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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 01/03/2005
Sherrydon, Cranleigh - Affordable Housing Scheme


Summary & Purpose
This report invites the Executive to consider how best to resolve an issue which has arisen in respect of the disposal of a Council-owned site on which it is proposed that nine affordable homes be provided for nominees of Waverley Borough Council. Since the original decision to dispose was made, land values have risen considerably. The original decision to dispose of the site in exchange for nomination rights no longer represents ‘Best Value’ for the Council. The Executive is invited to consider how best to resolve this dilemma. It is suggested that the Council makes a grant by way of a ‘gift-in-kind’ of land (to the value of £186,000) with First Step finding the sum of £192,000 to pay to the Council to meet the difference between the old and the new land values.

If the Executive does not make a formal resolution in respect of the use of the receipt, it will have to be pooled and 50% will have to be made over to central government, rather than used locally.
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APPENDIX F
WAVERLEY BOROUGH COUNCIL
EXECUTIVE – 1st MARCH 2005

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Title:

SHERRYDON, CRANLEIGH – AFFORDABLE HOUSING SCHEME

[Wards Affected: All]
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Note pursuant to Section 100B(5) of the Local Government Act 1972

The (Exempt) Annexe to this report contains exempt information by virtue of which the public is likely to be excluded during the item to which the report relates, as specified in Paragraph 9 of Part I of Schedule 12A to the Local Government Act 1972, viz:-

Any terms proposed or to be proposed by or to the authority in the course of negotiations for a contract for the acquisition or disposal of property or the supply of goods or services.

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Summary and purpose:

This report invites the Executive to consider how best to resolve an issue which has arisen in respect of the disposal of a Council-owned site on which it is proposed that nine affordable homes be provided for nominees of Waverley Borough Council. Since the original decision to dispose was made, land values have risen considerably. The original decision to dispose of the site in exchange for nomination rights no longer represents ‘Best Value’ for the Council. The Executive is invited to consider how best to resolve this dilemma. It is suggested that the Council makes a grant by way of a ‘gift-in-kind’ of land (to the value of £186,000) with First Step finding the sum of £192,000 to pay to the Council to meet the difference between the old and the new land values.

If the Executive does not make a formal resolution in respect of the use of the receipt, it will have to be pooled and 50% will have to be made over to central government, rather than used locally.

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Quality of life implications – social, environmental & economic (sustainable development):

E-Government implications:

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

Resource and legal implications:

Since the original committee decision was made, the land value has increased and the residual land value is now £378,000. It is proposed that the Council makes a grant of £186,000 (by way of a gift-in-kind of the land) and receive a capital receipt of £192,000 from First Step.

Under the Local Government Act 2003, capital receipts arising from the sale of non-Right-to-Buy Housing Revenue Account assets are to be pooled and 50% passed to central government. However, where the Council makes a specific resolution to apply the receipt for affordable housing or regeneration schemes, the Council can then retain the receipt for that purpose. It is proposed therefore that the Council resolves to apply the receipt to future regeneration schemes.

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Background

1. Some years ago, the Council agreed to dispose of a parcel of land at Sherrydon, Cranleigh to First Step Housing Company. (See location plan at Annexe 1)

2. In 1998, the Council agreed to dispose of the site at nil value in exchange for nomination rights to the affordable homes to be built. At that time the open market land value was equal to the value calculated for the nomination rights. In short – the Council could effectively ‘give’ the land to First Step Housing Company in exchange for nomination rights, having demonstrated ‘Best Value’ because the Council would be able to nominate households from the Council’s Housing Needs Register to the homes.

3. It should be noted that whenever the Council disposes of land to support affordable housing, it has to be valued in order to ensure that there is a clear understanding of how much public subsidy is being applied to support the affordable housing.

4. Unfortunately, there was something of a hiatus and the planning permission for six homes, which had been secured some time earlier, elapsed and it was necessary to make another planning application. In the intervening period, the Local Plan had changed and there was a new national directive to increase density levels. In the event, a planning permission was granted for nine dwellings on the Sherrydon site.

4. With the passage of time and the increase in the number of dwellings, the land value has risen significantly since 1998. The Committee authority to dispose of the land to First Step at nil value in exchange for nomination rights is no longer possible for officers to pursue, because the value of the land is now well in excess of the nomination rights. The Council would not be obtaining ‘Best Value’ if the land were disposed of on this basis and the public subsidy could, potentially, go unrecognised. Officers would not be acting in the best fiduciary interests of the Council if this were not drawn to the attention of members.

5. An exercise of re-valuing the land was carried out recently and this is detailed in (Exempt) Annexe 2). After deducting ‘abnormal development costs’ (which relate to the diversion of the road that cuts through the two parcels of land which constitute the Sherrydon site) and once the nomination rights have been deducted, a residual land value remains. It would be reasonable to expect an ordinary purchaser to pay the Council this remaining sum.

6. There have been discussions with representatives of First Step who see and understand the dilemma. However, as First Step had been moving forward on the basis of effectively receiving the land at ‘nil value’ it has not budgeted for the additional expense of having to pay an increased land value.

Options

7. There are a number of options available to the Council:

A way forward

8. It is hoped that Members would prefer the latter approach, given that First Step has invested considerable time and effort (certainly in recent times) to bring this matter towards a conclusion.

9. One source of additional finance, to bridge the gap between the land value and resources available, is the Housing Corporation which can provide Social Housing Grant (as can the Council). The Council needs to maximise its resources, including capital receipts, but it also has a role enabling affordable housing.

10. As members will see from (Exempt) Annexe 2, the residual land value is £378,000. In an effort to help resolve the issue, the Housing Corporation has agreed to make a social housing grant of £192,000 (in 2005/06) to First Step as a contribution towards the residual land value. It is suggested that the Council effectively gives a grant-in-kind by way of the land in the sum of £186,000.

Financial implications

11. In practical terms, the residual land value is £378,000. This would be paid for by First Step who would give the Council a cash sum of £192,000 and the Council would be providing a grant-in kind of £186,000. In effect, the Council would be deciding to forgo a potential capital receipt of £186,000.

12. Of course, the Council should recognise that it could achieve a much greater land value by simply disposing of this site on the open market. However, it has a number of objectives to achieve – both optimising income and helping to meet housing need locally, which is a Council priority.

13. Under the Local Government Act 2003, capital receipts arising from the sale of non-Right-to-Buy Housing Revenue Account assets are to be pooled and 50% passed to central government. However, where the Council makes a specific resolution to apply the receipt for affordable housing or regeneration schemes, the Council can then retain the receipt for that purpose. It is proposed, therefore, that the Executive should recommend to the Council that it should resolve to apply the receipt to a future scheme or schemes for the regeneration of housing in the Borough.

Recommendation

That the Council be recommended as follows:

1. the Council disposes of the Sherrydon, Cranleigh, site to First Step through a combination of:

o nomination rights (100% in the first instance and 75% thereafter);
o the Council making a gift-in-kind of £186,000 by way of land value;
o the receipt of a sum of £192,000;
o the three elements constituting the land value after deductions for abnormal site conditions.

2. the capital receipt arising (£192,000) be applied to a future scheme(s) for the regeneration of housing in the Borough.

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Background Papers (DoH)

There are no background papers (as defined by Section 100D(5) of the Local Government Act 1972) relating to this report.

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CONTACT OFFICER:

Name: Mr J Swanton Telephone: 01483 523375

E-mail: jswanton@waverley.gov.uk

Comm/Executive/2004-05/431