Agenda item

Appointment of a Programme Wide Sales and Marketing Agent to Support the Housing Delivery Programme

Report of the Director of Placemaking and Housing. To be introduced by the Cabinet Member for Council Housebuilding, Placemaking, and Development.

 

This report seeks Cabinet approval for the appointment of a sales and marketing agent identified through competitive tendering to provide a variety of services in relation to the homes that the Council will build for market sale in order to cross-subsidise the delivery of a new generation of council homes for local residents.

Minutes:

The Cabinet Member for Council Housebuilding, Placemaking, and Development introduced the report which sought approval for the appointment of a sales and marketing agent identified through competitive tendering to provide a variety of services in relation to the homes that the Council would build for market sale in order to cross-subsidise the delivery of a new generation of council homes for local residents.

 

It was noted that the appointment for sales and marketing agent services was capped at a maximum of £3.9 million over five years.

 

The Cabinet Member continued to outline the following issues which supported the  need to take the  decision forward:

-       High demand for council homes coupled with commitment to delivering high quality council homes and to enable viable delivery, there had been access to GLA grants and borrowing but in addition, there needs to be efficient market sales of private homes.

-       Assurance that the contract level was the maximum expenditure and decision did not mean that the Council would be spending the full amount.

-       Council did not have expertise for sales and marketing homes and the provider would be able to provide efficiencies and consistency of branding.

-       This was not an exclusive agreement, and the Council could use local estate agents as well for smaller purchases.

 

In response to questions from Cllr Cawley-Harrison, the following information was noted:

-       That the absolute maximum expenditure would be £3.9m as set out in the report. The estate agency services would be on a commission basis for each home sold and this was included in this figure, with the percentage commission set out in the exempt report.

-       There are no current plans for increase in the numbers of private homes provided to ensure viability.

-       This decision was a necessity to ensure that each housing delivery scheme, as it went forward, was financially viable, meeting the overall objectives of the housing delivery programme.

-        That in regard to the query on fees, section 6.17.1 – 6.17.7 of the report provided this information. In summary, this set out that £499,000 was for the consultancy items and the rest of expenditure was on fixed fee basis. The additional £3.4m expenditure was on a percentage fee basis and there would need to be a progression of sales to reach the £3.9m figure set out.

-       This was a competitive percentage fee offer, of which the detail was set out  in exempt part of report. If a different agreement had been sought on a site-by-site basis, this would not have been as competitive as the fixed fee offer for the Council.

-       The Council did not have a large sales programme to take forward of private homes but some individual large schemes, such as Ashley road depot and some later regeneration programmes, would have a higher concentration of homes that required marketing and local sales agents would struggle with these schemes.

 

Following consideration of the exempt information, it was

 

RESOLVED

 

To approve that a contract be awarded to the tenderer named in the exempt part of the report, who has been identified through a competitive procurement exercise as the sales and marketing agent for the Council’s housing delivery programme for a value of £3,431,062 to provide services as specified at 6.17 for a five year period; and authorise the Director of Placemaking and Housing in consultation with the Head of Legal and Governance toenter into the contract with the appointed tenderer.

 

Reasons for decisions

 

The Council needs to maximise its returns from the market sale element of its housing delivery programme to provide the required financial support for its ambitious programme aimed at delivering new council homes of the highest quality for the borough’s residents. Currently around 370 new homes for sale are planned for the period of the proposed sales and marketing agency contract and we anticipate that this number may rise over the coming years as proposals for further sites are developed and brought into the Council’s Housing Delivery programme.

 

The Council has never marketed and sold homes on a commercial basis, and it has no existing expertise or capacity to do it effectively.

 

Unlike most other boroughs, we do not currently have a substantial private sales or shared ownership programme. We are currently forecasting 16% of the homes that we deliver to be for private sale and have an extremely limited and historic shared ownership programme. In addition, the sales programme is concentrated within a few of our higher value projects – which means that while we have moments of very high demand – we do not have a sustained pipeline to justify regular sales activity. All of this mitigates against the establishment of an in-house team – as we would not have the required level of activity to sustain it over a period.

 

We are therefore proposing the appointment of a specialist-marketing agent. The Council has carried out a competitive procurement exercise to identify the most appropriate option. This procurement is for a non-exclusive sales agency appointment, which means that the Council can still choose to procure and appoint alternative agents if necessary or appropriate for specific private sale projects, particularly where we may want to take a more localised approach.  Similarly, it does not preclude the Council choosing to develop a private sales specialism in-house in future if our private sales or shared ownership pipeline grows.

 

Based on the tender returns, the winning tenderer provided the most competitive tender return from a cost, quality and programme perspective demonstrating value for money for the Council.

 

Alternative options considered.

 

The Council could try to deliver Council homes for Council rent without cross subsidising them through homes for market sale. This has been rejected because the Council’s first priority is to deliver as many high-quality Council homes at Council rent as possible. It is not currently financially viable to do this without an element of cross-subsidy, even allowing for maximising the amount of available public grant funding. Homes for market sale provide the maximum cross-subsidy possible with the fewest number of homes that are not let at Council rent. The Council’s Housing Revenue Account (HRA) business plan allows for providing the minimum amount of new non-Council rent homes to ensure long-term financial viability of the Council’s rented stock.

 

The Council could carry out the marketing and sales activities itself. This option was rejected because the Council does not have the existing specialist expertise, resources, or capacity to do this effectively. To develop the required in-house capacity, a significant financial investment would need to be made to attract candidates with the right qualifications, in a competitive jobs market. This process would take a prolonged approval period internally and a lengthy recruitment timeframe. There would then need to be a period of bedding in the team, it would take a significant amount of time to build the contacts, resources and local market knowledge.

 

As previously set out, the Council does not have a large enough sales programme to justify the mobilisation of an in-house team described above, given that the vast majority of the homes within the Haringey development programme are for council rent, with practically no shared ownership and a relatively modest number of homes for sale.

Our programme is also somewhat inconsistent, with private sales mostly concentrated on a small number of large sites. This means that there will be times over the coming years where there will be a significant resource requirement and other times when the requirement will be virtually non-existent.

 

The Council could solely procure the services on a site-by-site basis.  This option was rejected for the following reasons:

·         The intention is that the Council develops an overarching sales and marketing approach and ‘brand’ for the new homes being developed for private sale, which will provide consistent messaging and clearly communicate to potential buyers the link between the home sales and local investment in the borough, improving neighbourhoods and providing affordable housing. 

·         A single provider can achieve efficiencies from a resource management perspective.)

 

However, the tender is clear that the agency services are being commissioned on a non-exclusive basis. If it is felt the winning tenderer is not suited to provide agency services to certain sites, the Council can appoint an alternative provider and are not bound to use the successful tenderer for all sales and marketing services. A number of our smaller private sales sites may lend themselves to a more localised approach. As noted above, the Council may choose to procure local agents for specific sites where this may be appropriate.

 

The Council could have attempted to procure from an external framework. This option was rejected, as there is not a framework which has a robust list of tenderers on it which the Council felt would lead to a competitive tender process and/or complement the needs of the housing delivery programme.

 

 

Supporting documents: