Self-financing taking full advantage Ian Doolittle and Suzanne Benson Tuesday 12 June 2012
Part 1 the new dynamic relations between Councils and RP partners Self-financing what lies ahead Local authorities working with RPs RPs working with local authorities Self-financing new relationships
What lies ahead - headline/national statistics and issues Overall surpluses accessing them early? Headrooms but surpluses to exploit? Debt caps Public debt anxiety
What lies ahead - local issues and priorities Debt repayment? New build Useable surpluses Property values
What lies ahead - opportunities Business plan discipline Assured or semi-assured income Scope for real asset management Long termism?
What lies ahead - constraints/uncertainties Debt statement in Budget RTB surge Rent decisions CLG consents
Councils working with RPs - new build Land? Development expertise Access to grant and other resources Who owns? Nb temporary accommodation
Councils working with RPs - problem stock Archetypes or estates Sheltered schemes Redevelopment or reconfiguration Transfer - and RP re-provides?
Councils working with RPs - management (and maintenance) ALMOs becoming RPs? M&M JV (with RP integrated or alongside) RPs (new or existing) as PFI-lite contractors?
Councils working with RPs - conditions for working together Constitutional/contractual arrangements? Tendering/competition Rent policy affordable rents? Fixed term tenancies?
RPs working with Councils - supporting/delivering new build Who owns? Grant terms Selling expertise Formalising the collaboration?
RPs working with Councils - acquiring problem stock A redevelopment proposal not a tenanted transfer? Re-provision commitment? Consultation/promises Nominations and ongoing Council involvement
RPs working with Councils - housing Management? Councils with ALMOs Integrating the local housing offer CBL and Working with major turn-key contractors PFI-lite offer?
RPs working with Councils re-aligning the business? Local authorities new approach and power Rationalising stock acceleration? Focusing on key Council partnerships? Aligning policies?
New relationships Local authority/rp partnerships More coalescence/less differentiation in the sector Nb PRS? Anticipating social housing debt reclassification A long-term re-alignment
Part 2 Delivering new homes and regeneration Councils doing it themselves On balance sheet HRA or General Fund ALMO or ALMO sub Councils using a partner Off balance sheet
The key questions Does the Council itself (even without its own stock) want to build? What future role is envisaged for its ALMO? How do RPs feature in the Council s plans What are residents and tenants priorities? What appetite is there for risk? What are the political imperatives?
On or off balance sheet HRA borrowing cap Prudential borrowing limits Separate vehicle for off balance sheet 50% Council ownership Constitutional restrictions on (1) board removal powers and (2) voting rights at meeting Limit on contractual indemnities, guarantee, right to control borrowing
On balance sheet Directly by the Council Council as landlord RTB would apply Secure tenancies Rent controls would apply Through subsidiary/almo RTB and rent controls would not apply unless contractually Assured tenancies LA Companies Act provisions would apply Group accounting
On balance sheet HRA or GF (1) Within HRA If Part II Housing Act 1985 Subject to HRA borrowing cap RTB would apply and rent controls
On balance sheet HRA or GF (2) Within GF (outside HRA and borrowing cap) No HRA powers (i.e. not Part II) General Power of Competence If HRA land query appropriation power in s19 Housing Act 1985 Disposals
New build through ALMO or sub of ALMO Impact on non-trading relationship? Tax advantages of a separate subsidiary Board, governance and accounting arrangements Would developing through a subsidiary of the ALMO provide better value? Related issues EU Procurement/Tax
Off balance sheet Through vehicle not controlled by LA Levels of other controls/guarantees Impact on prudential limits involvement in other entities
Council with Partner Generating/releasing value through private sector investment/sales RP reserves Phased development to secure viability? Starting small but allowing model to grow?
Key issues Council control/influence Financial return Land transfer valuation issues State Aid Which model/structure? VFM Council attitude to risk
Part 3 New approaches to management and/or maintenance Housing Service housing management/repairs and maintenance Regeneration Asset ownership
Models Contractual or Joint Venture Vehicles? Business plan certainty a drive to fixed price contracting?
Contractual model LA R+M staff LA HM Staff HM or R+M Staff HM and R+M services RP (or Contractor) R+M Contractor HM Subcontractor (RP)
Joint Venture Vehicle HM staff LA R+M staff SPV* HM subcontractor R+M subcontractor * LA may or may not be a member
Externalisation Future Potential Targeted stock Combined volume procurement economies of scale participation with RPs in cost sharing vehicles?
Regeneration There s no money for regeneration Can a partnership approach between a LA and RP unlock a project? Council as lender
Details and issues Utilise headroom as short term development finance to unlock site regeneration by reducing cost of debt LA makes funds available at a lesser margin than commercial lender Arms length documentation market terms Powers and Consents State Aid Accountancy sign off
Assets stock rationalisation Business plan review Location, condition, costs of housing stock Outlier estates Does retention make economic sense? Options void transfers/trickle transfers stock swaps tenanted transfers
Part 4 - the future for Stock Transfers estatebased or whole stock Stock transfer after Self-financing - why? Some new challenges New approaches/models What hasn t changed?
Why look to transfer? The Council s Strategic role Constraints of the debt cap Mitigation of Self-financing risks Targeted solution to estate or archetype investment needs
Some new challenges (1) The debt question Transferring stock Retained stock Easier for estate regeneration? NB: access to land value
Some new challenges (2) Making a business plan work Irrecoverable VAT Diseconomies of scale General Fund impact
New approaches New CLG guidance (?) Debt write off (repayment) programme (?) Making the case to CLG
New models for transfer CoCo? Mutuals Tenant led transfers Leasehold/Tenants Choice? Trickle transfers
What hasn t changed? Tenant consultation and the ballot requirement What makes an attractive offer? Political sensitivity
For further information please contact: Ian Doolittle or Suzanne Benson e idoolittle@trowers.com t +44 (0)20 7423 8415 e sbenson@trowers.com t +44 (0)161 838 2034