Agenda item

Purchase of homes at Phase 3, Spitfire Green, New Haine Road for Affordable Rent

Minutes:

Ashley Jackson, Head of Housing and Planning introduced the report and made the following points:

 

  • Council approved an accelerated affordable housing development programme of at least 400 new homes, constructed or acquired, by 2027;
  • Officers were already working in partnership with BDW on a number of sites, and they contacted the Council regarding Phase 3 at Spitfire Green, New Haine Road;
  • Although they had made enquiries with other Registered Providers, no offers for the units had been received and they were keen to maintain continuity throughout the sites by working with us. These homes were anticipated to be EPC B and construction would start early next year;
  • The capital cost for these 32 Section 106 affordable rent units at Phase 3 of Spitfire Green, New Haine Road, Ramsgate was £4,050,000 and £212,000 for associated costs;
  • Paragraph 3.4 shows that the proposed purchase would generate a cash flow deficit in year 1 of £43,813 with a break-even point in year 16, with surpluses accumulating between year 16 and year 50. The project shows a surplus over a 30 to 50 year period;

 

  • The Council was being very proactive in its approach to what had been described as the 'market failure' across the South East;
  • Councils and developers from Kent, Essex and East Sussex had been discussing the difficulty in sourcing registered providers to take the affordable housing set aside in s106 allocations. Thanet was among those councils seizing the opportunity and stepping in. This was actually having multiple positive impacts, as it was achieving the following:

 

§  Ensuring those affordable homes are not lost to the open market;

§  Providing homes that can be not only let to those on the housing register but directly let through local lettings plans to those in temporary accommodation;

§  Actually helping developers with their investments in our district.

 

  • However, the changes to the multiple dwellings relief for Stamp Duty Land Tax (SDLT) that was announced in the Spring 2024 budget had provided a further obstacle to the Council’s due diligence and viability tests to buy larger numbers of homes;
  • The Council had since written to the Chancellor of the Exchequer to raise with them these concerns. Officers realised the rationale for bringing the measure was to prevent perceived abuse of the rules and speculative claims for relief, but increasing the amount of SDLT Councils pay on larger acquisitions had the significant potential to adversely hamper attempts to deliver the positive outcomes listed above;
  • 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. There was a significant level of need for 1-bedroom homes, as well as for larger family homes. The unit sizes and the mix of dwellings were as follows: 

 

·  18 x 1 bed units

·  14 x 2 bed units

 

  • It is proposed that the new homes be let in accordance with the council’s adopted allocations policy.

 

Ashley Jackson then requested members of the Overview and Scrutiny Panel to review proposals detailed in the committee report and consider any representations to Cabinet in ahead of its meeting on 25 June 2024.

 

The Panel discussed the report, made comments and asked questions as follows:

 

  • How long was the borrowing for?
  • Although the right to buy was not an issue, it should be noted that after fifteen years the tenant would get a large discount. If the project’s break-even would be realised in year sixteen, what risk exposure would the Council have for the future?
  • Was the right to buy not a risk to the Council, as there was the potential to lose millions due to the discount?
  • The Council needed to continue to provide social housing in order to push private sector housing rent levels down;
  • How did the Council factor in risk into the business model for this programme?
  • One Panel member said that they the Council should be weary of the possibility of Aa Section 114 Notice;
  • They further asked if the Housing Revenue Account was stress tested;
  • Did the Council also consider the impact of projects on the delivery of other services?
  • Did officers use net present value to check viability of the project models used?
  • How many houses had been offloaded to other social landlords and how many more did they have?
  • The Council should ensure that more local residents should have access to these houses.

 

Ashley Jackson, Bob Porter and Matt Sanham responded as follows:

 

  • The borrowing was for thirty years;
  • Right to buy would have some impact as there were three hundred of the 3,500 properties owned by the Council;
  • There was a risk posed by the right to buy the facility. In the business plan, officer carried out prudent forecasting of risk of the right to buy and the Finance team helped with that forecasting exercise to mitigate the risk;
  • It was worth noting that the economic ability of the tenants determined whether they could exercise their right to buy. Officers were of the view that the risk was manageable;
  • Officers had stress tested the HRA. Interest rates and inflation were the key variables. The Finance team had carried out the analysis. The Business Plan was also stress tested with different interest rates. Currently the rent policy was also a key factor to consider;
  • It was also worth noting that the HRA could be managed in a deficit;
  • The housing programme did not impact any service delivery for other service areas;
  • This housing programme was opportunity led and officers kept an eye on interest rates for developments;
  • There were developments in Spitfire Green and another in Minster;
  • The Council knew it was buying these properties, but did not have control on who could or could not buy the properties. The feedback the Council was getting was that local young people were also buying properties in these developments.

 

The Panel noted the report.

Supporting documents: