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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 02/12/2003
Capital Funding for Affordable Housing - Institute of Oceanography, Wormley


Summary & Purpose
This report seeks authority to provide a capital grant to James Butcher Housing Association to enable the development of 21 affordable homes at the Institute of Oceanography site, in Wormley.

This project had previously been in the Council’s forward capital programme. However, in February 2003, the Government announced that the Local Authority Social Housing Grant mechanism was to be abolished. It had been expected that this scheme would have received funding under the transitional LASHG arrangements. In mid-November, the Council was advised that none of the affordable housing projects in Waverley were to be funded by way of transitional LASHG.

In order to secure the 21 units of affordable housing, it is proposed that the Council should make a capital grant to James Butcher Housing Association amounting to £1,200,000 – the equivalent amount that could have been awarded under the LASHG mechanism. This will secure 9 homes for rent and 12 for shared-ownership.
Quality of Life Implications
Natural Resource Use
Pollution Prevention and Control
Biodiversity and Nature
Local Environment
Social Inclusion
Safe Communities
Local Economy
Natural
Resource Use
Pollution
Prevention and Control
Biodiversity
and Nature
Local
Environment
Social
Inclusion
Safe, Healthy
and Active
Communities
Local
Economy
N/A
N/A
N/A
N/A
Positive
N/A
N/A


As this report is primarily concerned with the funding of the affordable housing element of the Institute of Oceanography site, most of the quality of life issues do not apply and/or have been considered as part of the planning process, which is not the remit of this report.

Affordable housing is a key corporate priority for the Council and directly contributes helping people who are excluded from the housing market.

E-Government implications:

There are no E-Government implications arising from this report.


Resource and legal implications:

The resource implication arising from this report is that the Council would make a non-refundable capital grant to James Butcher Housing Association amounting to £1,200,000 in order to secure 21 affordable homes. In the past, where the Council has made LASHG available, the cash expended by the Council for that purpose was reimbursed by the Housing Corporation and the Council could use that funding again for a non-housing purpose.
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Introduction

1. Over the past decade, Waverley has increasingly supported Registered Social Landords (RSL’s) to deliver affordable housing – for rent and shared-ownership. In order to make schemes affordable to those who need to rent or part-buy, it has been necessary to provide a capital subsidy. In some cases the Council has given land ‘free’, but in exchange for Nomination Rights, and in other cases has made Local Authority Social Housing Grant available.

2. A key financial advantage of using the LASHG mechanism was that the cash given by the Council to the RSL was refunded to the Council by the Housing Corporation. This, it has to be said, was a remarkable arrangement and advantageous to local authorities such as Waverley. Over the past few years, the Government has been reviewing the capital and revenue funding arrangements surrounding affordable housing and has made many changes. One of the aspects of capital funding that came in for close scrutiny was LA SHG. In February 2003, the Government announced that, with effect from 1st April, the LASHG mechanism would be abolished – that is to say, the Housing Corporation would not be making reimbursements to local authorities from that date.

3. It is clear that the Government had not appreciated the implications and impact of the abolition of LASHG at such short notice when most local authorities had only just set their capital and revenue budgets and Council Tax. This action raises a number of questions, particularly:

4. This Council led the Housing Capital Receipts Group to raise the implications of the abolition of LASHG and the de-stabilising effect this decision could have on Council budgets that had only just been set, and the threat to schemes due to start on site in 2003/4.

5. As a consequence of these representations, the Government introduced Transitional Arrangements whereby it intended to ensure that funding was made available through the Housing Corporation to fund schemes that were in progress and where expenditure had been committed and was due. Once these schemes were funded, the Government intended make whatever resources were left over for new schemes due to start in 2003/04.

6. In the event, the Government did not make nearly enough resources available to cover schemes that were on site and those planned for 2003/04. In mid-November 2003, the Council received Transitional LASHG funding of £1,019,442 to cover schemes on site - e.g. Greylees, Godalming; the Magistrates Court, Farnham; Tyndalls Pine, Hindhead and Ewhurst rural housing.

7 Disappointingly though, the schemes that were anticipated to start on site in 2003/04 received no funding namely

SchemeRSL PartnerUnits
DIYSOThames Valley5
Essential Worker DIYSOThames Valley20
Low Lane, Badshot Lea, FarnhamThames Valley6
Woodpidgeon, WormleyEnglish Rural 5
Kilnfields, HaslemereThames Valley20
Bramley GrangeEnglish Rural6
Institute of Oceanography, WormleyJames Butcher21
TOTAL83

8 During the summer and autumn, it became increasingly clear that the amount of resources being made available under the Transitional LASHG Arrangements would be insufficient to ensure that all new schemes were funded. In anticipation of this, officers started to make contingency plans should this be the case.

9 The two rural housing schemes – at Bramley and Wormley – have now been funded directly through the Housing Corporation’s Approved Development Programme, as there were underspends elsewhere in the region. As members will be aware, rural housing is a national and regional priority.

10. The scheme at Low Lane, Badshot Lea, Farnham is now being funded directly by Thames Valley Housing Association. This association is using its ‘Recycled Capital Grant Fund’ (RCGF) – these are monies raised through the sale of additional shares in shared-ownership properties (stair-casing receipts), which have to be reapplied in the area where they accrued. Whilst it is fortunate that these funds happened to be available at this time, there is a finite amount of RCGF and, in any event, it had been hoped to use these proceeds later on another scheme.

11. At the current time there is no confirmed funding for the other schemes. However, the Council is able to bring certainty by making its own resources available for these schemes.

12. Mindful of the Council’s financial position, and the need to prioritise projects, it is considered that 21 units of affordable housing at the Institute of Oceanography, Wormley, is most pressing.


13. The Council has resolved to grant planning permission subject to a number of conditions, one of which is to enter into a Section 106 Agreement to provide 21 units of affordable housing. The developer has been working with James Butcher Housing Association – one of the associations on the Council’s approved RSL list - to ensure that the affordable housing meets the Housing Corporation’s scheme development standards, and meets housing need identified by the Council.

14. In order to proceed, the housing association and developer need to be assured that the anticipated grant funding will be forthcoming from some source. James Butcher Housing Association will be making a bid to the Housing Corporation for funding in 2004/05. However, it will not be until March/April 2004 that the Corporation will make its announcements about funding. Should the Housing Corporation make funding available, this Council will not need to use its resources for this scheme and will be able to apply them elsewhere.

15. In the meantime, however, the association and developer need certainty about the funding of the affordable housing element to satisfy other funding bodies who are financing the overall development. In order to do so, it is proposed that the Council agrees to make a capital grant available to James Butcher Housing Association amounting to £1,200,000 in order to secure the 21 affordable homes – 9 of which are for rent and 12 for shared-ownership.

16. Given the guarantee of funding from the Council, James Butcher Housing Association would then use some of its own resources to ‘front fund’ the initial costs in the hope that the Housing Corporation will provide Social Housing Grant in 2004. Should this happen, the Council would not need to make its grant, as promised, available but would be able to reapply this funding to other schemes. In the event that the Housing Corporation does not fund the scheme, the Council would then step in and fund it.

17. As in all affordable housing schemes, the Council would receive 100% nomination rights to the accommodation at first letting and 75% thereafter.

Financial Implications

18. Members had approved an LA SHG Capital Programme of £2,834,800 for 2002/03 and 2003/04 with approval given for the re-cycled capital receipts to be applied to the reduction of Waverley's element of the Superannuation Fund deficit. With the abolition of the LA SHG mechanism as outlined earlier in the report, members now need to review the previously approved use of the £2.8m of resources. There are social housing schemes totalling some £1.8m in urgent need of funding. The Institute of Oceanography site forms the major part that members may now wish to consider funding from the resources approved for use in the 2003/04 LA SHG budget.

19. If members spend the £1.2m on this scheme, the sum will not be refunded through LA SHG and the payment into the Superannuation Fund will not be possible. The Council will be considering how future affordable homes will be provided and whether any payment to the Superannuation Fund is possible at the Council meeting in February 2004.

Conclusion

20. The abolition of the LASHG mechanism presents clear challenges as it reduces the Council’s ability to fund and influence the development of affordable housing. It also has meant that the Council has needed to review the whole of its financial strategy because of the loss of the reimbursement of the capital receipt. The Council therefore will now have to make evermore difficult decisions about its spending priorities.

21. Given the pressing need for a decision to support this scheme to secure the 21 units, and the Council's priority for affordable homes, agreement to use these resources now is considered appropriate.

Recommendation

It is recommended that:

1. the Council supports James Butcher Housing Association to secure 21 affordable homes at the Institute of Oceanography, Wormley – 9 homes for rent and 12 for shared-ownership – in accordance with the Section 106 Agreement;

2. the sum of £1,200,000 be provided from within the Council’s Capital Programme for 2003/04 resources; and

3. James Butcher Housing Association’s bid to the Housing Corporation be supported.

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Background Papers (DoH)

Letter from the Housing Corporation dated 31st October 2003
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CONTACT OFFICER:

Name: Mr J Swanton Telephone: 01483 523375

E-mail: jswanton@waverley.gov.uk