ITEM No: 9 Committee Report Date: 7 October 2008 Subject: Community Build Programme Update Summary The Community Build Programme has been promoted to enable over 500 new homes to be constructed on existing Council owned housing land, utilising a variety of funding routes. The homes will predominantly be for Social Rent and Low Cost Home Ownership and will provide much needed affordable accommodation for Westminster Residents and Key-Workers. This report provides an update on progress to date, with regard to establishing the Community Build Programme. Recommendations This report is provided for information and discussion. City of Westminster Committee Report Item No: 9 Date: 7 October 2008 Classification: FOR GENERAL RELEASE Title of Report: Community Build Programme Report of: Director of Housing Wards involved: All Policy context: Delivering a step change in Affordable housing Maximise delivery of permanent supply and access to affordable housing for Westminster residents and key workers Financial summary: The total scheme of 526 units is funded by a combination of Housing Corporation Grant, outright sale proceeds and long term financing provided by the private sector. This borrowing will be repaid over 30 years, from the rental income from the affordable housing. Report Author: Gary R. Clarke, on behalf of Rosemary Westbrook; Director of Housing Contact details 07973 519899; Gary R. Clarke, Interim Project Manager 1. Background Information 1.1 The Community Build (CB) programme is a key One City project which will enable over 500 new homes to be built on City Council estates over the next three years. This will in part be funded through Housing Corporation grants, with the remaining costs being met by sales income and loans. The initial programme, on which a successful bid for Housing Corporation funding has been made, comprises a total of 526 units. 1.2 Within this programme of 526 new homes, 246 are for Social Rent and 104 units are for low cost home ownership (on which a bid was made to the Housing Corporation for Grant funding). The balance of 176 starter homes and outright sales units do not qualify for Housing Corporation funding, but it is intended that they will generate surpluses, which will be entirely reinvested within the overall programme to make it financially viable. 1.3 In partnership with City West Homes (CWH), the City Council undertook an extensive evaluation of Council housing land to identify potential sites. A Task Group of Councillors met on the 30th July 2007 to discuss the programme and identify any issues in relation to planning and other policies. The Task Group supported the overall CB programme and put forward a number of recommendations for resolving potential planning and corporate policy tensions. 1.4 The Council Land is to be disposed of by way of a long lease to a Special Purpose Vehicle, set up specifically to deliver the Community Build programme. The Land disposal will have covenants relating to its future usage (which will primarily be to support the provision of low cost home-ownership and rented Social Housing) and payment of an annual ground rent. 1.5 The land disposal will be further restricted by relevant planning conditions and housing nomination agreements. 2. Detail 2.1 The Government decision to allow City West Homes (and ALMO’s in general) to access Housing Corporation funding is not without challenges for the Council. The City Council has taken detailed legal, taxation and financial advice and in order to take the ALMO’s funding element off balance sheet it is necessary to create a structure involving a finance vehicle and a charitable vehicle to achieve the necessary tax efficiencies. 2.2 To take forward the creation of the Group Structure and these Special Purpose Vehicles, a joint Project Board has been set up consisting of Senior Officers from Housing and CWH supported by external experts - Devonshire’s (for Legal advice), Tribal (Financial) and Price Waterhouse Coopers (Tax) and a specifically appointed Consultant Project Manager. 2.3 This Group Structure has two key vehicles, the “Operational Company” - a charity which will hold the completed affordable homes and the “Development Company” - which will hold the superior lease and provide the funding to develop this programme. 2.4 The creation of the “Operational Company” (charity) is the subject of a separate Cabinet Member report, which is currently awaiting formal approval. It is anticipated that this Special Purpose Vehicle could be legally formed and in place by the end of the calendar year. 2.5 The “Development Company” is still the subject of further consideration with regard to its exact structure and this will be clarified after further discussions with its potential funders (likely to be a Bank or Building Society). The creation of this Special Purpose Vehicle is expected to be in the first quarter of next year, subject to any necessary approvals. 2.6 A comprehensive Consultation Exercise has been started across the Borough by CWH (on behalf of the Council), to raise awareness of the Programme with all relevant stakeholders. For example, a newsletter has sent to all Westminster Council Residents and Leaseholders outlining the proposals. Any questions arising from this initial consultation have been dealt with by tailored responses to detailed queries. This is now being followed up by “open days” within the Community. 2.7 Future consultation will take place on a more targeted basis as the individual schemes are progressed, with briefing sessions for residents, Ward Members and other stakeholders. Community Architects will be engaged to work alongside the residents (and their representatives) to make certain that the housing plans are driven by and developed with the Community, as its main focus, thus ensuring an all “inclusive” process. 2.8 This latter process has already commenced on a number of schemes (the Warwick Estate, Bourne Terrace and the Undercrofts) and residents have also been involved with interviewing prospective Consultants for the overall “Framework Agreement” currently being finalised by CWH. 3. Financial Implications 3.1 The total scheme is funded by a combination of Housing Corporation Grant, outright sale proceeds and long term financing provided by the private sector and repaid over 30 years from the rental income from the affordable housing. 3.2 Before the scheme can proceed as proposed tax clearance will need to be given by HMRC. It is anticipated that the Development Company will not form part of the City Council’s Group Accounts but that the Operational Company will do. 4. Legal Implications 4.1 There are no legal implications arising out of this report. 5. Staffing Implications 5.1 There are no staffing implications arising out of this report. 6. Business Plan Implications 6.1 The recommendations set out in this report support the following Service Aim of the Business Plan 2007/8 – “to maximise delivery of permanent supply of affordable homes for Westminster residents and key workers”. 7. Outstanding Issues 7.1 There are still a number of issues to be resolved with regard to the Group Structure for the Community Build Programme, particularly with regard to setting up the Special Purpose Vehicles, in the most tax efficient way. These will be subject to further reports to Council and specific Cabinet Members approval at the appropriate time. 8. Consultation 8.1 The proposals affect all wards. 9. Reason for Decision 9.1 The report is provided for information and discussion. If you have any queries about this report or wish to inspect one of the background papers please contact Gary Clarke on 07973 519899, or by email firstname.lastname@example.org.