BOROUGH OF POOLE CABINET 12 JANUARY 2016

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Luke Heath
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1 AGENDA ITEM 10 BOROUGH OF POOLE CABINET 12 JANUARY 2016 AFFORDABLE HOUSING DEVELOPMENT ON COUNCIL OWNED LAND AT HOLES BAY ROAD, POOLE: REPORT OF THE HEAD OF HOUSING AND COMMUNITY SERVICES AND CHIEF EXECUTIVE OF POOLE HOUSING PARTNERSHIP LTD (PHP) PART OF THE PUBLISHED FORWARD PLAN No STATUS Strategic 1 PURPOSE 1.1 To seek approval from the Council to support the use of funds collected through planning applications in lieu of housing on site to deliver the proposed housing scheme on Holes Bay Road as 100% affordable housing. 2 DECISIONS REQUIRED 2.1 That Cabinet agrees to recommend that 603,000 be allocated from funds collected through Planning Applications in lieu of housing on site to provide a 100% Affordable Housing Scheme at Holes Bay Road. 2.2 That Cabinet requests the Chief Executive to exercise his delegated authority for the provision of 603,000 as grant funding (from affordable housing contributions already collected) to enable the delivery of 46 affordable flats on the Holes Bay Road. NOTE The Chief Executive is being requested to use his delegated authority to approve the funding for the above Scheme as, in accordance with Financial Regulations, this decision is reserved to Council. In order to meet the contractual deadlines to deliver this much needed Affordable Housing Scheme, work must commence on site as soon as possible and necessary approvals have to be obtained from the Council s partners. The Chief Executive will exercise his delegated authority immediately after Cabinet consideration of this Item to facilitate the expedition of the Scheme.

2 3 BACKGROUND / INFORMATION 3.1 In 2012 the Council made a commitment to deliver affordable homes using sites owned by the Borough of Poole. One of the sites identified was a site located on Holes Bay Road. 3.2 On the 16 th July the proposed development plans for the Holes Bay Road site were presented to planning committee. Members voted to grant the application made by Spectrum Housing Group, subject to conditions and referral to the Secretary of State. The policy compliant affordable housing provision was 40% which equated to 18 flats on site. 3.3 The budget announcements made on 3 rd July 2015 made an impact on the viability of the proposed scheme and the build costs were also known to be high. All Registered Providers were required to resubmit their business plans to the Homes and Communities Agency by the end of October in order that these could be reassessed. Spectrum in line with all other providers had to review their financial position on all schemes not currently on site to assess whether they continued to be viable and to resubmit business cases to their boards. During October November and December, Spectrum had to carry out a more detailed review of the build costs, undertake further value engineering and considering the impact of the budget changes to their rent charges and income to support borrowing on the scheme at Holes Bay Road. There were regular discussions with the council to assess whether the scheme could still be delivered and to assess how much additional grant would be required from the borough. 3.4 The viability review showed that the scheme was financially worse off if it continued to be delivered as a mixed scheme of 18 affordable units and 28 open market sale homes. 3.5 The viability figures showed that providing the scheme as 100% affordable allowed Spectrum to secure higher levels of grant investment from the Homes and Communities Agency and reduce the costs as CIL would be exempt on a scheme that delivered 100% affordable properties. The scheme however would now require in excess of 500k i.e. a higher level of grant from the council. 3.6 Providing the scheme as 100% affordable would deliver an additional 28 affordable housing units. The revised proposal made by Spectrum to the Council would deliver 35 x 2 bed flats and 11 x 1 bed flats, 30 would be affordable rented and the remainder 16 would be shared ownership. 3.7 Summary of the revised scheme costs and revised funding required: Total Scheme Cost 7,496,167

3 Total Subsidy required Homes & Communities Agency (HCA) Grant 1,287,860 Recycled Capital Grant (held by Spectrum) 452,000 Local Authority Grant 603,000 Total 2,342,860 Income from Shared Ownership Sales 1,196,010 Investment from Spectrum Housing 3,957, All of the scheme viability figures provided by Spectrum Housing Group have been independently reviewed and verified by Jones Lang LaSalle (the Council s independent values). 3.9 Within the development agreement there will be a requirement for the final scheme costs at the completion of the development to be further reviewed and verified by Jones Lang LaSalle. If sales revenues have increased or costs have reduced then this will reduce the level of grant ultimately required from the Council. If the scheme cost however has increased then the development risk will be with Spectrum Housing Group The opportunity to secure new build affordable housing outside of planning obligations is extremely difficult and often only leaves the option to acquire at market prices. The grant level being requested from Spectrum Housing Group to enable this scheme to be 100% affordable equates to 21,536 per flat (for the 28 additional affordable homes). The average market value of the flats is 223, FINANCIAL IMPLICATIONS 4.1 The development of new housing and the services to address homelessness rely on significant levels of funding both in terms of capital and revenue. The Council agreed the principle of supporting new affordable homes with the use of Council owned land and assets in The financial support is provided via funding received from developers which is specifically restricted to the provision of affordable housing units. The funding proposed in this report is from funds already collected and held by the borough. 4.2 The Council has been working in partnership with the Homes and Communities agency and Spectrum to secure grant funding to enable the delivery of this scheme by March In order to deliver the scheme within the current affordable housing programme with Homes & Communities Agency, Spectrum must be in contract and have builders starting on site by March Spectrum will not be able to secure board approval to enter into the build contract and complete the development agreement with the Council unless it has secured all the necessary funding streams.

4 4.6 If Spectrum cannot deliver the scheme as 100% affordable homes then the viability figures have already shown that the development is unviable. A mixed scheme providing 40% affordable is unlikely to proceed. Therefore there is a significant risk that no affordable housing units will delivered and that the approved 1.2 million of Homes Community Agency grant will be lost along with the additional 28 affordable homes 4.7 The number of general needs homes becoming available for re-letting is at its lowest level for many years and last year less than 200 households found a home this way. The vast majority are reliant on the private rented sector as a solution to their housing problems and in many cases this has become a problem in its own right. The council will loan around 200k this year to help people access a home in the private rented sector. The cost of accommodating households in bed and breakfast in an emergency is very high and numbers are steadily growing. A key aim of homelessness prevention is to maintain low levels of placement into B and B. 5 LEGAL IMPLICATIONS 5.1 Money which is collected in lieu of affordable housing on site from other planning applications is usually required to be spent / committed within 5 years of collection. Poole has a limited land supply and therefore the opportunity to invest in other affordable housing schemes is limited. If money collected is not spent then developers can ask that the money is returned to them. 5.2 A development agreement and a land transfer contract are currently being drafted. 6 RISK MANAGEMENT IMPLICATIONS 6.1 The development agreement that would be entered into with Spectrum Housing Group will still allow the Council step in rights if the development was failing. 6.2 There is a very significant risk that if this development does not proceed the Councils financial revenue position will be made worse due to the inability to accommodate homeless households in anything other than B and B accommodation. 7 EQUALITIES IMPLICATIONS 7.1 There are not considered to be any specific equalities implications with this report however many of these much needed affordable properties will provide homes for those with protected characteristics under the Equalities act. There is a full EQIA attached to the Councils Housing Strategy

5 8 CONCLUSIONS 8.1 It is recommended that the Council allocates 603,000 to allow for the development at Holes bay road to proceed and to provide a 100% affordable housing scheme. Report Authors: Cally Antill and Kerry Ruff Contact officer: Cally Antill ext 3440 Kerry Ruff ext 3495 Background Papers:

Assets, Regeneration & Growth Committee 17 March Development of new affordable homes by Barnet Homes Registered Provider ( Opendoor Homes )

Assets, Regeneration & Growth Committee 17 March 2016 Title Report of Wards Status Urgent Key Enclosures Officer Contact Details Development of new affordable homes by Barnet Homes Registered Provider