Agenda item

Housing Delivery in South Kesteven

The Deputy Leader of the Council to provide an overview of the options available to promote housing delivery within the district.  The report seeks approval to pursue a selection process for a strategic partner to support the delivery of new homes and seeks the views of Companies Committee on the selection process

Minutes:

The Deputy Leader, in his capacity as the Cabinet Member for Housing introduced his report to the Companies Committee, which provided an overview of the options that were available to promote housing delivery within the district. In doing so he welcomed comments and suggestions from members of the Companies Committee.

 

The Assistant Chief Executive, Housing Delivery and the Finance Lead for Housing Delivery gave a presentation. Key points within the presentation included:

 

·         The inter-relationship between economic growth and housing delivery

·         Activities that were already being undertaken by the Council to promote housing delivery including the introduction of a project team to work with developers and the Design PAD process

·         Targets within the current local plan to deliver 13,500 new homes by 2036

·         There were wider issues around affordability in the south of the district

·         81% of Local Plan house building targets had been met cumulatively between 2011/12 and 2018/19; of those 18% were affordable

·         The question that was being addressed was how the council could play a proactive role in delivering and stimulating the delivery of housing in the district. The council was working with a range of organisations to answer this question

·         Best practice had been researched and site visits undertaken to Stoke and Brighton where similar housing delivery challenges had been experienced and action taken to address those challenges

·         When the Council went out to market it did so with the idea that it wanted to deliver affordable housing in some quantity

·         Market feedback indicated that the council needed to further develop and clarify the aims of the project

·         Two initial approaches had been identified; either an asset-backed vehicle or a more flexible investment partnership approach to be determined in conjunction with prospective partners

·         It was noted that outside the Housing Revenue Account the council did not own large amounts of land

·         Key considerations for any partnership into which the Council might enter included:

o   Ease of exit

o   Governance and control

o   Sustainability / quality

o   Flexibility

o   Local economic impact

o   Costs

·         The partnership selection overview process had been designed to demonstrate value for money, transparency and minimising unnecessary times/costs

·         The design of the selection process aimed to enable flexibility and innovation

·         The draft first-stage selection papers focused on an aligned ethos and objectives, to be validated with example sites

·         The second stage involved clarification and negotiation with short-listed partners, agreement of targets and the finalising of partnership documentation

·         An overview of timescales for delivery and decision-making

 

One Member asked about the number of people who were currently on the Council’s housing register; members were given an indication of the number of people in the priority bands and the band that included more aspirational requests for council housing. Discussion ensued about the nature of any affordable housing that might be provided through the partnership. There was a concern that some of the properties that were badged as affordable and aimed at first-time buyers could still prove a challenge for young people and families. A clearer indication of non-market options would be identified through the partner selection and negotiation processes.

 

A question was asked about linking any housing development with social and community facilities. Whilst there was recognition that Section 106 monies attached to a development would support necessary infrastructure like schools and health facilities, there was concern that informal community hubs including churches and local groups may be overlooked. As part of the partnership questionnaire, bidders were being asked to put together a specific ethos question about community engagement, validated with reference sites, indicating they would approach and address best practice in respect of community provision. This would capture community support and community cohesion, with prospective partners being asked how they would achieve this; their responses would be incorporated within any partnership agreement to provide a contractual commitment. It was suggested that consultation with residents who already lived in an area could help identify actual needs. It was noted that there would ultimately be a balance between the percentage of affordable housing, energy efficiency and additional community / other funded development. The selection process was designed to enable potential partners to play to their strengths and propose their balance and for SKDC to select the proposal that best fits its overall requirements.

 

The intention was that the Council would enter into a long-standing investment partnership where both parties would retain equal control. Once both partners had agreed on a project, a detailed business case underpinned by financial commitments would be developed. When this had been signed-off by both parties as being financially acceptable, the scheme would proceed.

 

The advantages of a partnership arrangement had been highlighted, but members were interested in any potential negatives related to the proposed approach in favour of traditional council housing. The committee noted that the Council was still committed to building additional social units within the envelope of the Housing Revenue Account regardless of whether the project proceeded. These would be funded through the Housing Revenue Account and Section 106 commuted sums. The Housing Revenue Account programme was looking to build approximately 100 homes each year. Members were informed that during consultation on an alternative delivery vehicle, the council had indicated that it was seeking a partner with the ability to deliver up to 300 homes a year, but that would be subject to negotiation with prospective partners.

 

The committee was advised that the rationale behind the partnership was to excite the market and to build as many homes as possible. The housing mix would include both affordable and market housing and that mix would be adjusted depending on the sites coming forward. The disposal or letting arrangements for any homes would be developed by working alongside the selected partner for the venture. One member identified the relationship between the objectives for this venture and the reasons for which Gravitas was set up. A question was raised about how this venture differed from Gravitas. Gravitas was seen as a good vehicle for small scale development using the local supply chain for proof of concept.

 

Members commented that they were grateful for the opportunity with which they had been provided to speak to officers and ask questions on the proposal prior to the meeting.  The chair asked that this was noted.

 

In response to a series of questions, members were advised:

 

·         Flexibility had been left to enable different types and mixes of development on different sites. Members were also given an indication of the cost per dwelling where the land was in the ownership of the partner and where it had to be acquired

·         As part of the preparation of any business case, a decision would be taken with the partner to agree the appetite for risk and targets for affordable dwellings

·         It was hoped that with the council being a key development partner, that projects could provide an exemplar as to what Section 106 benefits could be achieved whilst the development remained viable. This could then be used to challenge other developers

·         The project timeline had been designed to enable the committee to have the maximum opportunity to comment and contribute as possible

·         Any property that was owned by a local authority within its Housing Revenue Account was subject to the Right to Buy. There was, however, a 7-year period for new build properties when discounts did not apply. This protected the local authority from losing money. Where properties were owned by a Registered Provider, tenants had the right to acquire their property

·         Additional wording around modern slavery could be built into the partnership questionnaire

 

A question was raised which related to how the weighting of the questionnaire had been determined. Members were given an opportunity to raise any comments during the meeting or to contact the officers directly, setting out any comments, questions or suggestions by Friday 17 January 2020.

 

Action point

 

Members to submit comments on the weighting within the questionnaire to the Assistant Chief Executive, Housing Delivery by 17 January 2020

 

Clarification was sought as to whether the Council would be able to bring any land forward for the partnership to develop. Members asked whether it would be possible to pursue an asset-based approach because of comments about how land within the General Fund was limited.

 

Members asked for clarification about how the partnership would relate to Gravitas with reference being made to a comment within the Cabinet Member’s report about avoiding duplication. The Committee was advised that Gravitas was a vehicle that was wholly owned by the Council. What was being proposed as part of this report was a joint venture that complemented the strengths of both partners. It was suggested that working with others and developing a longer-term relationship was likely to deliver more added value on developments, sharing both costs, risks and rewards. How any partnership fitted with Gravitas would be easier to articulate once the process of selecting a partner progressed.

 

Business plans would be developed with the selected partner on a site by site basis; these would include a viability assessment of the site, how the land owner wishes to be involved, affordability and cashflow projections related to the disposal of any dwellings or renting them out. The business plan would be brought to council, which would then have to consider whether it wished to proceed with the project.

 

Reference was made to the timeline that was set out in the presentation and the proposed date for the commencement of trading as a company, which was in April 2021. Whilst the cautionary approach was welcomed, members were concerned that it would take 15-months before delivery commenced. Members were advised that April 2021 was the latest date at which it was anticipated the partnership would begin trading. Once a partner had been selected, there was an intention to take a twin-tracked approach, which could see projects brought to fruition sooner. Alternatively it could provide an opportunity to run a small one-off project to test the delivery vehicle prior to entering into the longer-term, formal partnership arrangement.

 

Members asked about how long it had taken other local authorities to bring similar projects to fruition. The example of Brighton was cited, and members were advised that its timeline was a year longer than that proposed for SKDC. Brighton did save some time because it began working directly with a preferred partner rather than testing the wider market. The SKDC preference was to consider the wider market to increase the range of opportunities that would be available to it.

 

The committee was reassured that the process was being led by Members, rather than officers, with the Deputy Leader of the Council confirming that he had been fully involved in his capacity as the Cabinet member for Housing.

 

Questions were put about the requirements for those officers who were involved in the project to declare interests to ensure that there would be no conflicts in the selection of a partner or letting of any contract. Members were advised that there was a process in place for officers to disclose interests, gifts and hospitality. Members were also reassured that the project would be well-governed and well-led with proper project management, risk assessment and financial appraisal around it. The project would be transparent and accountable with reports being made to the Companies Committee for oversight and scrutiny.

 

Members asked how pioneering the project was. The committee was informed that there were a number of different models for housing delivery across the country and the proposal was a variation of those. The project was described as innovative but not without precedent.

 

Based on soft market testing, the expectation was that there would be a reasonable level of market interest with 3 or 4 organisations having expressed a significant interest in becoming the joint venture partner, with others interested in working on the project at a lower level.

 

The committee identified other areas that they felt should be included in the partner selection questionnaire: declaration of forthcoming legal proceedings and declarations about financial and accounting information and reassurances related to that which were not in the public domain. Members also requested information on prospective partners’ ambitions and information to help understand their expectations on the level of the return. It was also felt that there was a need for clearly stating what would happen if the contract was breached, exiting arrangements and governance.

 

Members talked about their expectations with regard to business plans for the venture. They suggested that they would expect to see a 1-year business plan and a five or 16-year business plan.

 

Action point

 

The risk register for the project to be shared with members of the Companies Committee

 

Members discussed the model that was being considered. Whilst there were no concerns about due diligence with the top partner in the joint venture, there were concerns that the if the top Joint Venture partner entered into a partnership with another partner then it could dilute the control of the Council and mean that it ended up working with an organisation that it had previously dismissed. These concerns were noted. Members were advised that if the decision was made to use an LLP as the top company, it provided the greatest level of control for the Council, as any members that sat on it would represent the interests of the council rather than the interests of the company.

 

Reference was made to a project in Canterbury and opportunities presented by different types of planning obligations. Particular interest was expressed by one member in using the Community Infrastructure Levy rather than Section 106 Agreements.

 

Recommendation

 

That the relevant overview and scrutiny committee(s) consider Community Infrastructure Levy

 

The Committee asked for details about the information it would receive when the next report was brought to it in April 2020. The Committee would receive a report summarising the feedback to the questionnaires and initial views on that feedback

 

It was proposed, seconded and AGREED:

 

  1. To endorse the Council’s strategic ambitions for housing growth and delivery in the district
  2. Recommends to Cabinet that the selection process for a strategic partner is pursued to the next stage of seeking bids, to properly form a view as to whether an investment partnership is viable and could deliver additional homes, including affordable housing for the district subject to the comments made during the meeting

3.    Receives feedback on stage 1 of the partner selection process in

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