APPENDIX S - HOUSING OPTIONS REAPPRAISAL - FINAL REPORT : Executive on 06/02/2007

Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 06/02/2007
APPENDIX S - HOUSING OPTIONS REAPPRAISAL - FINAL REPORT

Summary & Purpose

This paper provides a summary of the actions taken throughout the Housing Options Reappraisal process and identifies decisions made, the current position and future issues for the Council.

This report was considered by the Housing SIG at its meeting on 10th January 2007 and its comments are set out at the end of the report.

APPENDIX S

Waverley Borough Council
HOUSING SPECIAL INTEREST GROUP
10TH JANUARY 2007

REPORT TO THE MEETING OF THE EXECUTIVE ON 6TH FEBRUARY 2007

Title:

HOUSING OPTIONS REAPPRAISAL – FINAL REPORT

[Wards Affected: All]

Summary and purpose:

This paper provides a summary of the actions taken throughout the Housing Options Reappraisal process and identifies decisions made, the current position and future issues for the Council.

This report was considered by the Housing SIG at its meeting on 10th January 2007 and its comments are set out at the end of the report.

Environmental implications:

There are insufficient funds to meet the Decent Homes standard. The lack of resources means that very limited investment in environmental and external improvements can be made. However where the Council is making capital improvements to dwellings energy efficiency and sustainability remains a high priority.

Social / community implications:

Decent homes help improve the quality of life for the occupants. They help increase life expectancy, health and well-being and educational attainment. Well-maintained homes also improve the attractiveness of the local area, helping to reduce crime and vandalism. Officers will work in partnership with statutory and voluntary agencies to address any associated issues.

Equality and Diversity - The lack of resources may have an adverse effect (as above) for minority groups in Waverley (eg elderly, disabled, single parents).

E-Government implications:

There are none arising from this report.

Resource and legal implications:

There are significant resource implications for the Council as a whole, and the Council’s Housing Revenue Account. The Council has the challenge of striving to meet the Government’s Decent Homes Target and not enough resources to do so. This report suggests a number of opportunities to maximise resources and minimise expenditure in relation to the Housing Revenue Account. Some of the proposals will have knock-on effects to General Fund activities.

Partnerships – the Housing department works closely with Registered Social Landlords and its maintenance contractors.

1. Background

1.1 In 2000, the Government set a standard for decent housing so that homes should:

§ be above the statutory minimum standard “the fitness standard”;
§ be in a reasonable state of repair;
§ provide reasonably modern facilities and services; and
§ provide a reasonable degree of thermal comfort.

1.2 The Government’s target is for all social tenants to have a decent home by 2010 though for some landlords (Arms Length Management Organisations) this date is being extended to 2012.

1.3 The Sustainable Communities Plan, published by the ODPM in February 2003, required local authorities that still own housing stock to carry out “an objective and rigorous appraisal of investment options” to ensure all their homes could be made decent by 2010 and continued to be decent thereafter.

1.4 Where Councils found that they did not have the financial resources to meet the Decent Homes Standard, the Government set out options for them to achieve additional financial investment through:

- Arms Length Management Organisation (ALMO)
- Private Finance Initiative (PFI), or
- Stock transfer

1.5 During the latter part of 2003 and through 2004, this Council undertook a thorough Stock Options Appraisal.

1.6 In September 2004, the Council decided that there were only two viable options under which the Council’s housing stock could meet the Decent Homes Standard, namely: the establishment of an Arms Length Management Organisation (ALMO) or a Stock Transfer. The two other options – Stock Retention or Private Finance Initiative (PFI) – were considered to be unviable in the Waverley context.

1.7 In January 2005, the Council determined that the Stock Transfer option provided significantly more benefits for tenants, the Council and the community than an ALMO. It therefore resolved to undertake a formal consultation exercise with tenants about a proposal to transfer Waverley’s housing stock to a newly created registered social landlord.

1.8 In December 2005, following the formal consultation period, tenants were balloted on the issue of Stock Transfer and tenants voted to remain with the Council as landlord.

1.9 The Government Office of the South East (GOSE) met with Officers, in January 2006, to discuss Waverley’s position and the next steps following the ballot result.

1.10 GOSE was clear that although the Stock Transfer option was rejected, the Council was still obliged to strive to meet the Decent Homes Target by 2010. The Council would therefore need to consider the various options available to maximise its resources to invest in its Decent Homes programme. GOSE also expected that any approach to meeting the DHS would need to be credible, sustainable and provide long-term value-for-money.

1.11 It was also recognised that the Council had other obligations as a statutory housing authority and as a housing enabler. GOSE identified that the Council had a suite of strategy statements (Community Strategy, Corporate Plan, Housing Strategy, Financial Strategy etc), which clearly identified that a key local issue and corporate priority was the provision of more affordable housing for local people in the Waverley community. Any decisions taken in respect of the future for the Council as a landlord would also, therefore, have to take into account these other strategic documents and corporate priorities.

2. The re-appraisal process

2.1 The Housing Special Interest Group was established in January 2006 to reappraise the Council’s housing options on how to achieve:

a) the Decent Homes Standard by the 2010 deadline;
b) Health and Safety, Disabled Adaptations and other statutory responsibilities within the available resources; and also to
c) reconsider the housing business plan and housing strategy

2.2 The SIG examined the housing options available to Waverley and reassessed the Housing Revenue Account resources.

3. Stock Options

ALMO

3.1 The Housing SIG considered setting up an Arms Length Management Organisation (ALMO) in March and June 2006. The SIG considered the financial implications, opportunities and risks of an ALMO in March. Officers explained that if successful an ALMO could receive funding of approximately Ł20million. This additional borrowing could be used to fund Decent Homes works (only). The set up costs would be Ł300,000 to Ł400,000 and the ALMO would need to achieve a 2(good) or 3(excellent) star rating form the Audit Commission to be eligible for funding. At that time the SIG did not wish to pursue an ALMO application but supported the creation of a Quasi-ALMO ie further separation of Landlord and Strategic functions and creating a true landlord business unit. The separation would result from a structural review of the Housing Department. (This review has been put on hold until the review of the Council’s management structure has been resolved.)

3.2 In June, Officers advised the SIG that the guidance had been issued for the final round of ALMO applications. Officers again presented the SIG with the financial implications of applying for an ALMO, the requirements and opportunities of the ALMO process. Further information about the future of ALMOs was provided indicating the review of ALMOs and the scope for new freedoms and flexibilities. In July 2006 the Council decided not to submit a bid for the Round 6 ALMO scheme upholding the SIG’s previous recommendation.

3.3 In the event, it transpired that some of the reservations expressed by Members and Officers about the Round 6 ALMO process were well founded. There was immense competition for the resources available, applicants did not receive full funding of their bids and programmes are being extended to 2012 to spread the costs.

Partial Transfer

3.4 In March 2006, the SIG explored the principles of Partial Transfer. Groups of property could be transferred to a Registered Social Landlord by area, estate or housing type. Small-scale transfers could increase the HRA resources which, in turn, could help fund Decent Homes works. Any RSL taking over such properties would have additional funds to meet the Decent Homes work and other estate and environmental improvements. Officers advised the SIG that there would be resource implications for the Council and any decision to propose a partial transfer would involve consultation and a ballot of tenants affected. The SIG requested Officers further explore partial transfer option with regard to Sheltered Housing and Estate Regeneration.

3.5 Exploratory discussions were held with three specialist sheltered accommodation RSLs and information presented to the SIG in July 2006. The SIG had no wish to pursue a partial transfer of the Sheltered schemes because these properties largely meet the decent homes standard. In addition there would be a loss of revenue income and it was considered there would be a lack of tenants support for transfer.

3.6 An Estate based assessment was completed for Ockford Ridge, the estate with the largest concentration of properties that fail the Decent Homes Standard. The Council owns 153 properties of which 80% are un-modernised. The properties are over 70 years old and although they are habitable when vacant they are costly to be upgraded due to structural issues. Further community consultation work and a technical study would need to be completed before an informed decision could be made on the possibility of transfer. The SIG recommended that further work be commenced to assess the viability and options for Ockford Ridge.

Stock Transfer

3.7 Large Scale Transfer is not a viable option in light of two tenant ballots, in 2000 and 2005, when tenants expressed a wish to remain with the Council as landlord. However, unless there are changes to the Housing Revenue Account subsidy system transfer, wholesale transfer may have to be considered again in the future.

Partnering with another Local Authority

3.8 Officers have held exploratory discussions with neighbouring Local Authorities to examine partnership options and good practice. It is worth noting that each Local Authority that retains its housing stock is required to have it’s own Housing Revenue Account. It is not possible for two or more Local Authorities to merge their HRAs together. In any event, the two main Local Authorities with which Waverley has agreed to promote joint working ie Guildford BC and Woking BC can meet the Decent Homes Standard within their existing HRA resources. Even if it were possible to merge the HRAs it would not be advantageous to Guildford BC or Woking BC.

3.9 Officers are working with Guildford BC on an asbestos programme and an assisted bathing scheme. Officers have also met to evaluate the Disabled Adaptations Scheme. This joint working will continue as officers review services. In addition Waverley is working in partnership with Guildford, Hart and Rushmoor to develop a Choice Based Letting Scheme. Waverley is also working with Guildford and Woking on non HRA Housing related projects eg Private Sector Stock Condition Survey and a Sub-regional Housing Market Assessment.

Stock Retention

3.10 The Council has, by default, retained it’s stock following the tenants vote to remain tenants of Waverley Borough Council. In 2004 Stock Retention was discarded during the Options Appraisal as a viable option as there are insufficient funds to meet the Decent Homes Standard. As no other option is currently available, the Council will strive to meet the Decent Homes Standard it but must be acknowledged that on current projections 58% of properties will not meet the Decent Homes Standard in 2010. The Council cannot meet the Government’s target for achieving decent homes by 2010, though it is not clear whether there are any penalties for failing to do so.

4. Reassessment

Financial reappraisal

4.1 The SIG received Housing Revenue Account Projections illustrating that significant savings, some Ł5m, need to be made over the next 6 years on the revenue account to maintain a balanced budget and deliver the essentials. The draft 2007/08 budget illustrates a Ł650k saving achieved through cost savings achieved and the exclusion of a full external redecoration programme.

4.2 Members noted, with concern, that some Ł8.66m in 2006/07 had to be paid to the Government by way of Negative Housing Subsidy out of a rental income of Ł21m and that this negative subsidy was likely to increase year on year. It is worth noting that for 2007/08 Negative Housing Subsidy will exceed Ł9.2m. Any rent increase has little impact for Waverley’s finances as the increase is largely swallowed by the Negative Subsidy regime.

4.3 In addition to challenges on the revenue account, there are significant shortfalls in the capital budget required to meet the Statutory, Health and Safety, Decent Homes works and other essential improvements. There is a projected Ł29.6m capital resource available over from 2006/07 to 2010/11, which falls well short of the Ł47m required to complete the works required. As agreed by Members resources will be aimed at high priority health and safety works leaving a small amount for other works.

Decent Homes Work Plan and Responsive Repairs

4.4 Officers have reviewed in consultation with tenants the decent homes work programme. A report was presented to the Member Tenants SIG in June. Agreement was sought on the most productive way to use the resources available. Work has commenced on a worse first basis addressing all health and safety works first. Annexe B illustrates the projected number and percentage of decent and non-decent homes.

4.5 Officers have re-let the Responsive Repairs Contract during 2006. Waverley now has one contractor (rather than two previously) across the borough. Efficiency savings have been made as advantageous rates were received due to the scale of the contract, managing one contract is less intensive on staff time and there is scope to build and develop the services provided through the contract.

Maximising Resources

4.6 The SIG has considered ways to increase the resources available to the HRA to provide further finds for capital works.

Trickle Transfer

The Office of the Deputy Prime Minister’s (ODPM) Housing Transfer Manual states that:

“

a trickle transfer occurs when an authority arranges to transfer a small number of its properties to an Registered Social Landlord as and when they become vacant

.”

In February Waverley adopted a Trickle transfer policy whereby empty properties with repair costs exceeding Ł20k will be transferred to a local RSL. A maximum of 20 properties (1, 2, 3 and 4 bedroom houses or bungalows, that are non-specialist) will be transferred per annum. Thus reducing the amount required for capital works whilst keeping the property in social housing. The programme started in April 2006 and will the policy will be reviewed in April 2007.

Asset Disposal

The SIG has received reports to consider asset disposal of HRA land to increase the resources available for Decent homes works. The HRAs assets including garage sites, one off properties and land. In April, the Council agreed to the disposal of two sites. As a general principle it was agreed that open market sale was preferential for isolated properties and properties within estates or groupings of social housing should be considered for affordable housing provision on a case by case basis. Capital receipts were designated to fund decent homes works. In September, the SIG agreed to explore development options for a cross section of garage sites.

Right to Buy Receipts Policy

In July, the Council amended it’s Right to Buy Receipts Policy to provide additional resources for Decent Homes works. Previously the resources were split 50:50 between the capital works and affordable homes programmes. The new policy permits 100% of usable capital receipts of up to Ł500,000 be applied to the HRA Capital Programme and any excess over be applied to affordable homes programme. It should be noted that the number of right to buy sales has significantly reduced from 74 in 2000/01 to 30 in 2005/06. It is estimated that 20 homes a year will be sold creating approximately Ł2m in capital receipt. However it is worth noting that the Government’s Capital Receipt Pooling means that Waverley must hand over to the Treasury 75% of it’s Right to Buy capital receipts, which leaves the Council the remaining 25% approximately Ł500,000.

Housing Department Restructuring

4.7 In July, as part of restructuring the Housing Department the Council agreed to delete three posts and make one senior post holder redundant, in order to make revenue savings. In addition, charges made to the HRA by other departments have been reviewed resulting in some savings. Amendments to service costs arising from these actions have been included in the 2007/08 budget. Further work aimed at reducing revenue costs will continue in future years.

4.8 Reviews of the Sheltered Housing, Careline and Community Housing Officer services are currently underway.

4.9 A full departmental review will be undertaken later in 2007 when the Council has determined the top tier restructuring and consequential effects.

5. Conclusion

5.1 Waverley’s Landlord Services and tenants are facing a difficult future given the current financial position. The capital resources are reducing as Waverley’s contribution to the national Housing Subsidy increases and fewer Right to Buy properties are sold. Officers and Members accept that given the current resources and constrained financial options the Council cannot meet the Decent Homes Standard.

5.2 Officers will continue to strive to meet the standard through maximising income, resources reassessment and service reviews.

5.3 The SIG has examined all stock options available to the Council and considered the resources, services and assets of the HRA. It is clear that the Council has little room for manoeuvre and that for the immediate future stock retention is the default option, even though this means that the Decent Homes Standard will not be achieved.

6. Comments from the Housing SIG

6.1 Members asked whether there was any possibility of publicising the issues facing the Council in order to inform the public. They were advised that a number of press articles had already been written as well as letters written to central Government. Members also suggested that officers should look into more schemes similar to that run in Ockford Ridge whereby, the Council worked with the community to improve the area, to develop more facilities and to build capacity among local people. The Council and the County Council had jointly funded a Community Development Worker who had been working with residents to support and build capacity to address a range of specific projects. Members were advised that a report was to be considered by the Member Tenants SIG about implementing a similar scheme.

6.2 Representatives from the Tenants Panel advised the SIG that tenants had, so far, not noticed a difference in the level of service they received from the Council but they understood this could change in the future when the Council could not afford to reach the standards required by Decent Homes.

6.3 The Housing SIG noted

1. the financial context in which the landlord service has to operate particularly within the Negative Housing Subsidy and Capital Pooling Regimes;
2. the Housing stock consequences and associated risks for the landlord services of failing to meet the Decent Homes Standard for want of resources; and
3. the conclusions of the Housing Options Reappraisal.

Recommendation

It is recommended that

1. the conclusion of the Housing Options Reappraisal be noted and reported to the Tenants; and

2. the Member/Tenants’ SIG should now consider any outstanding or ongoing matters in the future on:
- estate regeneration proposals
- asset disposal possibilities
- review the Trickle transfer policy in April 2007
- update Housing Revenue Account
- update HRA Business Plan
- update Housing Strategy
- inspection action plan.

Background Papers (DoH)

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

CONTACT OFFICER:

Name: Annalisa Howson Telephone: 01483 523453
E-mail: ahowson@waverley.gov.uk

Comms/exec/2006-07/303