Decision Maker: Cabinet
Decision status: Recommendations Approved
Is Key decision?: Yes
Is subject to call in?: Yes
This report will present for adoption the Homes for Lambeth Business Plan for the next 12 to 18 months.
The Deputy Leader of the Council (Investment and Partnerships), Cllr Paul McGlone, introduced the report and noted that:
· Homes for Lambeth (HfL) would operate as a special purpose vehicle allowing the Council to build much needed homes at council rent.
· The Council had exceeded the target for new homes as stated in the Lambeth Local Plan.
· The housing market was unfair and the waiting list for social housing in Lambeth stood at approximately 23,000; 5,000 children also remained in temporary accommodation. This was an unacceptable state of affairs and the Council was acting to help resolve the situation.
· The Council had used planning powers to build more homes and would now use the special purpose vehicle, HfL, to the same effect. Cabinet had approved the incorporation of the four companies which made up HfL in July 2017. The proposed business plan would allow the company directors to proceed with the development of new homes.
· An Ownership and Stewardship Cabinet Advisory Panel had been set up to provide key governance and oversight of HfL operations. The panel had already met and recommended the proposed business plan for approval by Cabinet.
· HfL was a unique, 100% Council-owned company and all profits generated would be channelled directly back into providing more affordable homes for the people of Lambeth.
The Chair and Leader of the Council, Cllr Lib Peck, invited registered speakers to make their representations to Cabinet. Gerlinde Gniewosz, a resident of Cressingham Gardens Estate, made the following contributions:
· It was not clear where the forecasted income would come from or how the Council would repay the loans from the Public Works Loan Board.
· The Council had not hit its own affordable housing targets and was misrepresenting the figures. It had committed to building 275 extra council rented homes from the three most recent estate regeneration planning applications, but had only delivered 34.
· The business plan provided guarantees to the four subsidiary companies which did not adhere to the state aid rules. There were considerable risks inherent in the business plan and no detailed financial information.
· Leaseholders had been placed in Lambeth Build Ltd, the riskiest of the four subsidiary companies. The HfL business plan granted homeowners far fewer rights than tenants.
· The business plan was wholly inadequate and required further scrutiny.
· The Ownership and Stewardship Cabinet Advisory Panel included no homeowner representatives.
The Leader of Opposition, Cllr Tim Briggs, then made the following comments:
· There was no need for HfL to exist. Neighbouring Wandsworth Council had approved 1,091 new affordable homes, considerably more than Lambeth. It did this by allowing development on infill land through creative planning and proper consultation. A special purpose vehicle was not required.
· The Council should win a ballot of existing tenants and leaseholders before any proposed estate regeneration can take place.
· There was a lack of expertise in managing a company of this nature and it was not democratic for Labour councillors to oversee the boards of the HfL companies. The system of resident engagement had also failed with the loss of Leaseholders’ Council and Tenants’ Council.
· There were no clear lines of responsibility from management to outcomes. The decision making structure was unclear and there was a lack of accountability. No information about the terms of the loans had been made public and Lambeth Council’s record as a landlord was poor.
· There was a fundamental lack of understanding of profits, how to run a business and how to manage risk.
The Director of Strategic Programmes, Rachel Sharpe, and the Assistant Director Housing Regeneration, Jed Young, responded to the comments by providing the following information:
· The business plan could have included further financial information but it had been thoroughly tested and was considered to be robust. There would always be risks involved in setting up a company of this nature, however the level of risk had to be balanced against the outcomes the company was designed to achieve.
· In relation to risk, Members and observers were invited to examine Appendix A of the Business Plan which detailed some of the key assumptions around cost and income. Officers could not be precise to a point on a 5-year forecast but had set out how the risk would be managed within the corporate structure and would ensure that viability gateway assessments took place before each investment decision. The registered housing provider, Lambeth Homes Ltd, was also subject to regulation by the Homes and Communities Agency.
· In relation to the planning applications to bring forward the first phase of the scheme, these remained at application stage and had yet to be formally approved by the planning authority. The public consultation for the statutory planning process still had to run its course.
· Jed Young explained how investment would take place within the corporate structure and confirmed that any surplus generated would be used to manage risk and reinvested into more affordable homes.
Cabinet members then made the following contributions and asked questions of clarification:
· HfL had been set up to help meet housing needs in the borough. Lambeth had been recognised by the Mayor of London’s annual monitoring report as the best performing London borough for new house building, operating at 180% of its London Plan target. At 40%, Lambeth had a higher affordable housing target than Wandsworth and in 2016/17 delivered 43% of all new homes as affordable. Despite this, the Council had chosen to set up HfL with the ambition of providing 1000 extra homes at Council rent; the figure currently stood at around 958. HfL would allow the Council to develop new homes without using the private sector and could therefore reinvest any surplus into further housing.
· Housing was the most common issue at councillors’ surgeries and the shortage of affordable homes had to be confronted. Further clarification was requested into the financial mitigation measures in place should things go wrong.
· Efforts should be made to ensure all vulnerable people with disabilities were provided with homes that met their needs. The same principle applied for families living in overcrowded conditions.
· The state of the housing market directly affected all parts of society and doing nothing was not an option. Further information about the Council’s projected debt position could be in 2023.
· Section 4.15 of the report said the terms of the loans to the company was state aid compliant. Officers were asked whether, following the speakers’ representations, there was any reason to believe this was not the case.
· Further information was requested about the impact of the Equalities Impact Assessment on the estate regeneration programme.
· HfL would encourage and enable Lambeth’s residents to remain in the borough.
In response to queries from Members, officers provided the following information:
· HfL was about providing better homes for people on Lambeth’s estates. The Council was working to ensure that all vulnerable and disabled residents in need a better housing received it. Consultation was ongoing to inform the Council of residents’ precise needs. Households that were currently overcrowded would benefit from the new high quality homes.
· The Council would also build in additional capacity for disabled residents. Indeed it was Council policy that 10% of new properties on regenerated estates be suitable for wheelchair users. Households with the highest levels of need would be prioritised.
· Equalities Impact Assessments were being completed at regular stages throughout the regeneration process and officers were aware of the impact on different communities in the borough.
· There was no reason to review the position on state aid compliance.
· In relation to risk, some of the assumptions set out in Appendix A were highlighted and it was noted that individual cost plans had been developed by professional services teams with experience across both the public and private sector. Within the cost plans there were contingency allowances to mitigate for various eventualities and challenges. The performance of all contractors would also be tested to prior to the commencement of work.
Before moving to the vote, the Chair said it was undeniable that there was a housing crisis in Lambeth, a problem compounded with challenges around the existing quality of houses; a situation worsened by severe funding cuts. Government policy prevented local authorities from building council homes directly, so the Council was taking action, through the establishment of HfL, to build homes for the people of Lambeth.
It was RESOLVED:
1) To note the recommendation of the Ownership and Stewardship Panel and approve the Business Plan which includes forecasts for the period of 2017/18 – 2022/23 and to delegate authority to the boards of the Homes for Lambeth group of companies to implement the Business Plan over the identified business planning period of January 2018 to end March 2019.
2) To delegate authority to the Section 151 officer to raise and onward lend sufficient prudential borrowing to enable HFL group of companies to operate and to enter into construction contracts for the projects outlined in Section 2 of the report.
3) To approve the Memorandum of Understanding, registered names, board membership, and Articles of Association for each of the Homes for Lambeth companies and to delegate authority to the Council’s Director of Legal Services to enter into lease agreements for projects set out in section 2 of the report.
Report author: Julian Hart
Publication date: 22/01/2018
Date of decision: 22/01/2018
Decided at meeting: 22/01/2018 - Cabinet
Effective from: 03/02/2018