Agenda item

[Report of the Assistant Director for Regeneration. To be introduced by the  Cabinet Member for Housing, Regeneration and Planning.]Report to agree and investment in the Real Lettings Scheme, run by St Mungo's, alongside other Local Authorities and the GLA.  The fund acquires existing market properties that investors can use to discharge homelessness.  At the end of the scheme the homes are sold and each investor receives it's initial investment plus any capital appreciation, in addition to an annual dividend on the cash yield on investment.

The Leader of the Council introduced the report, which sought Cabinet agreement to take forward joint investment in the Real Lettings Fund.

This decision would aim to provide longer-term sustainable homes, with high quality management and move on to support provided by St Mungo’s. It would reduce the need to place homeless households in expensive and unsuitable emergency accommodation.

It would further involve a partnership with three other London Boroughs – Croydon, Lambeth and Westminster, with the Mayor of London also considering investing. The Fund would provide homes to be managed by St Mungo’s, which were noted to have an excellent record in supporting homeless people and assisting them to move on into settled housing.

The Leader expressed that this decision was not the whole or the only solution to the Council’s homelessness challenge. But was one of a suite of proposals, described in the report that would start to produce better outcomes for homeless households and ultimately reduce costs for the Council.

The Leader asked Cabinet to note that the report recommended investing in the Fund, with 30% of that investment (£4.5 million) being Right to Buy receipts. Cabinet noted that, although Lambeth have invested in the fund using their RTB receipts, the Council had sought QC’s advice as to whether this would be an appropriate use of these funds. This advice has now been received.

The Leader reported that the QC did not advise that the Council cannot use the funds in this way. He notes that he was not able to find any law or guidance specifically on this particular issue. Given the nature of the financial arrangements in this Fund, he advised that the Council should seek express consent of the Secretary of State to use the funds in this way. Officers would now seek to do this.

Consequently, Cabinet was asked to make the decision on whether to invest in the Fund contingent on the Secretary of State granting consent for making payments to the fund out of Right to Buy receipts as set out above.

Therefore the resolutions and decisions below were contingent on first receiving express  approval from the Secretary of State to use the Right to Buy receipts for these purposes.

Subject to receiving express approval from the Secretary of State to using Right To Buy receipts  Cabinet RESOLVED

1. To agree to the Council participating in the Fund as a limited partner and to invest a total sum of £15 million in the Fund for the purpose and objectives set out in section 6 of this report.

2. That this be funded from the capital budget for Temporary Accommodation Property Acquisition Scheme agreed by Full Council in the Capital Strategy in February 2017. Therefore this would be financed from the Councils own resources with £4.5m financed using Right to buy Receipts if permissible.

3. To agree to the Council entering into the nomination agreement with St Mungo’s. This agreement was ancillary to the Fund and is intended to secure nominations for Haringey to 47 properties within Greater London for the lifetime of the Fund.
4. To give delegated authority to the Director of Regeneration, Planning and Development in consultation with the Section 151 Officer and the Cabinet Member for Housing, Regeneration and Planning, to approve the final terms and conditions and all documentation.

Reasons for Decision

Help the Council meet its statutory duty to provide accommodation to homeless households in accordance with the provisions of Part VII of the Housing Act 1996, by increasing the supply of accommodation into which the Council will be able to place them, ending their housing duty.

Improve the quality of accommodation into which the households are placed and improve the support provided to them.

Help reduce the costs currently accruing to the Council in meeting that duty and potentially provide a return on the capital invested.

Alternative Options Considered

Other options considered include:

Investing the £15 million in other means of acquiring stock

The Council could offer the £15 million as low (or no) interest loans to Housing Associations to build stock to which the Council could nominate homeless families. But this is unlikely to be attractive to Housing Associations because they are able to access relatively cheap borrowing fairly easily. Indeed Government low cost loan schemes have had very little take up in the sector.

The Council could offer it as grant to achieve the same end. If it did so using Right to Buy receipts it would not easily be able to combine it with other public funding, notably from the GLA, in the way that the Fund can combine these funds. If it did so using borrowing, it would be a questionable use of Council resources to borrow against its own assets to increase the asset base of any particular Housing Association.

The Council could also use these funds to acquire such stock itself for use to meet its statutory duties. This option is also being explored and could be delivered alongside the Real Lettings scheme, where the opportunity to acquire homes arises and where the viability is strong. The financing of such purchases would be considered separately and would need to address three main drawbacks, as set against the Real Lettings scheme. Firstly, there would not be the expertise of the Fund in acquiring and managing the stock, built up over the two previous funds that have acquired stock all over the capital. Secondly, were the stock owned directly by the Council in the HRA it would raise issues about the rents that could be charged and this may undermine the viability of the scheme. Thirdly, purchasing independently would not provide the Council with some of the protection provided by a wider portfolio should there be any housing market downturn. These do not rule out future initiatives in this direction, but are highlighted to stress the fact that the Real Lettings scheme offers a tested, relatively straightforward and immediately available route to acquire the use of housing stock.

There are a range of initiatives under way to reduce the cost of temporary accommodation, and to effectively prevent homelessness and the reliance on expensive nightly let temporary housing from the private rented sector (known as ‘annexes’). This proposal is one of several approaches, supplementing the drive to produce greater numbers of better priced and sustainable homes, to either prevent homelessness or move people on from expensive temporary accommodation. These include:

·         the drive to access greater numbers of Assured Shorthold Tenancy offers in the private rented sector, where homeless people are able to establish themselves in a settled home, no longer requiring the Council to owe them a homelessness duty;

·         the conversion of existing Council buildings into more affordable temporary or emergency housing, as has recently occurred with the conversion of the Broadwater Lodge former care home into emergency accommodation for families;

·         the consideration of new temporary homes being built, using modular technology and using temporary sites within and near to Haringey:

·         the temporary use of Council housing that has been earmarked for future demolition, through regeneration schemes; and

·         the consideration, as appropriate, of moves out of London to meet some temporary accommodation needs

Not making any such investment in new homes for temporary accommodation

The current cost of temporary accommodation to the Council, around £7m per annum as of Q3 2016, is unsustainable. This proposal will only go some way towards reducing these costs. However it is essential that the Council takes some action to increase supply of alternatives to expensive Temporary Accommodation, in addition to the programme in place to maximise homelessness prevention. If the capital is available to invest in a scheme with very low risk that will likely deliver substantial revenue savings alongside a medium term capital gain, the Council’s financial position does not easily allow it to ignore that opportunity.