Agenda item

[Report of the Director for  Housing, Regeneration and Planning . To be introduced by the Leader of the Council.]

Cabinet is asked to agree the final price and terms of the acquisition of the Welbourne Centre site and the details of the novation of the Development Agreement and Funding Agreement between the Council and Argent Related.

The Leader introduced the report, highlighting that, in December 2018, Cabinet had agreed to the principle of the acquisition of the Welbourne Centre site. This report clarified a number of supplementary issues that surround that decision.

The Leader advised that securing homes for Haringey’s residents was central to what the Labour administration had set out to achieve. The acquisition of the Welbourne site delivered 131 council homes - or 13 per cent towards the overall target of delivering 1000 new council homes. Furthermore, the acquisition also helped to secure the delivery of a district health centre that had been long fought for locally. The Leader was pleased the Council would be playing its part in bringing forward this critical facility that would significantly improve healthcare facilities and health opportunities for Tottenham residents.

This report also set out the final company structure under which the developer would deliver those outputs. The Council had also received funding from this partnership which has allowed the Council to facilitate the delivery of 167 much-needed affordable homes and infrastructure. This was a significant outcome for residents in the east of the borough and the Leader looked forward to the rapid delivery of those homes and the much-needed health centre on the Welbourne site.

In response to a question from Cllr Palmer, the Leader confirmed that all the housing on the Welbourne site was council housing at council rents. The Leader reiterated that the Cabinet was against segregation of spaces on housing developments.

Further to considering the exempt information at item 25,

RESOLVED

To agree:

1. To the council proceeding with the acquisition for housing purposes of 131 homes and a ground floor non-residential space from Argent Related, to be constructed at the Welbourne site, for a total sum plus expenditure for acquisition process costs and on-costs, as set out in the exempt part of the report.

2. To the final terms of the Contract for the acquisition attached at Appendix B and based on the Heads of Terms previously approved by Cabinet and attached at Appendix A.

3. To give delegated authority to the Director for Housing, Regeneration and Planning to agree any future amendments to the contract, in consultation with the Director of Finance.

4. To the novation of the Development Agreement and Funding Agreement from TH Ferry Island Limited Partnership to TH DM Limited as set out in the Deed of Novation for the Development Agreement attached at Appendix C and the Deed of Novation for the Funding Agreement attached at Appendix D.

Reasons for decision

Acquisition of Affordable Housing on the Welbourne Site

As detailed in Paragraph 1.1 above, on 11^th December 2018 Cabinet agreed (subject to the council’s full budget setting meeting in February 2019) to the in-principle acquisition of the homes and ground floor non-residential space to be constructed at the Welbourne site for a maximum total sum; to unallocated General Fund capital receipts being retained corporately and to note that a further Key Decision will be taken at a later date to agree the final purchase price and contract for the acquisition.

[contained in the exempt part of the report]

[contained in the exempt part of the report]

The acquisition of the residential premises on the Welbourne Site will allow the council to secure the rapid delivery of 131 council-owned homes (13 per cent of its 1,000 target) and a district health centre using the existing Development Agreement with the developer as the delivery agent. The district health centre will be delivered under the Development Agreement rather than under the Contract to be entered into.

The council has a time-limited window to acquire the 131 homes to be constructed on the Welbourne site under the terms of the s106 agreement. If this option is not exercised, the developer will dispose of these homes to a Registered Provider of affordable housing and these will revert to shared ownership dwellings.

Officers have been negotiating with the developer on the contract for the purchase and build of the homes and this has now been agreed (with the exception of the VAT clauses which were added to the draft Contract by Argent Related late in the process and are being reviewed by the Council’s specialist VAT advisers.) The Contract is based on (and is in accordance with) the Heads of Terms attached at Appendix A.

Under the terms of the Development Agreement, entered into on 21^st March 2017 with the council, Argent Related is entitled to novate the Development Agreement and Funding Agreement to other Group Companies. The council has an obligation to act reasonably through the Agreement with Argent Related and not withhold consent to the novation of the Development Agreement and Funding Agreement.

As is typical in situations such as this, the detail of this company structure was not finalised when the original Development Agreement was entered into, resulting in provisions being included in the Agreement to allow for the novation at a later date. Now that resolution to grant planning permission has been secured and the project is moving into the delivery phase this structure has now been finalised.

The company and land ownership structure proposed by Argent Related is typical for a development of this nature which is split across separate buildings and involves differing delivery timescales, mixed tenures and use-types. The novation of the Development Agreement and Funding Agreement allows the development costs to be accounted for in the correct developer entity. The proposed changes are not considered to represent a material change in risk to the council as all the terms and principles of the Development Agreement are retained. Though the delivery entity has changed the Argent Related Group retains all the same obligations in relation to delivery.

As detailed in the Deeds of Novation, the incoming party (TH DM Ltd) would assume all obligations of the outgoing party (TH FI Ltd) under the terms of the Development Agreement. The Development Agreement already contains step-in rights for the council, providing an additional security provision should the developer not be able to complete the development for unforeseen reasons. These terms are reflected in the Funding Agreement.

Alternative options considered

Alternative options for recommendation 3.1, 3.2, 3.3 – Acquisition of the Welbourne Site

A series of options for the acquisition (recommendation 3.1) were considered by Cabinet at its meeting of the 11^th December 2018. These were:

Option A: The council acquires the Welbourne site in its entirety. This was the preferred option as it allows the council to control the tenure for all homes, set the rent levels, negotiate an appropriate specification for affordable homes and service charges.  This option achieves the most affordable outcome for the homes to be delivered.  This option also results in surplus land receipts being returned to the General Fund, as set out in the exempt part of the report.

Option B: The council could provide grant funding to a Housing Association in order to deliver more genuinely affordable homes on-site. This option would involve the council providing grant funding to secure the delivery of lower cost affordable housing. This option was discounted on the basis that the council is moving towards a position of prioritising the delivery of council owned homes on its own land, in order to maximise the delivery of safe, stable and affordable homes.

Option C: The council could decide not to proceed with either acquiring the Welbourne site in whole or in part, or funding a third party at this or other locations in Tottenham Hale to increase the amount of affordable housing delivered. This would result in the Argent Related scheme proceeding with 25% Shared Ownership homes on the basis of its SDP affordable housing contribution.

If the contract for the acquisition of the new build units is not approved, the Developer will still be able to proceed with the development of the Welbourne site under the terms of the Development Agreement. In this scenario the site would be delivered as per Option C above which would achieve poorer outcomes for the council.

Ultimately, this council is serious about securing the delivery of council homes using a variety of tools. Building through partnerships can deliver homes while we build up our own capacity to do more ourselves. This scheme alone will deliver 13% of our overall target and will deliver within the lifetime of this administration. This scheme also delivers a health centre that the local community and GPs have been campaigning for years. This scheme not proceeding will result in the funding secured by the CCG expiring, with no obvious alternative means of delivering a new fit-for-purpose health centre.

Alternative options for recommendation 3.4 – Novation of the Development Agreement and Funding Agreement

The alternative option would be to not novate these agreements, however, under the terms of the Development Agreement the council is required to not unreasonably withhold its consent to the novation of the Development Agreement and the Funding Agreement. Should approval not be given the developer will have the option of proceeding with the development as the developer for all of the sites within the Development Agreement or seek to challenge the council’s refusal to give consent which will lead to delay in the delivery of both the development (including the affordable housing) and the outturn dwellings.