Agenda item

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

To make the necessary decisions to incorporate Haringey's wholly owned company for housing development.

The Cabinet Member for Housing and Estate Renewal introduced this report which sought Cabinet approval to make the necessary decisions to incorporate Haringey’s Wholly Owned Company (WOC) for housing development. The Cabinet Member noted the Labour administration had been elected on a manifesto which had placed housing at its core. The manifesto had committed to deliver at least 1,000 new Council homes at Council rents by 2022. This was the latest report that had the recommendations to put in place the structures to deliver those homes.

The Cabinet Member referred to the Labour administration’s preference in the Manifesto was to build Council housing directly through a company we fully own. 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. The Council had since considered what those changes meant for housing delivery in the borough, and the role that the Company could best play in making that delivery happen.

The Cabinet Member stressed the recommendations Cabinet were asked to approve would create the housing company contained within the Labour administration’s manifesto, to support the creation of new Council homes for Haringey families on the waiting list.

Clerk note - Cllrs Bevan and Rossetti addressed the Committee in their capacity as board members of Homes for Haringey and as Councillors.

Following questions from Cllrs Bevan, Dennison, Williams, Rossetti, Brabazon and Carlin, the following was noted:

• Homes for Haringey (HfH) is an Arms-Length Management Organisation (ALMO). The Cabinet Member noted HfH could be supported to create new Council homes in the future but that was not the commitment the administration had made within its manifesto. The manifesto had made a commitment to directly creating those Council homes, not at arms-length, which is what HfH effectively was to the Council. This consideration was set out in the July Cabinet report on the WOC.

·         The Cabinet Member held frequent discussions with the Managing Director for H4H and discussions had been productive but it was accepted the direction of travel was for the creation of a WOC and for HfH to continue to it’s current role. July Cabinet had considered the option of exploring creating the 1,000 new Council homes with HfH but this was ruled out for the reasons contained in that report to Cabinet

• Officers referred members to the 17^th July 2018 report entitled ‘Setting up a Wholly Owned Company for Housing Development’ to Cabinet where the option to explore creating Council homes through the HfH had been explored as an alternative option but was not pursued for the reasons set out in that report.
• Contractual arrangements would be sought with companies to build any new properties, which would follow the usual tender process. Once built, HfH would be managing those newly built Council properties.
• The Cabinet Member highlighted the Labour manifesto had given the administration the mandate to set up a wholly owned company and this was what the administration would pursue. The Leader noted the WOC was within the parameters of the Labour Manifesto.
• Regarding the governance, Officers confirmed no Councillors would be on the board of the proposed WOC given members would set the parameters within which the company would operate through the business plan and the board would be enforcing what members had set in the business plan.
• It was correct that Cabinet at its meeting of the 17th July 2018 had agreed to allocate a maximum of £500k of flexible homelessness support grant to the establishment of the company. However, Officers confirmed that figure was set at a time when the WOC was expected to be the main vehicle for the development programme but, with the lifting of the HRA borrowing cap, this was not this case moving forward, and so it was expected the figure of £500k would be significantly reduced. It was also not expected that the Council would incur such level of costs even with the creation of the other companies it was proposing to set up. Furthermore, all of the proposed companies contained within the report would have an impact on reducing homelessness in the borough. The purpose of the WOC was to hold forms of rented housing which were not social rented housing and could therefore not be held within the HRA. The Council acknowledged that that type of housing was a potential solution for certain homelessness family’s needs. That was why the Council was interested in developing that type of housing within the borough and officers were wholly satisfied this was an appropriate and legitimate use of money from the flexible homelessness support grant. This was confirmed by the Council’s legal team.
• The Council’s finance and legal teams had had sight and commented on the financial implications and legalities of all aspects contained within this report. In addition, this report had two previous associated reports, which, similarly, went through the same rigorous clearance process with both teams satisfied they complied with the relevant financial and legal frameworks.
• Due to the change in the HRA borrowing cap, this meant the Council was in a position to build a number of the social homes properties itself. The Cabinet Member noted they would be subject to Right to Buy but this would have been the case even if the homes had been built by HfH within the HRA. The WOC was proposed to accommodate different types of rent.
• The Cabinet Member accepted the risk of Right to Buy but felt strongly that secure tenancies were the most appropriate type of tenancy a Council should offer, given the guarantees this offered to tenants. Only a Council was able to offer a secure tenancy and a WOC would not be able to provide this on its behalf.
• The Cabinet Member informed that certain schemes required a mixture of properties to ensure they were financially viable. The WOC gave the Council the capacity to have a combination of rents in the scheme to make it financially viable but still able to exercise a degree of control over its direction than if it were to collaborate those products with a private developer.
• Intermediate rented homes would not count towards the 1,000 new homes commitment in the Labour manifesto. Such rented homes were important in making schemes viable and would help the Council in its pursuit of creating those 1,000 new Council homes by supporting it financially. The Cabinet Member noted the report could have been clearer concerning the role of the intermediate rented homes.
• Officers confirmed the HRA could develop housing that was not for social rent but if the Council wished to hold a particular type of home and rent it out at a different rent to that of social rent, it could only do so through a WOC. The WOC provided the Council with flexibility and options for the future if, for example, it sought to provide homes at market rent. All homes would be developed by the HRA and if and when those properties would be moved to the WOC, the WOC would effectively buy those homes off the HRA using the general fund borrowing.

RESOLVED

1. To agree the Company’s name as ‘Haringey Housing Company Limited’, and give delegated authority to the Director of Housing, Regeneration and Planning and the Chief Finance Officer (s151 Officer) to agree the final wording of the Articles of Association and Memorandum of Understanding as set out in draft form in appendices 1 and 2.

2. To agree that the purpose of the Company will be primarily to facilitate the Council’s ambitions to deliver new homes and to hold homes developed by the Council that cannot normally be held in the Housing Revenue Account, for example intermediate and other non-social rented homes.

3. To agree the appointment of the following Directors of the Company:

·         A senior housing officer nominated by the Director of Housing, Regeneration and Planning;

·         A senior finance officer nominated by the Chief Finance Officer (s151 Officer) and

·         A senior legal officer nominated by the Monitoring Officer.

To agree the creation of a wholly owned subsidiary of the Company to be registered as a Registered Provider to be called the ‘Haringey Housing Company Registered Provider Limited’ (the “Company RP”); and give delegated authority to the Director of Housing, Regeneration and Planning and the Chief Finance Officer (s151 Officer) to agree the final wording of the Articles of Association and Memorandum of Understanding as set out in similar draft form to the Company in appendices 1 and 2.

4. To agree that the purpose of the Company RP will be primarily to hold homes developed by the Council that would be held by the Company but are required to be held by a Registered Provider; and that Officers seek registration of the Company RP as a Registered Provider.

5. To agree that the composition of the Board of Directors of the Company RP shall be the same as the Board of Directors of the Company.

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 of the Company and the Company RP have been drafted by the Council’s external legal advisors and Cabinet is being asked to consider these documents so the Company and the Company RP can be incorporated.

The July Cabinet Report described the primary purpose of the Company as being to maximise the delivery of new Council owned homes and this remains the primary aim of the Council’s housing delivery programme. However, following the abolition of the HRA borrowing cap, the Company’s role within the programme will be to support the Council’s ambitions to deliver new homes, primarily by holding those homes that the HRA cannot.

The members of the Board of Directors of the Company need to be appointed. These will be Council officers, namely a senior officer nominated by the Director of Housing, Regeneration and Planning, a senior finance officer nominated by the Chief Finance Officer (s151 Officer) and a senior legal officer nominated by the Monitoring Officer. The Chief Finance Officer (s151 Officer), the Monitoring Officer and any officer with direct responsibility for planning have been deliberately excluded, to minimise the risk of conflicts of interest.

The creation of a subsidiary ‘not for profit’ Company RP is necessary for the Company to hold sub-market rented homes that have received housing grant from the GLA.

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. Recommendations within this report reflect advice from Pinsent Masons, the Council’s external legal advisors in relation to the formation and running of the Company. The use of a detailed Objectives clause was considered and discounted to ensure that the Company could have scope to operate more freely in the future. (An Objectives clause can limit trading of the company, for instance to ‘owning and managing sub market rental homes’, whereas the Council may in future want the Company to be able to develop/own community projects which under such an Objectives clause it would be unable to do).

The Articles of Association and Memorandum of Understanding are clearly drafted to give the Council the assurance that the Company will remain wholly owned and controlled by the Council, less clearly draft documents may lead to confusion or challenge in the future.

A wider range of director positions were considered but discounted; for instance including the Monitoring Officer or Chief Finance Officer (s151 Officer) or including external directors. These options were discounted to ensure potential conflicts of interest are avoided, to maximise the direct control by the Council of the Company and to allow the Council and the Company to operate in a proper and consistent manner.