Agenda item

a)       Report of the Corporate Director of Regeneration Economy and Growth 

 

b)       Presentation by the Housing Development Manager

 

The Committee received a report of the Corporate Director of Regeneration, Economy and Growth that provided an update on the Council House Delivery Programme that set out the context to the programme outlining the objectives of the programme along with the delivery approach, current stage of the programme and next steps (for copy see file of Minutes).

 

G Smith, Housing Development Manager gave a detailed presentation on the Council House Delivery Programme that provided the background, the objectives, the approach to the delivery of the programme, the sites that had been identified, the key challenges faced by the programme and the next steps.

 

In relation to the background the Housing Development Manager highlighted that in 2020 the Council had agreed to begin a council House delivery programme to deliver up to 500 homes by 2026 with phase 1 and phase 2 sites agreed by Cabinet in 2021.  However, the progress of the programme had been impacted by macro-economic factors including the Covid 19 pandemic, the war in the Ukraine and the global energy crisis, impacting on both the construction industry costs and the Council’s budgetary position.  In July 2023, Cabinet approved an updated business case for the programme which responded to the three macro-economic factors above and included a revised financial model. 

 

The Housing Development Manager confirmed that the objectives of the programme were to deliver affordable housing, homes for older people and to reduce the cost of the provision of temporary accommodation in the county.  In relation to providing affordable homes it was highlighted that the programme provided an additional source of supply to meet the shortfall in affordable housing provision which was around 40% each year.  County Durham had seen a demographic shift with the number of older people increasing with a projected increase of 65.6% between 2016- 2035 of those aged 75 and over.

 

In relation to temporary accommodation members were informed that the Council’s cost of providing temporary accommodation had increased from £10,343 in 2016/17 to £806,179 in 2022/23 and that this was the result of several factors including new responsibilities placed upon the Council through the Homelessness Reduction Act.

 

In relation to the approach to delivery to overcome challenges within the programme, the Housing Development Manager confirmed that this included an updated financial model based on revised assumptions, delivering bungalow accommodation alongside a range of house types to meet identified needs although bungalows remained the core intention and a move towards a design and build’ approach to development.

 

It was confirmed that the report considered by Cabinet in July 2023 identified three sites with other phase 1 and 2 sites to be progressed subject to viability considerations. In relation to rural delivery, three distinct model delivery approaches had been identified which included identifying suitable land to purchase or to swap, making use of existing buildings or the purchase of s106 units where there was no interest from Registered Providers.

 

In addition, it was intended that alongside development a programme of acquisition would be undertaken to acquire homes to help meet our housing needs. It was highlighted that key challenges to the programme included the viability of the development, the viability of some of the sites allocated in terms of the topography and scale of the sites.  The Housing Development Manager confirmed that the procurement exercise for the appointment of a contractor was going through the required process now and would conclude in the first quarter of 2024.

 

Councillor C Lines observed within the report that the costs associated with temporary accommodation had increased at an alarming rate.  He asked if Officer’s thought this trend would continue and whether this was a result of the extension of the duties placed on the Authority under the Homelessness Act and if it would impact on budget pressures.

 

The Housing Development Manager responded that they were stark figures.  There were several factors that had impacted and caused the increase in costs including the additional duties that had been placed on the Council through the Homelessness Reduction Act 2017.

 

I Conway, Programme Lead (Council House Build) added that along with the extra duties from the Homelessness Reduction Act 2017 other factors had increased the cost of temporary accommodation that included the settling in period following the stock transfer of council houses to the Registered Providers in 2015.  During the initial transfer both organisations had similar policies but over time the Registered Providers developed their own policies that saw each organisation deal with homelessness in different ways.

 

During Covid the government embargoed tenants from being evicted for any reason but following the pandemic landlords started serving section 21 notices to evict tenants who had not paid rent.  Registered Providers having their own policies which made them more critical when assessing applicants and refused to house people if they had previously had bad experiences with that applicant in the past.  This left the duty of care on the Local Authority to find alternative provision with some applicants being left in temporary accommodation for longer periods than in the past.

 

The Housing Development Manager in response to Councillor C Lines’ enquiry believed that the trend would continue to increase.  However, the Council had put measures in place to respond to the issue.  This included a refresh to both the Housing and Homelessness Strategies.  It was also noted that the council house delivery plan would provide an opportunity to prove ‘move on accommodation’ to support bringing households out of temporary accommodation. The Council had looked to create its own temporary accommodation by acquiring properties to reduce costs.

 

Councillor A Batey was aware of pressure on the Council’s budget and queried if there was any interest in using either existing unoccupied buildings or untenanted buildings that landlords wanted to sell in rural areas as temporary accommodation.

 

The Programme Lead (Council House Build) confirmed that the Council was looking at a strategy for County Durham to look at the high levels of empty properties that potentially could be put back into use as council houses. 

 

The Housing Development Manager verified that it was proposed that there would be 130 council houses in the Council’s ownership by the end of the year.  Any acquisition undertaken by the Council would need to be assessed to ensure they were financially viable.  There would be 32 units for supported accommodation for rough sleepers as part of a targeted programme.

 

Councillor A Batey commented that in relation to the rural delivery slide and making use of existing buildings had the council done any work looking at vacant terraced housing owned by private landlords who may want to sell their properties.

 

The Programme Lead (Council House Build) made the Committee aware that although there were 10,000 vacant buildings across County Durham which seemed a complete waste of resources not all would be financially viable to use and would require a lot of money spent on them to bring them up to the required standard. He continued that some of these empty properties were normal churn however for those that were not there was a range of activities ongoing to bring empty properties back into use across the county.

 

The Housing Development Manager continued that empty properties were assessed in relation to location, whether the property met the housing need of a particular location, current state of the property and it was then determined as to whether it was viable to bring the property back into use.

 

The Programme Lead (Council House Build) continued that some properties were not within DCC’s resource to bring back into use viably and confirmed that there was government funding available for specific targeted programmes in relation to empty homes which DCC was tapping into.

 

Councillor A Batey queried if there were financial constraints on housing associations for them not to look at new builds.

 

Councillor D Freeman asked as to why the registered providers in the county were not addressing the housing need by building the new homes required and queried as to whether it was land availability preventing them from building the required new homes.

 

The Housing Development Manager commented that there was a shortfall of affordable homes in the county and the council house delivery programme provided an additional source of supply to meet affordable housing needs.  He continued that potentially registered providers also had to direct resources towards their existing stock.  It was noted that registered providers often operated across local authority boundaries. It was thought that if the Council built their own council homes they could manage them directly which would support a reduction in the cost of the provision of temporary accommodation.

 

The Programme Lead (Council House Build) commented that there were business plan issues in relation to new builds that needed to be considered as significant borrowing would be required resulting in them representing a greater risk for registered providers in their business plans.  At the same time there were financial pressures to deal with issues such as decarbonisation and in retrofitting within their existing stock.  He added that the Council were at a stage where they could look to build new properties without the pressure to also maintain an ageing housing stock.

 

Councillor K Shaw explained that he was the former portfolio holder for housing and was disappointed that the Council had not progressed the Council House Build work since 2021.  He noted that between 2017 and 2018 Theresa May, Prime Minister had highlighted a national housing crisis and the Registered providers were in a standstill position, with housing needs not being met with 11,000 residents on the housing list.  The only way to meet that need was a total change of direction for Councils to start building their own homes.   He added that previously Government legislation had prevented borrowing in relation to transferred housing stock.  He noted that there had been £70 million to build 500 homes from 2021 to 2026 and if progressed when originally planned Council homes could have been delivered by now so the opportunity had been missed. He continued that Registered providers were now using their land to build market housing which again reduced the number of affordable homes available within the county.  He concluded by questioning as to why when cabinet had approved this programme in 2020 there had been no development, a two-year delay when nothing had progressed.

 

The Housing Development Manager responded and put into context that following approval in  2020 and allocation of sites in 2021 it was determined at the cost estimate stage that some of the sites were not viable.  This led to the business models, costs estimates, designs and layouts for the sites having to be reviewed.

 

The Programme Lead (Council House Build) explained that all the prep work on the site layouts, pre-planning applications, costings and issues had to be revised due to the changes in the market as it was found that new builds were no longer affordable using the existing financial model. Following soft marketing exercises the approach to tendering, bespoke house designs and financial modelling had to be reconsidered.  Although it appeared that there had been no progression on the project Officers had worked continuously to encompass the additional work of refreshing every element of the original plans.  He advised that presently the project was at the procurement stage which took several months.  There was an expectation that tenders would be submitted to engage the contractors to develop the programme as quickly as possible. He highlighted that there had been several factors across the timescale in question which had prevented the scheme from progressing as quickly as originally envisaged.

 

Councillor K Shaw commented that he acknowledged the points made by officers however he could not understand following all the necessary preparatory work being undertaken in 2020 and the project ready to proceed with the relevant finances in place how it had not progressed any further within the time scales from 2021 until 2026.  He continued by expressing concern and disappointment that four years later with two years delay the project had failed to deliver any of the proposed 500 homes.

 

Councillor R Crute commented that the delay was not a criticism of Officers as they were bound by policy decisions and external factors. He commented that what was to be considered was set in front of them.  He continued that where we find ourselves today was the result of political decisions and highlighted that the increase in interest rates had resulted in the programme having to be remodelled.  He continued that the project formed part of the wider DCC Capital Programme of £700 million that had cost £900 million and he questioned why the initiative had appeared to be given a lower priority than other elements of the top heavy programme with undeliverable schemes. 

 

He continued by expressing concern that the project could assist significantly in addressing the ongoing levels of revenue costs being incurred by DCC as part of its responsibilities in relation to homelessness and lift the pressure on the revenue budget.  He was aware that it was down to political choice where the priorities lay. He continued that in considering how the large capital programme was funded through borrowing and the ongoing high levels of interest applied to this borrowing, he suggested that priority within the capital programme should be given to those initiatives which would deliver savings against the revenue budget whilst at the same time provide valuable homes for residents of County Durham. Mr E Simons noted that the report had indicated within the business case review that there was a reduction in the capital costs within the programme.  He queried why that was as he knew from a background in construction that the costs of bricks had not gone down. 

 

The Programme Lead (Council House Build) explained that the cost per unit had increased to between £180,000 to £220,000 from around £140,000 per unit with a corresponding knock on for the cost of the project overall.  The other factors helping to balance the revised plan included the projected increase in funding from Homes England from £35,000 per unit to £49,000 per unit, changing the loan from the initial annuity loans to maturity loans and changing borrowing over a longer time frame of 40 years instead of 30 years as recommended by Savills  He continued that he believed that the remodelled programme could be delivered without as much capital input from DCC with £4.5m held to one side to be used to assist where the viability of a site required additional subsidy or any unforeseen risks materialise. . 

 

Mr E Simons asked if Savills had remodelled the life cycle of the cost of design as he knew that over the cycle costs could escalate at the tail end of the build.

 

The Programme Lead (Council House Build) commented that an element for repair and maintenance had been included in the programme with an increased amount from the rental income to pay for major repairs in the future.  Savills had recommended an increase rental income set aside within the Major Repairs Reserve for each property from £700 per unit to £917 per unit per annum.

 

Councillor B Moist questioned that if there was £70 million in budget for 500 houses how many council homes had been delivered to date within the 5 year period.

 

The Programme Lead (Council House Build) stated that no new build council homes had been delivered to date however 6 new homes had been acquired from Chapter Homes and other older properties had also been acquired. 

 

Councillor B Moist asked when it was thought that 0% of the proposed Council homes would be delivered and commented that this may be a question posed to the Cabinet Portfolio Holder.

 

The Programme Lead (Council House Build) advised that the Council was currently out to tender for a contractor to start the programme. The Council would be in early discussions with the appointed contractor to agree the development programme in detail and the pipeline of sites.

 

The Housing Development Manager clarified that it was proposed to have 42 units on the first two sites following the procurement process and have a contractor in place later this year.

 

The Programme Lead (Council House Build) added that the Council would have an additional 130 homes by the end of the year through the acquisition process.

 

Councillor B Moist felt that strategies should be written with realistic targets rather than unreasonable targets that told people what they wanted to hear.  He noted that if you failed to prepare, you prepared to fail.  He was shocked that there had been plans to build 500 homes within 5 years and that none had been delivered.  He noted that the Capital programme for regeneration had the biggest budget however he saw no point in spending money if programmes were not going to be delivered.  He was not sure of the implications but suggested that potentially some Capital Programme monies should be redirected to those activities that were needed now.   He continued that he had taken on board the macro-economic issues highlighted in the presentation however we had to live with these issues and deliver for the residents.  He then proposed that the relevant Cabinet Portfolio Holders should be invited to a future meeting for members to ask questions and raise concerns which had been highlighted at the meeting.

 

Councillor R Crute suggested that due to the size of the committees work programme the Chair of the committee write to the relevant Cabinet Portfolio Holders expressing the concerns raised by members during the meeting, asking that a response was provided to the various concerns raised by members.

 

Councillor Stead asked for clarification that when the sites had been originally identified that they were in the wrong areas with some sites having issues with Japanese Knot Weed, the size of the sites, some were small scale and would therefore cost more to develop.  He continued that Chapter homes had been successful in their site allocations.

The Programme Lead (Council House Build) confirmed Councillor M Stead’s query that some sites that had been allocated were deemed unviable and that Japanese knot weed had been found on one site. 

 

Councillor M Stead asked who identified land with no amenities.

 

The Programme Lead (Council House Build) noted that some land allocated had been sold to help fund the capital programme.  It was beneficial that any land used would be required to be attractive to entice investors which had not been the case with some allocated sites as they were deemed unfit upon assessment as they were on hills or had slopes and were more costly to develop and therefore attract a lower or no capital receipt.   He confirmed that Chaytor Road and Greenwood Avenue had been allocated Brownfield Land Release Fund to help with some of the site abnormalities.

 

Councillor M Stead commented that Chapter Homes had built two sites successfully.

 

The Programme Lead (Council House Build) stated that the Council had generally identified more viable sites for the Chapter Homes as the aim of the organisation was to be able to achieve the development of the site and achieve a developer profit which could be returned to the Council as shareholder to relieve budget pressures elsewhere.

 

The Housing Development Manager commented that the initial site allocation for the council house programme was on the basis that they were acceptable for housing development in principle and that once the viability had been investigated it was found that there were issues with some of the sites which required further investigation.

 

Councillor B Moist thought that other options could also be explored for Council Houses and gave an example of Newcastle Council who were looking to bring back previously transferred housing stock into their ownership.

 

Resolved

 

i)                        That the report and presentation be noted.

 

ii)                  That the Chair of the Economy and Enterprise Overview and       

     Scrutiny Committee write to the relevant Cabinet Portfolio 

     Holder expressing the various concerns raised by members in 

     relation to the report and presentation and request that a

     response is provided to those concerns.