AGENDA ITEM 8

BOROUGH OF POOLE

CABINET

12th December 2007

REPORT OF HEAD OF HOUSING AND COMMUNITY SERVICES

AFFORDABLE HOUSING PROGRAMME

  1. Purpose of the Report and Policy Context

1.1The purpose of the report is to update Members on the delivery of the 2006-8 Affordable Housing Programme. The report recommends supporting schemes to secure external Housing Corporation funding, accelerate the reduction in the number of households living in temporary accommodation and the funding of a frail elderly sheltered housing scheme in the town centre.

  1. Recommendations

2.1Members are asked to note the transfer of Housing Corporation funding from the Astbury Avenue scheme to the Sterte Court scheme

2.2Members are asked to support the transfer of the Arne Avenue Housing Corporation funding to the Home Challenge Scheme and also to allocate £946,000 from the Council’s housing capital programme.

2.3Subject to members decision at 2.2, Members are asked to agree that those households currently living in temporary housing in the Home Challenge properties are offered permanent tenancies to discharge the Council’s homeless duties.

2.4Members are asked to note the Housing Corporation funding of the Pitwines frail elderly sheltered housing scheme and also to allocate £200,000 from the Council’s Housing Capital Programme in 2009/10

2.5Members are asked to agree that £172,000 capital allocation from the Cash Incentive Scheme is transferred to the Affordable Housing Programme as outlined in section 5.

  1. Programme Update 2006-8

3.1Members were updated in March 2007, that the Affordable Housing Programme faced some difficulty as a result of undeliverable schemes. In 2006/7 the Natural England restrictions on residential development prevented a number of schemes proceeding and put social housing grant at risk. The schemes scheduled to start on site in the 2006-7 financial year represented 84 units of accommodation provided across 7 sites. £4,232,423 of Housing Corporation funding and £512,000 of Borough of Poole capital funding were allocated to these schemes. Through successful negotiation and securing additional opportunities, only £371,802 Housing Corporation grant was lost and 71 units of accommodation were secured. This is outlined at appendix A.

3.2The 2007-8 programme faces similar difficulties. In order to secure the investment from the Housing Corporation, our RSL partners commit to key milestones at the bidding stages. The first is an estimation of when a scheme will start on site. This is the key milestone for securing the grant to the scheme. With a very strong focus on delivery the Housing Corporation take a strong stance in terms of slippage at this stage. In these instances a process of negotiation between the RSL, Housing and Community Services and the Housing Corporation takes place, and in the past, we have been successful in securing grant by providing alternative sites and transferring grant allocations. At present, the issues are difficult to resolve due to a lack of sites available for switching allocations and therefore securing delivery.

3.3The majority of the schemes in the current programme were scheduled as having start on site milestones in 2007/8 meaning that the grant allocations and therefore, risk of loss of allocations in this latter phase of the 2006-8 programme is greater. The 2007/8 schemes originally comprised of 201 units, £11,483,546 Housing Corporation Grant and £1,171,750 from the Council’s capital programme.

3.4The following tables sets out the schemes which were originally scheduled to proceed in this financial year.

Allocations 2007/8 / Total public
Units / Start on site / HCSHG / BoP funding / subsidy / grant per unit
Sterte / KHA / 32 / Jan-08 / 2,802,591 / 0 / 2,802,591 / 87581
Astbury Avenue / KHA / 10 / Jul-08 / 799,907 / 0 / 799,907 / 79990.7
Turlin Moor Com Centre / KHA / 21 / Jan-08 / 869,726 / 434,750 / 1,304,476 / 62117.9
Fourways / KHA / 14 / Jan-08 / 630,000 / 0 / 630,000 / 45000
James Bros / WCHA / 38 / Jan-08 / 2,000,000 / 0 / 2,000,000 / 52631.6
Goods Yard Allocation / WCHA/Raglan / 60 / Jan/Feb 08 / 2,400,000 / 0 / 2,400,000 / 40000
Chapel Lane / Raglan / 22 / May-07 / 890,000 / 225,000 / 1,115,000 / 40454.5
Pergins / EBHT / 4 / Jul-07 / 226,322 / 0 / 226,322 / 56580.5
Arne Ave Zig Zags / WCHA / 19 / Jan-07 / 865,000 / 466,000 / 1,331,000 / 70052.6
Dewlish Close / 46,000 / 46,000
201 / 11,483,546 / 1,171,750 / 12,655,296

3.5.The Astbury Avenue scheme cannot proceed as it falls within the 400m Natural England development exclusion zone.

3.6.The proposals for redeveloping the Turlin Moor community centre site were generated by a competition to seek affordable housing provision on the site as well as the planning obligation to re-provide the community facility. The Council has not received any proposals which achieve both requirements and so the scheme cannot proceed at this point in time.

3.7.The Fourways scheme cannot proceed within the timescales set and so the allocation cannot be taken up in this round. The scheme will be subject to a new bid.

3.8.The Goods Yard scheme will not proceed within the time scales set and so the scheme will be subject to new bids in future financial years when start on site for the Registered social landlords is assured.

3.9.The Chaple Lane site is part of the Town centre North regeneration scheme and cannot proceed within the timescales set.

3.10.The Arne Avenue Zig Zag scheme falls within the Natural England 400 metre exclusion zones that prevents development and therefore cannot proceed.

3.11.The impact of the original schemes not proceeding is that there is £ 6,454,633 of Housing Corporation funding to re-allocate and £ 1,560,726 of Borough of Poole funding to re-allocate. This is shown in the following table.

Scheme / Housing Corporation funding £ / Borough of Poole funding £
Astbury avenue / 799,907
Fourways / 630,000
Goods Yard / 2,400,000
Chaple Lane / 890,000 / 225,000
Arne avenue Zig zags / 865,000 / 466,000
Turlin Moor community centre site / 869,726 / 869,726
Total / 6,454,633 / 1,560,726

4.Recommended transfer of Housing Corporation Grant Allocations

4.1The following sections set out the recommended transfer of allocations to secure the available Housing Corporation funding. Confirmation has been received from the Housing Corporation that they are prepared to fund the recommended schemes subject to Borough of Poole funding. The proposals will commit the Council to £ 1,192,000 of funding which is £20,250 more than the original programme agreed by Council. In addition the increased level of funding will deliver 12 less affordable housing units. However, in terms of tenure it will deliver 38 more rented units than the original programme and 50 less low cost home ownership units. Rented affordable housing requires a higher level of social housing grant and the increase in the number of units for that tenure will meet the highest level of housing need. Therefore, in overall programme terms the proposals contained in this report are consistent with the programme originally agreed by the Council.

4.2The allocation of £799,907 for the Astbury Avenue scheme is allocated to Knightstone Housing Association. Knightstone also have an allocation for the development of land at Sterte Court which was originally intended to deliver 40 units of accommodation. The scheme designed can now accommodate up to 56 units It is therefore recommended that this allocation is transferred to this scheme in order to maximise the opportunity and secure the grant available.

4.3Negotiations on a 45 unit Extra Care scheme at Poole Quarter - the final part of the Section 106 agreement relating to the provision of affordable housing on the site – have been concluded between the developer and East Dorset Housing association. The extra care scheme is one that will provide the facilities to enable frail elderly people to remain independent in their home. For example it will provide communal catering facilities East Dorset Housing Association have bid for grant from the Housing Corporation to support this deal. The Housing Corporation has agreed to allocate £ 2,435,000 of social housing grant to this scheme.

4.4The offer made by the East Dorset Housing Association to the developer for the extra care scheme is compliant with the Council’s planning affordable housing policy. Then total cost of the scheme is £5,979,934. The Housing Corporation has allocated £2,435,000 to the scheme. East Dorset Housing association have agreed to allocate £ 1,010,029 of their own resources to the scheme and the rents will support a loan of £2,334,909. The Council has been asked to support the scheme by allocating £ 200,000 .The question remains as to whether this represents good value for money for the Council to fund the £200,000.

4.5In establishing whether this represents good value for the Council it is necessary to return to the original section 106 agreement with the developer. The agreement was silent on the price to be paid for the 45 units scheme as the costs had not been agreed at time of signing. The Council’s policy requires the costs to be taken into account and if they exceed benchmarks then social housing grant is available to meet the additional costs. That was the case on the Pitwines development with the general needs accommodation . As the costs for the 45 units scheme have now been agreed the amount of social housing grant that is legitimate for the scheme can be calculated and is shown above. The average amount of social housing grant for the general needs properties on this development in 2003/4 was £39,996 ( which included shared ownership which requires on average half the social housing grant required for a rented unit) and the average for this scheme is £58,555.

4.6Therefore, the question remains what does the Council purchase by funding the £200,000 of social housing grant required. If the Registered Social Landlord does not contract with the developer then the developer will offer the same option to the Council . The Council will not be able to afford the purchase of the properties as it will have to pay the full cost of the development not just the public subsidy element and the rents charged will not cover that cost. Then the developer is required to sell the properties on the open market at 35% of their open market value and they will be always sold at that percentage of their open market value in perpetuity. Therefore, 45 units of affordable elderly sheltered housing will be available from the development ( subject to the section 106 agreement being complied with).

4.7Consequently, if the Council did not fund the £200,000 required there would be sheltered housing available for elderly people to buy. It is unlikely that people who require sheltered elderly accommodation would be able to raise a mortgage and so those buying would be households selling an existing property. As such they will not be those in most housing need that would purchase the properties. Moreover, the Council would not be able to nominate the purchasers so they may go to those who are not in housing need. Furthermore, any strategic intention the Council may have for the provision of frail elderly housing for elderly people in the town would be hampered.

4.8The benefits of the scheme being provided by the Registered Social Landlord are as follows. The scheme will provide rented accommodation rather than sale so will meet the requirements of those in greatest housing need for frail elderly housing in the town. The scheme will provide a range of services to meet the needs of frail elderly people that cannot be guaranteed if the scheme is sold. The Council will be able to nominate households to the scheme and thus it will be able to use the new scheme to support its strategic intentions around the provision of accommodation for elderly people in the town.

4.9Adult Social Services (Commissioning) are keen to see the development of an extra care housing scheme for Older People, which enables them to fulfill a strategic aim of increasing the proportion of care provided in people's homes rather than in residential care. They would contract for the provision of Home Care to the scheme from a dedicated team, and anticipate funding this through both a forthcoming review of long-term home care support, and through reduction in the number of residential places taken up. The care element would be charged for using the Fairer Charging guidelines, and so the tenants themselves would contribute to costs according to their means.

4.10An option would be for the Council to decide not to fund the scheme now; wait for the cascade in the section 106 agreement to take effect and then fund a Registered social landlord to purchase the units at 35% of the open market value. If the open market value of the units were to be £250,000 then the total income to the developer would be £3.937 million. The Registered social landlord could raise a mortgage of £2.334 million based on current rent levels leaving a requirement for at least £1.603 million to meet the cost of the purchasing the whole scheme. As the Registered social landlord would not have been in contract with the developer there would be no guarantee that the development would meet Housing Corporation standards . If it did not meet the standards then Housing Corporation funding would not be forthcoming and the grant requirement would fall to be met by the Registered social landlords and the Council. Clearly, this approach contains some risks in terms of the product that would be delivered as well as the level of funding that the Council would need to provide.

4.11The Arne Avenue Zig Zag scheme received a Housing Corporation allocation of £869,000 and £869,000 of Borough of Poole funding. It is proposed that this allocation is switched to support the Home Challenge scheme.

4.12The Council currently leases 57 units of accommodation from Western Challenge Housing Association under the Home challenge initiative. The properties are only available to households who the Council owes a homeless duty . The properties provide a home until that household is successful in moving into a Council or Registered Social Landlord property which would discharge the Council’s homeless duty. The rents on the Home Challenge properties are above market rents as that level of rent is required to meet the private finance costs that the Registered Social Landlord has entered into to purchase the homes. Western Challenge provide some subsidy to keep the rents within the maximum that can be claimed via housing benefit.

4.13The Government has set a target for Local Authorities to reduce the use of temporary accommodation by 50% by 2010. For Poole, this requires a reduction to 101 units by 2010. The current figure is 156 and the target position for the end of the current financial year is 125. Therefore this scheme will be run down over time . This will be achieved by moving those households currently into the Home challenge properties into Council or Registered social landlord properties and handing back the Home Challenge units.

4.14The Council leases and manages the properties from Western Challenge. Under the terms of the lease the Council is required to return the properties at the end of the lease after addressing dilapidations. There is a six month break clause available to either party to end the lease. The Council is managing the costs of the leases including the cost of dilapidations on an annual basis . The predicted total Council revenue costs of the scheme over the next three years is £143,254. The following proposal will reduce those costs to £43,338.

4.15At present, the Home Challenge portfolio consists of 57 units. Of that number 16 properties have already received social housing grant and will be handed back to Western Challenge over the next two years. The proposal is to secure social housing grant for a further 24 properties out of the portfolio and for Western challenge to sell 17 properties.

4.16The Housing Corporation has agreed to transfer the Arne avenue allocation of £ 869,000 into the Home challenge scheme to bring 24 of the existing properties to affordable rent levels.

4.17The total cost of converting the 24 units to affordable rent levels is £3,619,579. There is a total of £945,000 of social housing grant available from the Housing Corporation ( £865,000 from Arne avenue plus £80,000 from a scheme in another Local authority area). The rents from the 24 units will only support a loan of £807,131. This leaves a shortfall to finance the scheme of £1,867,448. Western Challenge have agreed to fund £921,448 and have asked the Borough of Poole to fund £946,000. Western Challenge are prepared to accept the funding from the Borough of Poole on the following basis,

2007/8£339,250

2008/9£169,250

2009/10£437,500

4.18The benefits to the Borough of Poole funding this scheme are as follows. Firstly, it represents a net increase in 24 units of affordable housing which are street properties and always popular with households. The average cost to the Borough of Poole in social housing grant terms is £39,416 which is competitive compared to other purely Poole funded schemes. However, the total public subsidy cost of £75,458 is towards the high end of what has been supported in Poole. Nevertheless, the Housing Corporation have agreed to fund the scheme and therefore must regard it as value for money. Secondly this is the purchase of existing properties so the market value of each property is being purchased rather than cost of developing a new unit of accommodation ( which is lower than market value) and this means it is competitive as other comparables are new build schemes based on paying the cost of development.

4.19If the Council is minded to support this scheme it would present the option to offer the Home challenge properties to the households currently living in them as a discharge of the Council’s homeless duty. The properties are popular and families will have children in local schools. To ask them to move on to other Council or Registered social landlords property will involve disruption and cost for the families. It is recommended that the families are given the choice of staying in the properties and accepting them as a discharge of the Council’s homeless duty.