Agenda item

Cabinet considered proposals for the purchase of Section 106 affordable housing units. As part of the Council’s accelerated housing delivery strategy, Cabinet had adopted a policy of purchasing viable Section 106 properties that had been turned down by registered providers, in order to ensure that the Council did not lose the affordable housing that should be the key foundation of any large development. Council was contacted by Bellway, owner of the development of Section 106 properties at Nash Road, Margate, who were legally required to deliver 18% affordable housing on site. The developer had been unable to secure a registered provider.

As per policy, 70% of the affordable delivery was required to be affordable rent, which allocated 31 units to the Council. The remaining units would be delivered as shared ownership. The Council had offered 31 new affordable rent homes, as they had been unable to secure an affordable housing provider to deliver these homes. The Council were facing many complex and interwoven issues when it came to affordable housing. These were linked to planning, central plans for housing delivery and the reliability of external markets to deliver sustainable affordable housing.

Responding to the Overview and Scrutiny Panel recommendation that “Cabinet further explore the liabilities for stamp duty land tax (SDLT) to ensure that the correct liability is assessed,” the Portfolio Holder advised the meeting that Cabinet was hugely limited in amending Planning requirements and the affordable housing delivery model, which relied on the external market. Cabinet would be more satisfied if Government policy was for Councils to be funded directly to produce the housing needed for each local area, as Thanet District Council had an excellent record of delivery and of multi organisation working. TDC also knew exactly what was required within its housing list. However, the current central delivery model delivered affordable housing via the private sector and ensuring that the Council did not lose affordable housing was essential, especially for the 1907 households on the housing register.

At the Overview and Scrutiny Panel, a concern was raised that the Cabinet approach only benefitted developers; in actual fact, this strategy not only saved affordable housing that would be lost, but also allowed for direct and forward planning and influence of our housing quality, energy rating via our specification design. The approach also afforded specific planning to aid those on the housing list who may require more specialised provision. Combining the knowledge contained in the Council’s housing list with long term development plans for these sites via providers potentially allowed for very specific provision, both in terms of mapping and providing specialist and accessible housing needs, which was a continuing issue for the Council.

The Council built from a Home for Life perspective when the housing development was directly done by the Council, to try and ensure maximum accessibility within the design of housing units. The ability to produce via direct central funding was limited, which meant that even within Band A, for highest medical need, residents may be waiting a considerable amount of time for a property that met their specific needs. The Council’s new acquisitions policy had already produced accessible housing and the strategy allowed it to work with existing applications and developers to produce the housing that was genuinely needed for residents.

TDC was ensuring that anything that was purchased met strong environmental standards as well as went through rigorous financial testing to ensure viability. These homes were anticipated to be EPC B and construction would start early next year. The capital cost for the 31 homes was £4.275m with an additional £225k for associated costs, including Stamp Duty Land Tax (SDLT). The published Cabinet report included a figure of £574k for associated costs due to central changes around Stamp Duty linked to the last budget. However, Cabinet had since taken further tax advice following the publication of the report and the meeting of the Overview and Scrutiny Panel on 16 April 2024. The Portfolio Holder therefore confirmed at the meeting that the commercial rates of SDLT were required to be applied by central government where six or more dwellings were purchased in a single transaction. These rates were 0% on the first £150,000, 2% on the next £100,000 and 5% on the remainder. Cabinet would be writing to central government to request a commercial exemption where purchases relate to affordable housing.

Due to this change the correct figure for associated costs would be £225k, including £203,248 SDLT. This reduction in cost improved an already viable scheme, and reduced the year one revenue deficit from £47,960 to £32,240, and the break-even point from year 16 to year 12. The proposed purchase would generate a cash flow deficit in year 1 of £32,240 with a break-even point in year 12, with surpluses continually accumulating between year 12 and year 50. The project showed a surplus over a 30 to 50-year period, ensuring long term viability.

As the homes had been designated as affordable homes in the planning consent and section 106 agreement, they had been designed specifically for that purpose and accordingly were considered appropriate for the HRA, in line with the needs of households on the council’s register or those living in temporary accommodation. The largest proportional local need was for 1 bedroom homes, although this acquisition also provided for larger family homes. This acquisition would deliver the following:

12 x 1 bed units

16 x 2 bed units

2 x 3 bed units

1 x 4 bed units

Both 3 and 4 bed homes were a significant need for families on the housing register and it was pleasing to see them within this mix. It was proposed that the new homes were let in accordance with the Council’s adopted allocations policy. These properties would be let at what was a genuinely affordable rent, which would not exceed local housing allowance, ensuring that these properties were genuinely financially accessible to residents on the local housing list.

This acquisition brought another 31 properties into the Council portfolio, at a time of extraordinary housing need in Thanet. This was 31 new homes for 31 households, creating a virtuous circle in terms of both investment and social good and evidenced clearly how creatively and competently Cabinet was managing the challenges that central housing and planning policies presented the Council with.

The following Councillors spoke under Council Procedure Rule 20.1:

Councillor Bambridge;

Councillor Bayford;

Councillor Davis.

Councillor Whitehead proposed, Councillor Yates seconded and Cabinet agreed the following:

1. The purchase of 31 new affordable homes, using the additional capital budget, approved by council at its meeting on 12 October 2023;

2. The letting of these homes in accordance with the council’s Allocations Policy, at an affordable rent as set out in the council’s Tenancy Strategy.