Agenda item

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

To note the progress of the establishment of a wholly owned company and to make decisions to facilitate the Council’s housing delivery programme, namely the agreement of HRA capital, the acceptance of the GLA’s grant offer and right to buy receipt ring-fencing offer, the reversal of a previous Cabinet Member decision to dispose of HRA sites to Sanctuary Housing and consequential financial decisions  The report will further be identifying the first sites to enter the housing delivery programme.

The Cabinet Member for Housing and Estate Renewal introduced the report and reiterated the Labour administration’s manifesto commitment to deliver at least 1,000 new Council homes at Council rents by 2022. This was the latest report putting in place the programme to deliver these homes.

The Cabinet Member outlined the Labour Administration’s stated preference in the Manifesto to build Council housing directly through a company it fully owned. However, this was at a time when the GLA funding was not available and was before the announcement, in the October budget, of the scrapping of the HRA borrowing cap. Time was now needed to consider what those changes meant for housing delivery in the borough, the role that the proposed Company could best play in making that delivery happen and the extent to which the HRA could now support the house building programme, before Cabinet finalised any decisions on forming the Company. Proposals on the Company would be presented in the 2019 but, in the meantime, the Council sought to continue with work on the Company.

This report sought Cabinet to make some key decisions to get started on the Council housing development programme. It identified the first sites to come forward with the GLA funding, including bringing back sites that the last administration had passed over to a Housing Association to build shared ownership and Affordable Rent homes, on which instead would be built Council homes at Council rents. It also provided the initial funding necessary to start work on those first sites and asked Cabinet to agree to accept over £62m of GLA housing grant to help the Council deliver 848 affordable homes over the next four years.

The Cabinet Member concluded her introduction by stating the GLA funding was a major vote of confidence in the Council and its capacity to deliver its housing programme and would be key to funding the bulk of the 1,000 new Council homes that were pledged.

Following questions from Cllr Barnes, the following information was noted:

• In relation to whether paragraph 4.4 of the report meant that right to buy receipts would only be spent on affordable housing and not rebuilding replacement Council homes, Officers advised that the point of that paragraph was to identify that this would stop the Council losing receipts back to the government. It would be up to the Council to determine how it spent the money generated from those right to buy receipts.

• With regards to the size of the sites in the report and the query on whether the Council under the Company scheme would build large housing sites, Officers informed the meeting that the Company would have small to medium sized sites with between 20 and 150 units. It was not within the capacity of the Council to develop larger housing sites. However, overall programme could provide a total of 848 homes.
• Officers responded that they were on course to put forward a further report with decisions on housing development sites to instigate the delivery of the additional homes; this is currently on the forward plan for January 2019 Cabinet.

RESOLVED

1. To note progress made in setting up the Company as set out in paragraphs 6.1 -6.3 of this report and that the recommendations in the Cabinet report of 17 July 2018 which were to come back to Cabinet later in 2018, will now come back to Cabinet in early 2019.

2. To note the Government’s announcement in the 2018 Budget to lift the cap on borrowing in the Housing Revenue Account and that officers will bring back a revised HRA Business Plan identifying the opportunities this presents for new housing development.

3. To note the six Council owned sites identified as priority 1 sites in the GLA grant funded programme detailed in paragraph 6.8 and that business cases will be brought to Cabinet on the development of these sites, including whether to proceed on these via the Company or within the HRA.

4. To establish a Housing development programme budget of £4.4m to continue with the development of sites with the budget to be funded from the resources set out below.

5. To approve that for 2018/19 the S106 funding of £1.516m previously allocated for delivery of schemes through Sanctuary Housing Association, as set out in paragraph 6.9, is added to the HRA capital programme to fund the Council’s housing development programme budget and to pay Sanctuary Housing Association £0.339m.

6. To approve the virement of £1.5m in 2018/19 from the HRA Stock Acquisition budget to the Housing development programme budget in accordance with Standing Order 5.32(b).

7. To approve the virement of £1.4m in 2018/19 from the HRA - P5 Homes for Haringey (HFH) budget to the Housing development programme budget in accordance with Standing Order 5.32(b).

8. To accept the GLA offer of £62.858m housing grant and add that sum to the capital programme.

9. To delegate the detail of negotiating the grant agreements is delegated to the Director of Housing, Regeneration and Planning after consultation with the Director of Finance and the Cabinet Member for Housing and Estate Renewal.

10. To agree, in principle, to the Council signing-up to the Mayor of London’s proposal to enable the Council to access the proposed ring fence of right to buy receipts, as set out in paragraph 6.25 of this report.

11. To agree to reverse the Cabinet Member decision of 23 January 2017 to dispose of 20 HRA infill sites to Sanctuary Housing Association and instead utilise these sites to deliver the Council’s housing development programme, either within the Company or in the HRA. This includes three sites identified as phase 1 sites in paragraph 6.8, ten further sites being brought into later phases of the GLA grant funded programme and seven sites being put onto the GLA’s small sites portal as detailed in paragraph 6.10. These sites will be brought back to a future Cabinet to agree disposals.

12. To agree to reimburse Sanctuary for their development costs of £338,758 on these sites in return for all surveys, searches, fees and designs and warranties undertaken to date on these sites, which will all novate to the Council and that the cost be met from the Housing development programme budget.

Reasons for decision

On 17 July 2018 Cabinet agreed to the setting up of the Company, subject to the documents needed for its incorporation being agreed by Cabinet. The Articles of Association and Memorandum of Understanding (shareholders’ agreement) and other documentation of the Company are being drafted by Pinsent Mason’s solicitors, the Council’s external legal advisors. The formal setting up of the Company will not now be agreed until early 2019, when the full implications of the lifting of the HRA borrowing cap are understood.

The Council’s housing development programme will initially develop on Council owned sites. Cabinet is asked to note the six Council owned sites identified as priority 1 sites in the GLA grant funded programme detailed in paragraph 6.8, as well as the sites detailed in paragraph 6.10, which are proposed for the GLA small sites programme. Business cases for these six will be developed and brought back to a future Cabinet for decision, including whether to proceed via the Company or within the HRA.

The Council’s housing development programme requires initial capital funding of £4.4m to work up the sites to planning stage. Other funding will be secured as the sites are developed from GLA grants and s106 offsite contributions, alongside possible sales revenue from the market homes developed that can cross-subsidise the affordable housing.

The agreement with the GLA to ring-fence Right to buy receipts will ensure that the receipts will always be spent on affordable housing within the Borough and will not have to be returned to Government after three years if unspent.

The decision not to proceed with the disposal of the Phase 2 infilled sites to Sanctuary will mean these sites can now be used to deliver the Council’s housing development programme, which would not have been possible under the previous Cabinet decision.

Alternative options considered

The formation of the Company was agreed by Cabinet on 17 July 2018, with the detail being left for agreement at a future meeting. Articles of Association and Memorandum of Understanding (the Shareholder Agreement) have been drafted, along with recommendations on all other key decisions. However, agreeing these and setting up the Company too soon may hinder the Council’s ability to deliver the housing development programme in the most effective way.

A decision to set up the Company and dispose of sites to it immediately could mean missing the opportunity of fully using the potential of the HRA borrowing capacity. Delaying the setting up of the Company until the New Year will allow time for the HRA business plan to be reviewed and for exploring all the options for the housing development programme.

The other key decisions, on identifying the sites (including the former Sanctuary sites), agreeing the initial capital funding and accepting the GLA grant offer and the Right to Buy Ring-fence deal) could all have been delayed until the decisions on the Company were agreed. However, this would have prevented any progress being made on these sites until after the decision on the Company. This would be an unnecessary delay, as this initial work is required whether the homes are delivered via the Company or in the HRA. It could also be a costly delay, as the GLA grant requires the initial starts on site in 2019/20.