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									      Housing and Communities Committee

Date: 1st November 2011
Agenda Item No 9:

Council New Build Housing Programme - Update
Report by: Derek Muir, Head of Housing & Neighbourhood Services
Wards Affected: All

      The purpose of this report is to provide Members with an update and to seek members’
      approval for a new-build council housing programme over the next 5 years, subject to
      confirming project viability and private sector contribution. The provisional programme
      as outlined includes delivery on a number of sites that are currently in Council and
      private ownership.

      It is recommended that the Members:
      1. Endorse the provisional programme as outlined subject to work continuing to
            assess the viability and feasibility of developing all sites/assets listed for affordable
      2. Endorse the continued development of an approach to engage the private sector.
      3. Note that further progress reports will be submitted to Housing & Communities

Resource Implications
      The potential for Fife Council to support additional investment has been identified
      through the Housing Revenue Account Business Plan 2010. Housing and
      Communities Committee at March 2011 agreed the potential to invest between £25m
      and £32.5m on developing new affordable housing, subject to a suitable programme
      being identified. Fife Council has £15.4m currently committed with up to a further £31m
      (approx.) available to support a future programme. Scottish Government subsidy has
      also been secured for all projects to date. Further subsidy may be available for future

Legal & Risk Implications
      Detailed appraisals and risk assessments will be undertaken to establish the
      deliverability and viability of individual projects.
      Work is ongoing to identify and resolve issues around procuring developments in
      partnership with the private sector.

Impact Assessment
      An IIA has been undertaken for new build affordable housing as part of the Local
      Housing Strategy priority 4 – supply. No adverse impacts were found.

      Consultation is ongoing with Procurement and Legal Services, Property and Enterprise,
      Planning and Protective Services and Corporate Asset Management over the
      development of the Council’s new build programme. Local members and communities
      will be consulted on site specific proposals as part of the planning process. Wherever
      possible individual projects will be taken forward to complement investment by others,
      including partners in the Fife Housing Association Alliance (FHAA), where value for
      money benefits can be secured.

1.0   Background

      1.1      Meeting Housing Need
      1.2      The Fife Local Housing Strategy identifies a significant unmet need for
               affordable housing in Fife. Specifically, the Fife Housing Needs and Demand
               Assessment estimates a net annual housing need of 561 units over the next 10

      1.3      Fife Council has agreed to target additional capital investment through the
               Housing Revenue Account (HRA) Business Plan towards the delivery of new
               build Council housing which will contribute to meeting this housing need in
               conjunction with additional new build proposals from the FHAA and the private
               sector. With regard to wider partnership projects details of all successful projects
               under the Innovation and Investment Fund (2011) are attached at appendix
               1.The Council has currently drawn down or committed £15.4 million in the first 7
               Council new build sites with up to a further £31m available to support further
               affordable housing projects over the next 3 – 5 years. This report provides an
               outline of the approach to taking forward the programme of Council new build

      1.4      The Fife Council new build programme comprises just one aspect of affordable
               housing development across Fife and complements development by housing
               associations. The number of completions by the Fife Housing Association
               Alliance totalled 244 in 2010/11 and the target for 2011/12 is 256.

2.0   Fife Council new build programme

      2.1      Progress to date

      2.2      From a standing start significant progress has been made to put in place a
               Council new build programme from 2009/10 to 2012/13 with six projects on site
               and one complete. Table 1 highlights that the Council has 41 completed units at
               Linburn Road, Dunfermline and a further 119 on site with 29 units programmed
               for a site start before the end of this financial year, 2011/12. In September 2011
               the North East Fife Area Committee agreed to grant Planning Consent for the
               proposed redevelopment at West Port, Cupar.

      2.3      Table 1 also highlights the level of investment across all sites. The Council has
               been successful in accessing Scottish Government subsidy from each of the
               bidding rounds to date for each of these projects £5.15m in total. It is estimated
          that £15.4m of council funding will be spent on the seven developments
          underway which equates to an average unit cost for Council investment of
          £81,000 excluding land value. This compares favourably with national

 2.4      Once complete this direct capital investment will address housing needs in the
          areas specified. As properties will be promoted to priority transfer applicants in
          the first instance each unit will meet the housing needs for at least 2 households
          thus increasing the impact.

 Table 1 – Council New Build Developments
Project                  No of     Estimated Scottish             Cost to        Total
                         Units     date of    Govt                Fife           project
                                   completion Subsidy (£m)        Council        cost (£m)
                                                                  HRA (£m)

Linburn Road,                 41 Aug 2009                 1.025          3.928         4.953

Castle Road, Rosyth           35 Nov 2011                 0.875          2.334         3.209

Monks Moss,                   22 March 2012               0.550          2.034         2.585

Ostler’s Way,                 32 June 2012                0.960          2.276         3.686

Blacklaw Road,                30 June 2012                0.900          2.166         3.066

Shore Road,                      8 Aug 2012               0.210          0.522         0.732
Anstruther                                                                             (est.)

West Port, Cupar              21 Oct 2012                 0.630          1.654         2.284
Project includes 9
additional mid market
rent units with
Kingdom HA

Totals                       189                       £5.150m      £15.365m      £20.514m

 2.5      In addition a number of economic and wider benefits will flow from this
          investment such as supporting jobs within the construction sector. Individual
          sites will contribute to local economic activity and regeneration in the area. The
          Ostler’s Way site will assist in kick-starting development of the wider site and
          West Port Cupar, when complete, will remove the blight of the previously derelict
          site through a mixed tenure and mixed use scheme.

 2.6      Design and project delivery teams are in place on each of the above sites. For
          future phases it is likely that a variety of mechanisms will be employed during
          the construction phases and in the meantime the Council has established a New
       Build Allocations Group to manage the handover and allocations of the new

2.7    Future Programme

2.8    Key to delivering the future programme is the availability of land on which to
       build. This is intended to come from either Council owned assets / land or the
       private sector. Work is underway both to consider the feasibility of projects on
       Council land and how the Council will engage with the private sector to secure
       development opportunities. Given the need to satisfy procurement rules, it is
       anticipated that in the main the Council will tender for private sector partners and
       those opportunities will be identified and worked up over the coming months. In
       the meantime the next phases of new build will be brought forward utilising
       predominately Council owned land or related assets.

2.9    Council land and assets

2.10   A number of Council owned assets are currently being considered for future new
       build council housing and these are detailed in Appendix 2. Priority for a
       preliminary programme has been identified using a scoring matrix based on
       housing need, location, and site conditions. However, it should be recognised
       that much of this work has, to date, been based on desk top studies with the
       more detailed feasibility work still ongoing. Subject to positive results it is
       proposed that Fife Council proceed to detailed design/costing stage with a
       subsequent application(s) for planning permission being lodged subject to
       member approval. It is proposed the development on all sites outlined will be
       progressed only where value for money can be demonstrated to the Housing
       Revenue Account (HRA) by reference to national benchmark costs.

2.11   Further funding opportunities may be available for these projects in the future
       through new build funding rounds by the Scottish Government. At the time of
       writing this report no announcement has been made regarding further funding
       availability to support new Council housing by the Scottish Government. Bringing
       forward a programmed approach to site development should allow the Council to
       maximise bidding opportunities from such funding should they be available. In
       addition, where appropriate, consideration will be given to working with partners
       to deliver mixed tenure schemes to provide housing choice, meet a wider range
       of housing needs, and deliver value for money objectives.

2.12   Appropriate land value will be an issue for the Council to determine. Where sites
       are held on the HRA there will be no additional land transfer or market value
       cost associated with development. It should be noted however that to date
       where land is held on the General Fund Account the HRA has been required to
       meet the full market value of transferred sites. This has been achieved
       predominantly through the excambion of sites of equivalent value, with cash
       adjustments where appropriate. This is not considered either sustainable for the
       HRA nor value for money. It is recommended that the issue of land value to be
       paid should an internal transfer be required, be subject to detailed consideration
       at an early meeting of Fife Councils Policy Finance and Asset Management
       Committee (PFAM), once the detailed feasibility work supporting the overall
       programme outlined is at an appropriate level. There is a significant difference
       between a full market value for a site considered suitable for housing
       development, and that considered affordable by an affordable housing
       development. A requirement to pay above an affordable housing end use site
       value for all/part of a site being considered would considerably increase the
       potential cost of a development, and threaten the viability, in addition it would
       weaken the prospect of securing future Scottish Government grant subsidy.

2.13   There is potential to prioritise only those sites held on the HRA this, if applied,
       would distort the provisional programmes capacity to address priority housing
       need, and is not at this stage recommended. Notwithstanding this the number of
       available sites held on the HRA considered suitable for development is reducing,
       and would not form a viable basis for the construction of a future programme of
       significant scale. When assessing sites held on the Council’s General Fund the
       current approach seeks to mitigate the need to pay a full market value for a site,
       by, for example, developing only the area of land equivalent to the Affordable
       Housing Policy (AHP) requirement (as for Ostler’s Way, Kirkcaldy). A further
       option is seeking off site provision between two sites putting the AHP
       requirement on one site allowing the other to be sold for market value (as for
       Shore Road and Pittenweem Road, Anstruther – still subject to consent). Using
       these models there is confidence that sites can be developed in early course for
       Council new build, without impacting significantly on the Council’s requirement to
       secure maximum return through the sale of its assets.

2.14   Partnerships with Private Developers

2.15   Given the reducing Council land resource, it is recognised that in the longer term
       the Council will increasingly need to engage with the private sector to deliver
       affordable housing. As above, buying land at full market price for affordable
       housing is not considered financially viable for the Council. Rather, the Council
       is likely to consider the development of land meeting the requirements of the

2.16   Within this framework, and to comply with Procurement Regulations, officers are
       developing a formal tender process to enable it to identify and subsequently
       select appropriate development partners for sites throughout Fife. In essence
       the Council will initiate a competitive and transparent process. This is still work
       in progress and the Committee will be provided with further updates in due

2.17   Whilst procurement law normally requires the Council to carry out a competitive
       process to select any development partners there are circumstances where a
       direct award may be considered appropriate. Such opportunities are being
       considered as they arise but are likely to be rare.

2.18   Resource Implications

2.19   Overall, up to £31m (approximately) of additional investment capacity has been
       identified through the HRA Business Plan for Council new build housing. As
       mentioned, early opportunities are likely to come from Council owned assets
       whilst recognising that there may be additional benefit in supporting private
       sector development to meet the affordable housing requirement and support
       implementation of the Council’s Development Plan.
       2.20   Appendix 2 shows the estimated investment that may be required to deliver
              social rented housing on potential sites within Fife Council ownership. All
              projects must be shown to be viable and demonstrate value for money, based
              on benchmark figures.

       2.21   Resource requirements for the delivery of affordable housing through
              partnerships with private developers are unknown at this stage. Further Reports
              will be submitted as individual projects are worked up.

       2.22   As a result of the significance of the programme further reports will be submitted
              as required.

3.0    Conclusions

       3.1    This is an important and growing work stream for the Council directly focussed
              on creating new housing opportunities to meet the need for an increased supply
              of affordable housing across Fife. Staff resources within Housing and
              Neighbourhood Services and other Council Services have been identified to
              ensure that the programme is taken forward. Individual projects will deliver new
              social housing within the context of Fife’s Local Housing Strategy and the
              Development Plan whilst seeking to address other priorities within the Council’s
              Big 8.

List of Appendices
Appendix 1 – Successful Innovation & Investment Fund Projects all streams
Appendix 2 - Potential Council sites for new build housing programme
Background Papers
                                              Derek Muir
                                                 Head of Housing and Neighbourhood Services

Report Contact
David Robertson
Team Leader Investment & Development
Rothesay House, Glenrothes
Telephone: 08451 55 55 55 + 444 556
APPENDIX 1 – Successful Innovation & Investment Fund Projects all streams

Table 1: Successful Fife Council Investment Bids

 Project           No of Units              Type of Unit           Funding award

 Westport, Cupar   21                       Social Rent            £210,000

 Anstruther,       7 (site increased to     Social Rent            £630,000
 Wester            8 units)

                                            Total                  £840,000

Table 2: Successful RSL Investment Bids

 Project             Housing           No of        Type of       Funding      2nd Homes
                     Association       Units        Unit          award        Council

 Dunlin Drive,       Kingdom           26           MMR           £1,152,437   ~

 Anstruther,         Kingdom           19           Social Rent   £826,796     £220,000
 Cellardyke                                         (11) /                     for 11 soc
                                                    Shared                     rent
                                                    Equity (8)

 Abbeypark, St       Kingdom           9            Social Rent   £350,000     £180,000

 Glenrothes,         Kingdom           15           Social Rent   £654,000     £150,000
 Tanshall &

 Craigie Street,     Kingdom /         14           Social Rent   £499,450     £140,000
 Ballingry           Ore Valley

                                                    Total         £3,482,683   £690,000

Table 3: Successful Innovation Fund bids

 Project           Housing     No of Units              Type of Unit    Funding award

 Westport, Cupar   Kingdom         9                    MMR             £45,000

                                                        Total           £45,000
APPENDIX 2 - Potential Council sites for new build housing programme

The following sites are those considered most readily developable following initial desk top
analysis. Further detailed site feasibility work will be undertaken including detailed housing
mix and justification of housing need. The sites are presented in no particular order.

Years 1 - 3: 2012 / 13 onwards
Site name          Holding         Local Housing     Indicative    Indicative   Indicative
                   account         Strategy Area     Capacity      Cost         house type
North Fod,         General Fund    Dunfermline &          40          £4.8m     General
Dunfermline                        Coast                                        need /
Orebank Terrace,   Housing         Glenrothes             28          £3.4m     General /
Thornton           Revenue                                                      Specific
                   Account (HRA)                                                need
Langside           General Fund    Levenmouth             15          £1.8m     General /
Crescent,                                                                       Specific
Kennoway                                                                        need
Balmblae,          HRA             Cupar and               7         £0.84m     General
Falkland                           Howe of Fife                                 need

Station Road,      General Fund    West Villages          15          £1.8m     General /
Oakley                                                                          Specific need

Elliott Street,    HRA             Dunfermline &          12          £1.4m     General need /
Dunfermline                        Coast                                        MMR
King Street,       HRA             Cowdenbeath            18          £2.2m     General /
Cowdenbeath                                                                     Specific
Millgate, Cupar    General Fund    Cupar & Howe            9          £1.1m     General
                                   of Fife                                      need
Ferguson Place,    General Fund    Kirkcaldy              20          £3.0m     General

                                                       164 units     £20.3m

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