Agenda item

Setting up a Community Benefit Society to deliver improved housing options for households presenting as homeless

[Report of the Director for Housing and Growth. To be introduced by the Cabinet Member for Housing, and Estate Renewal.]

 

To set up a Community Benefit Society  to acquire, repair and manage homes to be used as housing options for Haringey housing applicants. Also to update Members on work on a potential Purchase, Repair and Management Partnership to deliver additional homes for the same purpose.

Minutes:

The Cabinet Member for Housing and Estate Renewal introduced the report which proposed two schemes to increase housing options. These options were A Community Benefit Society (CBS), and a Purchase, Repair and Management Joint Venture Partnership (PR&M).

 

This would allow an increase in the number of properties available to the Council to use as temporary accommodation, or provide more affordable and better quality private rented housing into which homelessness duty can be discharged.

 

The Cabinet Member outlined that the manifesto upon which the Labour Council Leadership was elected is clear on the need to act decisively to address homelessness in the borough and to help the 3,000 households in temporary accommodation, and sometimes in homes that are in poor condition. The administration promised to deliver housing differently, alongside the position of the wholly owned company.

 

In response to questions, the following was noted:

  • It was highlighted that the decision on the Community Benefit Society was more of a safety mechanism as it was anticipated that the wholly owned company (WOC) may be able to achieve what the CBS seeks to achieve in terms of provision of homes.
  • It was noted that the caps on acquiring 100 properties and spending £25m did not mean an expected £250,000 cost per home. Instead these two figures represented a double lock on spending and acquisitions by officers, before the proposal comes back to Cabinet for review and to agree further spending and acquisitions. For information, the modelling for the CBS had assumed an average cost of properties acquired as £360k per home.
  • With regard to what discussions there had been with potential partners in PR&M, it was noted that there was a formal procurement process, started late last year, which in January 2018 identified three bidders as potentially meeting the requirements needed. Although there has been initial meetings with them, this process has been paused in order to explore the proposal with the newly elected Council before further progressing negotiations. The bidders would be named once the procurement had been finalised, if Cabinet decided to proceed with the proposal at that stage.
  • It was noted that, where possible, the Council was aiming to house residents in temporary accommodation within the borough but may use properties in neighbouring boroughs such as Enfield, Waltham Forest or Barnet.
  • All homes acquired through CBS would be managed by Homes for Haringey. It was further clarified that there may be bidders for the Purchase, Repair and Management Joint Venture Partnership (PR&M) in the form of a consortium, including a registered provider.

 

RESOLVED

 

1.    To agree to set up a Community Benefit Society, as set out at paras 6.8 to 6.18.

 

2.   To agree to the acquisition of the first 100 residential units for the purposes as set out in paras 6.8 to 6.18.

 

3.            To approve the first funding tranche of capital of up to £25m in 2018/19 for the purchase of properties set out in recommendation 3.2 to be funded by £17.5m of borrowing and £7.5m of retained right to buy capital receipts as agreed by Council at its budget setting meeting of 26 February 2018.

 

4.            To approve the first tranche of Right to Buy receipts of up to £7.5m in the financial years 2018/19 to fund the purchase of properties set out in recommendation 3.2.

 

5.            To approve the establishment of a CBS “smoothing reserve” as described in paragraph 8.20 to smooth any increases in capital finance costs during the life of the CBS or successor body or bodies.

 

6.            To delegate the following decisions:

 

a)    Delegate responsibility to finalise the necessary legal arrangements for the setting up of the CBS and to recruit the three independent board members for the CBS to the Director for Housing, Regeneration and Planning, after consultation with the Director of Finance and the Deputy Leader and Cabinet Member for Housing and Estate Renewal.

b)    Delegate the purchase up to 100 individual residential units to be acquired under recommendation 3.2 and to be leased to the CBS to the Director for Housing, Regeneration and Planning in conjunction with the Director of Finance up to a maximum amount of £25m in total.

c)    Delegate the agreement on property covenants and loan agreements to the Head of Legal Services and Director of Finance, as appropriate.

 

d)    To note the progress made on the establishment of a Purchase, Repair and Management Joint Venture, with the purposes as set out in paragraphs 6.19 to 6.30, with any final decision on its establishment to be taken at a future Cabinet meeting alongside consideration of other options to achieve the aims of this proposal.

 

 

e)    To Allocate up to £200,000 funding from the Government’s Flexible Homelessness Support Grant for 2018/19 to fund initial set up costs of the CBS and PR&M.

 

Reasons for decision

 

Haringey has experienced a significant increase in the number of households who are either homeless or at risk of becoming homeless. Where possible, the Council works with households to prevent homelessness, as set out in the Homelessness Strategy 2017-2022, but where prevention is not possible, the Council has a statutory duty to provide TA to eligible households until a more permanent offer of accommodation can be found.

 

A significant proportion of the TA used by the Council is sourced from the PRS. This TA is unsuitable in terms of its low quality, insecurity and high rents. This TA is also expensive to the Council, with over £8m spent on TA in 2017/18.

 

This report describes two schemes, a CBS and a PR&M, which will increase the number of properties available to the Council to either use as temporary accommodation, or to provide more affordable and better quality private rented housing into which homelessness duty can be discharged.

 

A Community Benefit Society (CBS) which is a capital-based model, in which the Council will use its capital resources, including retained RTB receipts, to acquire residential properties. These properties will then be leased to the CBS.

 

A Purchase, Repair and Management (PR&M) Joint Venture Partnership, which is a revenue-based model, in which the PR&M partner acquires the residential properties, while the Council guarantee nominations to the properties. The Council will take ownership of the properties at the end of the partnership.

 

The properties acquired through both schemes will be used as TA and for the discharge of homelessness duty into private sector tenancies. The homes acquired will be better quality and better managed (either by a Registered Provider or Homes for Haringey) than existing stock used as TA, the residents will have greater security and the costs of these homes to the resident and Council will be lower. In addition, the homes acquired by the Council and leased to the CBS and the homes owned by the PR&M will all ultimately be fully municipalised.

 

Alternative options considered

 

The Council is already taking action to address the high cost of temporary accommodation, for example by strategically evaluating demand to ensure the best use of resources. However, no serious dent can be made in the TA spend without addressing the cause of this cost: the high rents that are charged on TA leased from private sector landlords. Additionally, issues of poor quality will be best addressed by having close control of the homes used for temporary accommodation.

 

There are alternative options for acquiring properties to use for TA and discharge of homelessness duty. The Council commissioned an options appraisal, which considered a range of options, summarised below, against the key requirements of being able to use RTB receipts to support any capital costs and being able to charge Local Housing Allowance (LHA) level rents.

 

The Housing Revenue Account option

This would entail purchasing properties and owning them within the HRA for use as TA. However, this option would not allow sufficient rent levels to be charged to make the property purchases viable or to make savings in the TA budget.

 

The General Fund option

This would entail purchasing properties and owning them within the General Fund for use as TA. This option would also not allow sufficient rent levels to be charged to make the property purchases viable.

 

The Arms-Length Management Organisation option

This would entail Homes for Haringey purchasing properties, then owning and letting them directly. Homes for Haringey is unable to use RTB receipts provided by the Council, and could not charge LHA rents on the properties.

 

A Limited Liability Partnership (LLP) option

This would entail setting up an LLP between the Council and a charity to purchase properties, with the Council holding a minority interest in the LLP. It is not clear whether it is possible to use RTB receipts in this model, given the level of control and concern about the efficacy of LLPs as a model for Council delivery. However, an LLP could be a viable model in the future, if the partner was the CBS once it is fully and properly constituted. However, Council control of such a body would be diluted further than with a CBS.

 

Supporting documents: