Agenda item

Members considered an option to acquire approximately 242 properties under a funding arrangement with Orchard and Shipman for use as accommodation to help reduce the current pressures in relation to homelessness and temporary accommodation.

Further information of a private and confidential nature was contained in the accompanying Part 2 report on the agenda.

The Director Housing, Planning and Regeneration gave the following responses to Member questions:-

·  The number of properties acquired would depend on the final purchase price. The baseline would be 240 properties unless there was a major change in the market. Looking at availability on the market, the maximum could potentially be 286 properties. The aim was to complete within 12-18 months.

·  The Council would have exclusive nomination rights on all of the properties. In order to discharge the Council’s duty, homeless cases would be given priority. In the event that the Council did not have the same level of pressure, the properties could be allocated to clients on the waiting list or as private rented accommodation to those in housing need.

·  The scheme was brought to the Council by Orchard and Shipman. Previously, the Executive had agreed that schemes brought forward by a provider which met housing need could be considered.

·  In regard to demand, the highest need was for 2-bed properties equating to 50-60%; the remainder would be split between 1 and 3-bed properties. This would be kept under review to reflect need.

·  The Council was looking for properties in Bromley and the surrounding areas that met property standards and were structurally sound. They were predominantly from the private sector however, Orchard and Shipman had contacts within the registered provider sector so any properties being considered for disposal could be assessed for this scheme.

·  The LLP arrangement was a joint venture between Orchard and Shipman and the Council where the properties would be held and managed.

·  The funders agreement was with Bromley who were ultimately underwriting the funding which would be repaid through the rental stream coming in on those properties. The rental scheme would essentially pay for the management and maintenance of the properties being put forward. The Council would own the properties after 50 years.

The Head of Finance, Adults, Health and Housing reported that financially, this scheme compared favourably with other homelessness programmes in which the Council were involved. The scheme would deliver savings of around £1½m per annum and at the end of 50 years the Council would own the properties outright with no debt outstanding. There was an element of risk around inflation but unlike some schemes which had a fixed interest rate, the repayments on the loan were linked to CPI and the rental income would be linked to the increase in the local housing allowance rates.

The Director Housing, Planning and Regeneration reported that the properties would be used to discharge the homelessness duty rather than being used for temporary accommodation. They would therefore be let on an assured shorthold basis. A time limit would not be imposed but there would be ongoing reviews in regard to tenants’ circumstances. No right to buy would be available.

RESOLVED that the Executive be recommended to:-

1)  agree to enter into the limited liability partnership (LLP) arrangement described in this report with Orchard and Shipman for the acquisition of approximately 242 residential properties (dependent upon final purchase price);

2)  agree that the acquired properties will be leased by the LLP to Orchard and Shipman Homes for a 50-year period on an FRI basis;

3)  recommend that Council agrees the loan of £20m to the LLP for a period of 50 years with annual repayments starting from year 3 of 1.6% (£320k) per annum and increasing annually by CPI (collared at 0-4%), funded from the Housing Invest to Save Fund (£14m) and uncommitted Investment Fund (£6m) earmarked reserves;

4)  agree to enter into (i) the Members’ Agreement for the LLP (between the Council, Orchard and Shipman, and the LLP), (ii) a guarantee agreement  with the Funder (see part 2 report) to guarantee the loan facility of £60-£65m to the LLP and undertake to meet the liabilities of the LLP in respect of the loan facility in the event of loan repayment default, (iii) a loan facility agreement between the Council and the LLP for the loan made by the Council, and (iv) a Nomination Agreement with Orchard and Shipman Homes to secure nomination rights to the acquired properties (v) and all other ancillary documents in connection with the scheme;

5)  agree to delegate authority to the Director of Housing, Planning and Regeneration in consultation with the Director of Housing, Director of Corporate Services and the Portfolio Holder Renewal, Recreation and Housing to carry out due diligence in connection with the scheme,  agree the details of each agreement and enter into all relevant agreements in connection with this scheme;

6)  agree to appoint Sara Bowrey, Director of Housing, Planning and Regeneration and James Mullender, Head of Finance, Adults Health & Housing as the Council’s nominees to the board of the LLP, with authority to act on behalf of the Council in relation to all matters not reserved to the Council under the Members’ Agreement; such nominees to be indemnified by the Council and on the basis that the LLP will arrange suitable insurance for its Board members. To delegate to The Chief Executive, as Head of Paid service, to make a replacement appointment of suitable seniority with the agreement of the person nominated if the final structure requires a different skill set or if a vacancy arises;

7)  note that subject to the approval of the above the scheme will provide full year savings of £1.5m per annum;

8)  note that should there be any material change to the scheme from the details set out in this report then a further report will be presented to the Executive to inform members of such change;

Council will be requested to:-

9)  agree the loan of £20m to the LLP for a period of 50 years with annual repayments starting from year 3 of 1.6% (£320k) per annum and increasing annually by CPI (collared at 0-4%), funded from the Housing Invest to Save Fund (£14m) and uncommitted Investment Fund (£6m) earmarked reserves; and

10)  agree to enter into a guarantee agreement with the Funder to guarantee the loan facility of £60-£65m to the LLP and undertake to meet the liabilities of the LLP in respect of the loan facility in the event of loan repayment default.