Agenda item

To examine the intended Housing Acquisition Strategy – to assess right to buy numbers, values, type and age of housing and impact on the risk appetite for Council house building.  Plus to consider the progress deliberations around a Pension Provider providing a lease-back housing development. The meeting will also examine the use of Community Infrastructure Levy/section 106 funds to provide facilities/services and infrastructure.

In addition the report also provides an update on the councils voids position.

Housing Acquisition and Development Strategy

The Committee heard how the strategy was adopted by Cabinet in October 2020 and set out a framework around which the council owned housing stock would be increased to achieve a target of 200 additional homes. The strategy was appended to this report for ease of reference.

Right to Buy

Members were informed that when added to the housing stock held within the Council’s Housing Revenue Account (HRA) the impacts of right to buy have to be taken into consideration and factored into the financial planning.

Right to Buy numbers over the last five years were shown in the table below:

The total discount figure was essentially the financial loss to the HRA compared to the market value of the properties sold. Sales peaked in 2017/18 and had now returned to a lower level. The addition of newer and more desirable properties to our housing stock could have led to an increase in sales.

The current maximum discount was £84,200 or £112,300 if you lived in London.

Houses: Discounts started at 35% when you have been a public sector tenant for three years and the discount remained at 35% until five years spent as a public sector tenant. After year five, the discount went up by 1% for every year up until a maximum of 70% or £84,200 across England (excluding London) whichever was the lower.

Flats: Discounts started at 50% for three years as a public sector tenant and remained at 50% until five years spent as a public tenant. After year five, the discount went up by 2% for every year until a maximum of 70% or £84,200

Cost floor rule

Discount could be reduced by the ‘cost floor’ rule. That may apply if the property had recently been purchased or built by a landlord or they had spent money on repairing or maintaining it. Discount could be reduced to nil if the cost floor was more than the value.

It was reported to the Committee that the cost floor period for council properties was either a 10 year period prior to receipt of the RTB application form or 15 years if the home was built or acquired by the Council after 2 April 2012

That meant that a house bought through right to buy after year 15 could subject the HRA to a loss of over £80k.

Extending the cost floor to 30 years would alleviate that risk and put the Council onto a much lower risk position.  Officers had discussed that with representatives from MHCLG however it required a change of government policy and legislation so at the time all decisions around acquisitions and development had to be taken on the basis of the current 15 year cost floor.

Leaseback Housing Development

The Committee heard how leaseback was a means by which housing could be developed using funding from an institutional investor. The housing was then leased to the Council who manage it for the lease term, typically 40 years in the case of houses. At the end of the lease term the housing usually transfers into the ownership of the Council. During the lease term the management and maintenance costs were covered by the rental income, with the surplus rental income being passed on to the investor.

The Council was engaged in ongoing discussions with an institutional investor with a particular focus on providing housing in Jaywick Sands but also considered options elsewhere in the district. Whilst favourable because the arrangement would provide a significant number of rental properties without exposing the Council to financial risk, there were a number of legal considerations to be understood. The investor needed to also understand the build and acquisition costs which presented a significant challenge in Jaywick Sands and the weekly rent needed to be set at a level that was attractive to renters.

Officers would continue to explore this option and bring a report forward to Cabinet if and when a suitable arrangement had been developed.

Section 106 Funding

Members heard how the amount of s106 funding for affordable housing provision, often referred to as an off site contribution, awarded to the Council was reported as part of the quarterly budget report. In Quarter 2, £1.7M was available. That funding would be used to fund housing acquisition and development in order to achieve the Council’s 200 additional home target.

Housing Voids

Members also heard how housing voids had increased over the last year or so to a point where the Quarter 2 financial reporting showed a figure of 4% financial loss. Given the COVID-19 pandemic an increase in void properties was to some extent to be expected and was something that all landlords would have experienced. All but urgent lettings were suspended between April and mid-June 2020. General working restrictions both in respect of office based allocations staff and repair and maintenance contractors had meant a slower turnaround and allocation process had been in place since.

There had not been an increase in properties being handed back during the pandemic and rent collection levels had remained very good in the circumstances.

The Committee was informed that at the time of the report there were 108 void properties, equating to 3.5% of the total housing stock. 42 of those properties were ready to let with 15 of those being offered to prospective tenants during the week commencing 18^th January. The target was to reduce that total number to around 62 which was 2% of the stock. Officers believed that was possible and had been working on measures to improve the housing allocations process for several months. Those measures would include new allocations and housing register software that would streamline processes and move them away from the current paper based processes.

Members heard that an officer working group had been set up with the first meeting held on 20^th January. The group would be standardising data collection across the allocations and repairs teams and would be improving communication and certain processes that collectively would enable void times to be reduced. In April a new term maintenance contract would commence, placing all void repair works with one contractor that would be subject to performance targets and financial penalties where turnaround times were not met.

Due to small outbreaks of COVID-19 in some sheltered schemes and the challenges in managing those outbreaks there would not be any new allocations of sheltered housing until it was safer to do so.

During the consideration of this matter it was RECOMMENDED to CABINET that:

·         the quarterly Housing Revenue Account monitoring report (and the Out-turn HRA report) should include specific detail on the spend and funding for housing acquisitions to that point in the year and comparable data from previous years.

·         the Small Housebuilding Scheme Pilot the Council was participating in continue to be given the full support of the Council as a tangible measure to  getting local construction firms back working at capacity and helping to provide good quality homes for local people.

·         Representations be made, or continue to be made, to Government to adjust the Cost Floor Period for new Council Housing from 15 years to 30 years and thereby mitigate the risks to Council Housing supply from the “Right to Buy” and consequently positively contribute to the (re-) provision of Council Housing as an element of a vibrant mixed economy in housing.