Docstoc

COUNCIL MEETING – 9 SEPTEMBER 2008 WORTH MATRAVERS COMMUNITY

Document Sample
COUNCIL MEETING – 9 SEPTEMBER 2008 WORTH MATRAVERS COMMUNITY Powered By Docstoc
					      COUNCIL MEETING – 9 SEPTEMBER 2008

      WORTH MATRAVERS COMMUNITY PROPERTY TRUST                                         -   FURTHER        FINANCIAL
      CONTRIBUTION FROM PURBECK DISTRICT COUNCIL

1.    PURPOSE OF THE REPORT

      To consider a request from Worth Matravers Community Property Trust for a further financial
      contribution for the project to develop five affordable houses at Worth Matravers for local people.

2.    KEY ISSUES

2.1   The Worth Matravers Community Property Trust (WMCPT) was initially established to develop 5 units of
      affordable housing for local people on a “rural exception site” known as the football field in the village of Worth
      Matravers. The Trust is to be congratulated for getting the project off the ground and for developing it as far
      as it has.

2.2   The Trust has been successful in obtaining planning permission for the site; raising funds locally through
      donations; subscriptions and grants and raising funds nationally through grants and loans. The total raised so
      far to towards the project by these methods has been £490,000. A breakdown is given in the table below:

        Funds raised by subs, donations and                         £70,000
        grants
        Tudor Trust                                                 £70,000
        Charity Bank development loan                               £350,000
        TOTAL                                                       £490,000
        Tudor Trust contingency                                     £15,000

2.3   The Trust was anticipating starting on site in the summer of 2007; however delays meant they were not in a
      position to start as anticipated. Following the signing of the section 106 agreement and the issuing of the
      outline planning permission the Trust recalculated their finances with a view to starting on site in the autumn of
      2008. This has indicated that their costs have increased by about £200,000 to £660,668, mainly due to a
      recalculation of construction costs.



2.4   £45,000 of the increase will be funded by a Charity Bank loan and an additional £15,000 from the Tudor Trust.
      However, there remains a gap of £155,000. More details of the funding are provided later in the report. A
      break down of the current costs is attached as an Appendix.

2.5   In order for the project to go ahead and start as anticipated in the autumn of 2008 the funding gap needs to be
      filled. At the present time the Trust is proposing to make a bid to the Housing Corporation. The bid will be
      managed by Bob Paterson of Salford University as part of national CLT pilot programme. However, the Trust
      has requested that the Council considers the following options to provide financial assistance:-

      1) Make a loan to the community land trust of £155,000 to allow a start on site in the autumn of 2008. This
         option would require the Trust to pay any grant received from the Housing Corporation over to the Council
         to cover the grant made, up to the amount of the loan.

      2) Make a part grant/part loan to the Trust of £50k grant (in line with grants which the Council has previously
         made to Registered Social Landlords to enable the provision of affordable housing) with a further loan of
         £105k pending the receipt of a grant for this amount from the Housing Corporation.

      3) Make a grant to the Trust of £155k to allow them to begin construction of the houses immediately. This
         option would mean no grant would be available from the Housing Corporation.

2.6   The Housing Corporation has indicated, informally, that it will look favourably on applications for grant funding
      from Community Land Trusts. However, it has also indicated that should schemes appear to be fully funded
      from other sources through grant assistance, then it will not provide additional funding. The Housing
      Corporation has also indicated schemes which start on site before their application for grant assistance to the
      Corporation is approved will not be accepted for grant aid, as they will be regarded as fully funded.
      (MS)(im) CM 090908 WORTH MATRAVERS COMMUNITY PROPERTY TRUST
                                                                    1
2.7   It must be stressed that the Council is only acting as a facilitator/enabler in this project and is not seeking to
      become a landlord should the project fail. WMCPT has a close working relationship with Synergy Housing
      Group, through the Purbeck Housing Trust, and it is in this direction the WMCPT will look should additional
      landlord support be needed.

3.    RECOMMENDATION

3.1   The Council makes a grant to the Worth Matravers Community Property Trust of £50k (equivalent to
      £10k per unit).

3.2   The Council gives the Chief Executive delegated powers to make a loan available of up to £105k;
      following approval of a grant for that amount from the Housing Corporation. This loan is intended to
      bridge any gap between the approval of grant assistance by the Housing Corporation and the receipt
      of that funding by the Community Property Trust.

3.3   Council instructs officers to investigate with the Trust whether it is possible, should further grant or
      loan assistance be given, for the Council to have nomination rights over one or more of the houses.

4.    POLICY ISSUES

4.1   How will this affect the environment, social issues and the local economy?

      The provision of affordable housing for local people is a main priority of the Council’s Corporate Strategy. The
      main affect of this recommendation will mean that five units of affordable housing will be built in Worth
      Matravers. This is an area of the District that is badly affected by the impact of second homes and where
      houses are least affordable to local people in housing need.

4.2   Resource Implications

      4.2.1         The financing of a grant for £50,000 (£10,000 per unit) will be met from Preserved Right to Buy
                    Receipts (PRBR). These receipts are in respect of the Council’s entitlement to part of the proceeds
                    received by Purbeck Housing Trust in respect of the sale of former council houses. The Council has
                    agreed to earmark 50% of the PRBR for housing enabling activities. As these funds are not being
                    replenished from the revenue budget there is no impact on the council tax.

      4.2.2         The financing of the loan of £105,000 will be met from reserves. As a loan there would be no impact
                    on future council tax provided a current market rate of interest were applied. If the Council chose to
                    provide an interest free, or preferential rate, loan the Council would need to account for the loss of
                    interest at a notional market rate. Provided the loan were repaid in the current financial year, as
                    anticipated, the Council would be accounting for the loss in the current year but there would be no
                    impact on future council tax. If the loan were to remain in place when setting the budget for 2009/10
                    the annual loss on the loan would become a charge on the council tax as follows. For example, if an
                    interest free loan were granted, assuming a rate of 5% would mean an annual loss on the loan of
                    £5,250, this would represent an increase of £0.27 (or 0.18%) on the council tax.

5.    MAIN REPORT

5.1   Community Land Trusts (CLTs) are a high profile initiative for affordable housing in rural areas. However, to
      date there has been little delivery on the ground.

5.2   In May 2006 the Government’s Affordable Rural Housing Commission highlighted the role of CLTs in
      providing community based ownership of affordable housing. This was taken a step further in the
      Government’s Housing Green Paper (July 2007) and through the inclusion of CLTs in the Housing
      Corporation’s National Affordable housing Programme (NAHP) 2008-2011.

5.3   One of the actions of the Housing Corporation’s Rural Housing Advisory Group is to take CLTs forward. To
      this end it is supporting 7 rural pilot schemes including Worth Matravers Community Property Trust.




      (MS)(im) CM 090908 WORTH MATRAVERS COMMUNITY PROPERTY TRUST
                                                                    2
5.4    The Worth Matravers Community Property Trust was set up in 2005 to develop five affordable houses for local
       people. It was constituted as an “Industrial and Provident Society” in October 2006. The Council is
       represented on its Board.

5.5    The Council has assisted the Trust through ensuring objective criteria have been developed to assess local
       housing need in the parish and ensure that local people applying to occupy the housing meet that criterion.
       Officers are satisfied that when the dwellings are constructed they will assist in meeting local housing need in
       the parish of Worth Matravers. However, if the Council is minded to make this further investment in the project
       it might also wish to consider how closely the persons nominated for the housing meet its assessment of
       housing need in this area.

5.6    The Council and the Purbeck Community Partnership has also assisted with relatively small amounts of grant
       aid in the past in order to help the Trust achieve its aims. £28,000 has been provided from the Preserved
       Right to Buy Receipts and £10,000 from the Purbeck Community Partnership. The Council has also assisted
       other organisations, principally registered social landlords (RSLs) in providing affordable housing in the
       District. This assistance has included grants to develop new affordable housing for rent (Purbeck Housing
       Trust – 11 x 2 bedroom properties at Garrison Garage, Bovington £10k per unit) and to facilitate the purchase
       of a shared ownership property to enable the tenure to convert to rented (Purbeck Housing Trust – 1 x 3
       bedroom house at Upton).

5.7    Costs have risen during the course of the project for two main reasons. Firstly, raw material costs have risen.
       This accounts for a small amount of the increase. Secondly and more importantly, ARCO2 (the architects)
       and ecofab (the builders) had predicted they could fabricate the buildings for a much lower cost than they can.
       Their technology is new and highly sustainable. However, it is unproven. They have built two private sector
       houses and a school extension in the last year. This has proved the technology but the actual cost to build
       was higher than predicted. They have therefore recalculated their costs significantly.

5.8    The resultant costs are now very similar to the meter square cost of building conventional timber frame
       properties for Housing Associations. However, the Trust wishes to continue to pursue the sustainable option
       rather than the conventional alternative due to the environmental benefits these provide, and also to avoid
       starting the process again.

5.9    The Trust has received a written statement that the new prices will be capped. In addition, the ARCO2/ecofab
       profit margin will be capped at 6%. Any overspend will therefore be covered by ARCO2 and any under spend
       returned to the Trust. Open book accounting has been agreed to ensure transparency.

5.10   The Trust’s main funders the Charity Bank will only lend on the basis that an organisation has the income to
       repay. Five of the Trust’s 3 properties will be predominantly rental. These require long term loans to cover
       the cost of building the houses. The Charity Bank will only lend an amount the rents are able to repay. The
       Charity Bank can offer a lower interest rate than mainstream lenders but the maximum the affordable rents
       are able to support is £200,000. The Trust could borrow more if higher rents were charged but this would
       make the properties unaffordable to the people the initiative was set up to assist.

5.11   Rents for the rented properties are £99.18 for a 2 bedroom and £109.62 for a 3 bedroom. This is based on
       bad debts and voids averaging 4% per annum. Rents for those with an equity stake of £15,000 or £30,000
       are £94.22 for a 2 bedroom house and £100.74 for a 3 bedroom house. In August the maximum weekly Local
       Housing Allowance for a 2 bedroom property was £160.38 and for a 3 bedroom £190.38. The rents proposed
       are therefore well below maximum benefit levels.

5.12   Synergy Housing Group have assisted the Trust with their financial modelling and business plan, and advised
       on the development process. They have also offered to provide bridging finance during the construction stage
       and a rent collection and management and maintenance service for the completed units.

5.13   Tudor Trust, an independent grant making trust, has agreed to make a donation to the Trust. Tudor Trust is
       interested in helping smaller, under-resourced organisations which offer direct services and involve the people
       they work with in their planning. The Trust sees an important part of its role being to support work such as
       Community Land Trusts which are largely untried and may be difficult to fund. Consequently, the Tudor Trust
       does not have a specific funding programme which aims to advance a particular agenda. Instead it tries to
       support work which is clearly needed and for which funding from Tudor can make an important difference.
       Grants can take the form of core funding (including salaries and running costs), development funding, project
       grants or capital grants for buildings or equipment.


       (MS)(im) CM 090908 WORTH MATRAVERS COMMUNITY PROPERTY TRUST
                                                                     3
5.14   In addition to their original grant Tudor Trust has agreed a further £15,000. This is the maximum they can
       give and is built into the figures provided.

5.15   The result of the bid to the Housing Corporation is unlikely to be known until October 2008. In theory the
       Housing Corporation has been able to fund Community Land Trusts (CLTs) since April 2008 but currently has
       no policy or procedures in place to do so. Worth Community Property Trust and the Community Land Trust at
       Buckland Newton in West Dorset are likely to be pilot schemes for them.

5.16   The Trust wants to start work on site in the autumn for three main reasons related to people, timing and
       finance.

5.17   Many potential residents have been involved with the Trust from the beginning and are anxious to move. In
       addition, there is the capacity of the small group of volunteers who run the Trust, have been working hard to
       make the project happen and need to see success.

5.18   ARCO2 and ecofab are both small organisations with limited capacity. They will complete the Pre-School
       building at Corfe Castle in early September 2008 and move onto their next project. If the Trust is not ready to
       proceed they will go onto projects they accepted subsequently. If work is started on the Buckland Newton
       Community Land Trust for example it may be a further year before they can start work at Worth Matravers.

5.19   By September 2009 material costs may have risen further. Current costs also benefit from lower quotes for
       ground works and finishing due to the problems currently being experienced in the housing market.




       Appendices:                                1

       Background papers:                          Worth Matravers Community Land/Property Trust file.

       FOR FURTHER INFORMATION CONTACT:-

       Mark Sturgess, Head of Planning Services
       Fiona Brown, Housing Policy and Community Safety Team Leader

       (MS)(im) CM 090908 WORTH MATRAVERS COMMUNITY PROPERTY TRUST
                                                                               4

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:5
posted:3/8/2010
language:English
pages:4
Description: COUNCIL MEETING – 9 SEPTEMBER 2008 WORTH MATRAVERS COMMUNITY