Innovation and Ambition The Hammersmith & Fulham Approach. Melbourne Barrett MBA MRICS Executive Director, Housing & Regeneration

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1 Innovation and Ambition The Hammersmith & Fulham Approach Melbourne Barrett MBA MRICS Executive Director, Housing & Regeneration ARCH AGM 23 rd September 2013

2 Overview Local Government not Local Administration Explore how Housing Initiatives fit into wider strategic context and Asset Management approaches Opportunity vs risk appetite Hidden Homes Modern Methods of Construction (Rational House) Housing and Regeneration Joint Venture Vehicle Earls Court

3 Local Government not Local Administration Locally elected Members are accountable to their electorate and develop priorities and policies in the context of local circumstances and their political beliefs Therefore follows that LAs are not simply conduits for national government policy and in dealing with LAs a one size fits all approach is unlikely to be helpful Need to understand the local agenda: Protect and Conserve? Expansion and Growth? How is the agenda articulated and enacted locally: Planning Policy Housing Strategy Asset Management Plan How will projects be implemented in house team, external consultants or combination of the two

4 LB Hammersmith and Fulham LGA Council of the Year 2010 a flagship authority Unremitting focus on effectiveness & efficiency has allowed Council Tax cuts of 3% or more per annum in 6 years out of 7 since 2006, whilst improving resident satisfaction Embraces innovation as a way of achieving better for less Tri Borough partnership with Royal Borough of Kensington and Chelsea and Westminster Borough of Opportunity with unprecedented 3 London Plan Opportunity Areas

5 A Vision for Regeneration New jobs and new homes Old Oak up to 19,000 new homes 90,000+ new jobs White City Opportunity Area 5,000 new homes 10,000 new jobs Earl s Court Opportunity Area 7,500 new homes (1,500 affordable) 9,500 new jobs 10% of London Opportunity Areas in Hammersmith and Fulham

6 LBHF Borough of Opportunity High land values with resilient residential market Recently adopted Housing Strategy and HRA Asset Management Plan seek to maximise low cost home ownership opportunities across three strands: Hidden Homes Modern Methods of Construction with Rational House Housing & Regeneration Joint Venture Vehicle on larger sites, to capture additional development gains for reinvestment, taking on greater proportionate risk Council prepared to have some exposure to development risk to obtain greater returns over and above straightforward disposal Need to partner with private sector to fully exploit larger commercial opportunities and to ensure that end product will be fit for purpose

7 Housing Strategy

8 Hammersmith & Fulham HRA Context 13,000 social tenancies, 5,000 leaseholds with existing use value of c. 1bn Post settlement debt 217m = gearing of 23% on OMV Existing Use

9 Risk Appetite Skills, Capacity, Competence Opportunity vs Risk Appetite. Links to wider policies (e.g. Allocations) Strategic Asset Management Including Estate Regeneration Tactical Asset Management - Replacing units not fit for purpose Steady State Warm and safe homes

10 Development Strands Hidden Homes small conversion sites, generally less than 5 units per site New Build Innovative Housing sites of between 5 50 units, built using modern methods of construction (Rational House) H&R Joint Venture partnership with a private sector partner to redevelop selected larger council owned sites (50+ units)

11 Business Plan ( ) Cabinet Approval for 30m - 24th June 2013 Mayor s Housing Covenant ( 2.7m investment) 100 DMS & 33 private sale units (cross subsidy) 46m Gross Development Value 30m Development Costs 16m Surplus (incl. retained equity)

12 Hidden Homes Becklow Gardens completed 2012 Planning consent for 8 sites New DMS homes from Autumn 2013 Sale of site at Verulam House (with planning) Development agent Baily Garner

13 Becklow Gardens

14 New Build (Rational House) Establishment of single provider framework for design & development management services City House Project Ltd. (Rational House & Aecom) Pilot site at Spring Vale 10 new homes Built using modern methods construction Planning approval (August 2013) Start on site (February 2014) Next phase Becklow Gardens (12 new homes) Barclay Close (6 new homes) Jepson House (20+ new homes)

15 Rational House Could this prefab terrace be the future of housing? The Times A Ready-Made Solution to the U.K. Housing Crunch? The New York Times

16 Spring Vale

17 Hammersmith and Fulham Housing & Regeneration Joint Venture

18 JV Objectives Provides the best opportunity to achieve housing and regeneration objectives, to: - Deliver major economic and housing growth - Tackle economic and social polarisation Establish a long-term JV with a reputable partner with financial resources & skills, who shares our vision to deliver major residential led regeneration projects To redevelop selected sites for a range of different tenures which better meet the needs and aspirations of local people

19 Sites Watermeadow Court, SW6 Approx 1.2 acres (0.48Ha) Located west of Imperial Wharf and to the east of Wandsworth Bridge Road High value residential location

20 Sites St Thomas Way, SW6 Approx 0.16 acres (0.066 HA) 18 storey residential Tower block Located 10 minutes walk from Fulham Broadway

21 JV Structure 50/50 joint venture between the Council and selected private sector partner Business Plans based on the Council s objectives Council will commit its identified sites to the JV The partner will fund the working capital requirements of the JV and raise development finance Anticipated that partner will obtain a return on finance committed and take a Development Management fee prior to 50/50 share of returns JV will be for an initial period of 15 years Structured to allow the Council to put in additional housing development sites over the life of the arrangement

22 Earls Court Conditional Land Sale Agreement

23 Earl s Court Opportunity Area The opportunity 77 acres of land 3 Landowners: * CapCo * TfL * LBHF

24 Earl s Court Opportunity Area Benefits: 7, 500 new homes 9,500 new jobs New schools, leisure and health facilities Transport improvements 100m pa to local economy GDV 8 billion

25 Earls Court Deal Structure Deal structured as Conditional Land Sale Agreement, therefore not a procurement Land transferred from LBHF to Capco in phases only after relevant proportion of 760 replacement homes have been provided in advance LBHF granted 995 year lease and remains landlord of 760 replacement homes Intended first phase of replacement homes would be on Capco s land at Seagrave Road which facilitates one move only approach Value of replacement homes and cash consideration to LBHF is circa 280 million

26 Earls Court Scheme Benefits Comprehensive redevelopment allows existing housing stock to be replaced on a new for old basis Significant maintenance liability on the estates is avoided 16% of existing tenants who are overcrowded can be re-housed in homes with enough bedrooms to meet their needs Replacement housing is funded by private sector funds through the developer rather than through scarce public sector resources. Scheme is able to progress with no public subsidy. Council is required to approve proposal for each phase of development, safeguarding design and method of building out.

27 Earls Court Benefits for Tenants and Leaseholders Guarantees for tenants and leaseholders Brand new replacement home to London Design Guide Standards One move only - Developer has to build and deliver up replacement homes in the local area before any council land is transferred Tenants remain secure Council tenants & pay Council rents Phased approach allows communities to be moved together Additional advantages and compensation Tenants receive statutory home loss payment of 4,700, a disturbance payment to cover moving costs and in addition new white goods, carpets & curtains Resident leaseholders/ freeholders receive Market Value plus 10% disturbance payment plus a further 10% early purchase discount on replacement property If necessary council will bridge gap in value between old and new property and hold as equity so no additional borrowing required Service charges capped for 5 years and agreed by council beyond that

28 Conclusion Aspirations and risk appetite of individual local authorities will shape the extent to which freedoms and flexibilities are taken up. HRA Reform taken together with changes in Localism Act provide opportunity for local authorities to be more proactive in relation to estate regeneration and place making through delivery of additional housing capacity Local context, capability, capacity and risk appetite will impact on a public sector organisation s view of whether or not to go down the Joint Venture route not one size fits all In seeking a greater return on public sector assets a Joint Venture approach can be attractive providing the process is efficient (to keep bid costs under control) the partner is fit for purpose given the nature of the opportunities there is strategic alignment between the partners interests