The criteria for the procurement had also included social economic scoring which was equally weighted with the other regeneration priorities. Therefore, it was clear to the bidders that social economic criteria would need to be worked to and the Council had been clear on this.
The Cabinet Member for Finance and Health referred to the concerns raised on the financial risks of the Haringey Development Vehicle, and spoke about considering the future financial sustainability of the Council given the overspend and government grants currently being phased out. Councillor Arthur highlighted the increased risk of not having a clear way of delivering new homes. There currently was no risk free way to build homes, and it was not financially prudent for the Council to take a housing development venture forward alone.
The proposed decision would in future bring financial sustainability for the Council with increased business tax revenue and additional Council tax income to deliver the services needed across the borough. The Council would be eligible for 50% of the profits, allowing them to recycle this income into housing or back into the Council for investment in services.
The Leader concluded the discussion by speaking about the importance of providing a sense of certainty to people in the borough with no security of homes and to those who do not live in Council homes. There were only 1300 Council homes built in the whole country, in the last year, and the Council would need to be bold whilst taking proportionate risks to increase housing.
Cabinet considered the outcome of the Competitive Dialogue Procedure under the Public Contracts Regulations 2015 as outlined in the report.
Cabinet unanimously RESOLVED:
Reasons for decision
The case for growth
The Council’s corporate plan makes a strong commitment to growth. Specifically, it identifies the need for new homes to meet significant housing demand which is making decent housing unaffordable for increasing numbers of Haringey residents, and causing more and more families to be homeless. It also identifies the need for more and better jobs, to revitalise Haringey’s town centres, increase household income for Haringey residents and give all residents the opportunity to take advantage of London’s economic success. This commitment to growth is further reflected and developed in the Council’s Housing Strategy and Economic Development & Growth Strategy.
Growth is also essential to the future sustainability of the Council itself. With Government grant dwindling, local authorities are increasingly dependent on income from Council tax and – in light of recent reforms – business rates. Without growing the Council tax and business rate base, the Council will increasingly struggle to fund the services on which its residents depend. Improvement in the living conditions, incomes, opportunities and wellbeing of Haringey residents will also not only improve their quality of life, but also reduce demand for Council and other public services.
The risks of failing to secure growth in homes and jobs – or of securing growth at low quantities, quality and/or pace – are significant:
Failure to meet housing demand will lead to more and more families unable to afford a home in the borough, either to rent or buy, deepening the already stark housing crisis.
Failure to meet housing demand will also drive up levels of homelessness, not only leading to more households finding themselves in crisis, but also increasing the already significant pressure on the Council budget through increased temporary accommodation costs.
Failure to increase the number of jobs in the borough will lead to fewer opportunities for Haringey residents to boost their incomes and job prospects, less vibrant and successful town centres with less activity and spending during the working day, and increased risk of ‘dormitory borough’ status as working residents leave the borough to work elsewhere.
Insufficient or poor quality housing, low employment and poor quality urban environments are all linked to poor public health outcomes which in turn place a burden on Council and other public services; improved outcomes for residents also create reductions in demand-driven public sector costs.
Low levels of development reduce the Council’s receipts in s106 funding and Community Infrastructure Levy, in turn reducing the Council’s ability to invest in improved facilities and infrastructure (like schools, health centres, open spaces and transport) and in wider social and economic programmes such as those aimed at improving skills and employability.
Failure to grow the Council tax and business rate base will increasingly lead to a major risk of financial instability for the Council, and to further, deeper cuts in Council budgets and hence to Council services as Government grants dwindle to zero over the coming years.
Options for driving growth on Council land
The Council cannot achieve its growth targets without realising the potential of unused and under-used Council-owned land. Accordingly, in autumn 2014 the Council commissioned work from Turnberry Real Estate into the options for delivering these growth objectives, either on its own or in partnership with the private sector. Turnberry also examined the market appetite for partnership with the Council to deliver new housing and economic growth.
In February 2015 Cabinet, on the basis of this work, agreed to commission a more detailed business case to explore options for delivery. At the same time, the Member-led Future of Housing Review concluded (as set out in its report to Cabinet in September 2015) that a development vehicle was ‘likely to be the most appropriate option’ for driving estate renewal and other development on Council land.
The business case developed following Cabinet’s February 2015 decision compared a number of options for achieving the Council’s objectives, and ultimately recommended that the Council should seek through open procurement a private sector partner with whom to deliver its objectives in an overarching joint venture development vehicle. This business case, and the commencement of a procurement process, was agreed by Cabinet on 10 November 2015.
The joint venture development vehicle model
The joint venture model approved by Cabinet on 10 November 2015 is based on bringing together the Council’s land with investment and skills from a private partner, and on the sharing of risk and reward between the Council and partner. The Council accepts a degree of risk in that it will commit its commercial portfolio to the vehicle, and will (subject to the satisfaction of relevant pre-conditions) also commit other property, as its equity stake in the vehicle. It has also to bear the costs of the procurement and establishment of the vehicle, and a share of development risk. However, in return, the contribution to its Corporate Plan objectives, including high quality new jobs, new homes including affordable homes and economic and social benefits, would be at a scale and pace that would otherwise be unachievable. The Council will also receive a financial return, principally through a share of profits that it can reinvest in the fulfilment of its wider strategic aims as set out in the Corporate Plan.
Under this model, the development partner matches the Council’s equity stake, taking a 50% share of the vehicle and hence a 50% share of funding and development risk. In return, and by maintaining strong relationships and delivery momentum, they obtain a long term pipeline of development work in an area of London with rising land values, and with a stable partner.
The preferred bidder decision
As well as approving the business case for establishing the Haringey Development Vehicle, at its meeting on 10 November 2015 Cabinet also resolved to commence a Competitive Dialogue Procedure under the Public Contracts Regulations 2015 to procure an investment and development partner with which to establish the Haringey Development Vehicle. Following a compliant procurement process, the preferred bidder is recommended in this report.
By approving the final stage of work with a single preferred bidder, paving the way for a final agreement and establishment of the vehicle later in 2017, Cabinet will be taking the next vital step in unlocking the considerable growth potential of the Council’s own land and meeting a number of core Council ambitions.
Alternative options considered
In November 2015, Cabinet considered and approved a business case for establishing an overarching joint venture vehicle to drive housing and job growth on Council land. That business case identified and assessed a number of alternative options for achieving the Council’s objectives, and found that the overarching joint venture vehicle would be the most effective mechanism of achieving those goals.
The Council has reserved its position to not appoint any of the bidders in the event of the bids not being satisfactory, or otherwise not wishing to proceed. The report outlines the benefits and projected outcomes that will arise from the appointment of the proposed preferred bidder, and how they meet the Council’s objectives and aspirations as set out in the November 2015 report to Cabinet. If the Cabinet chooses not to appoint any bidder, it will not obtain these likely benefits.
Notwithstanding the above, choosing a preferred bidder does not at this stage commit the Council to enter into an agreement or indeed to the establishment of the Haringey Development Vehicle at all. That decision is taken after the close of the preferred bidder stage and will be the subject of a further report to Cabinet.
The Council has within its procurement documentation made clear to bidders that bidders’ participation in the process is at their own expense, that the Council will not be responsible for bid costs and that it is not obliged to accept any tender.
Supporting documents: