The Director of Regeneration and Head of Capital Projects were in attendance to provide an overview on housing development and associated infrastructure in Middlesbrough with a focus on Housing Delivery Vehicles (HDVs).
In terms of housing numbers, Middlesbrough had a quite ambitious target and housing building rates were currently higher than they had been for some time. Sites were being brought onto the market that were where Developers wanted to build and people wanted to buy. However, if this continued there were certain types of housing that would be built in the town and certain types that would not. The market itself would not provide the broad mix of properties that the Council wanted to see provided.
The Council worked with registered providers including Thirteen and Endeavour with regard to social housing and also with Developers to examine the plots of land available. There was confidence that whilst the house building rates required could be met, the housing mix required might not necessarily be built without the Council taking a more proactive role in the housing market. One option the Council was considering, among others such as financial interventions, or offering mortgages, was the establishment of a Housing Delivery Vehicle.
In order to address the local housing market need, the Council was trying to increase the delivery rate of new housing developments by utilising Middlesbroughs land assets. Land to the south of the town was a key driver in this. Maximising Council income streams in terms of capital receipts, Council Tax, New Homes Bonus, rental income and house sales were all key benefits of delivering new housing. Another key factor was re-shaping the local housing market by enabling and increasing home ownership and reversing the current high proportion of private sector renting.
Officers had engaged with Keith Tallentire, ex Chief Executive of Prince Bishops Homes, a not-for-profit registered provider based in the north east. Keith Tallentire had developed a model that had been successfully utilised to deliver options around the housing market. The Council had set out some terms of reference for Keith to identify the housing objectives and vision that set the values that the Council aspired to achieve through the implementation of an HDV that would:
Maximise Council income streams, rental income and house sales.
Speed the pace of delivery of housing to ensure a high level of housing growth to support economic and population growth.
Deliver the Councils Social Regeneration agenda and place making and create quality places where people wanted to live, acting as a catalyst for further regeneration and investment.
The Council also wanted to explore different models for housing delivery and identify a preferred option for implementation; setting out the benefits, disadvantages and risks associated with each approach. As the second part of the process, the Council had requested that the resources and structures required to implement the HDV were identified along with an implementation strategy including costings, timetable, key milestones, risks and mitigations.
Following the Localism Act 2011 and the Housing Revenue Account (HRA) self-financing reforms in 2012, Councils were seeking new ways to unlock their financial strength using delivery models that enabled the retention of asset value in the long term and also presented significant opportunities for greater involvement in the pace and nature of delivery, the product itself and the share of the financial returns. It had been identified that on average, housebuilders made a 25% profit on delivery. If the Council delivered its on offer a similar profit margin could bring money back into the Council enabling it to provide a better model for the delivery of housing and its ambition for city status.
Nationally, 44% of the 353 Local Authorities had already established their own local housing offer. In 2017 alone, 30 local housing companies had been established. Recent examples of Councils setting up their own HDVs to address market needs were Swindon and Liverpool City.
Options available to the Council which were currently being appraised included: building housing through HRA, creating a wholly owned company or establish a joint venture. The Company formed could be a Limited Liability Partnership (LLP), a Company Limited by Guarantee (CLG) or a Company Limited by Shares (CLS). The CLS was the most common commercial form of company and the option typically pursued by local authorities.
The most important feature with regard to governance, was that the Council would hold 100% of the shares in the housing company and as such would have full ownership and would manage the direction of travel the organisation took.
Some of the benefits of establishing an HDV were outlined as follows:
The pace of delivery of housing could be accelerated to ensure that the Council maintained a high level of housing growth that both supported the population and economic growth, increased home ownership and contribute to growing the Council Tax base and New Homes Bonus in support of the Medium Term Financial Plan (MFTP).
The financial return to the Council including capital receipt from the land sold, profit margin on lending, revenue from services provided, cash held within the company and ownership and control of the assets.
Job creation and a positive effect on the local economy. Seven sites with 700 new homes could support 3000 jobs and generate economic activity of £220m.
It was clarified that there was no intention to take private housing stock into Council control. The basic principle was that the Council would take a site and build new housing developments with a range of different products including houses for sale, rent, and rent to buy. The Council could engage a partner to manage the properties but the Council would retain overall control.
With regard to Middlesbroughs projected population, it was explained that the Councils Local Plan was currently being renewed and had indicated the need for a further 5,500 dwellings by 2029. Whilst that number was probably achievable from the current market, having an HDV would provide more scope and control than just selling land and waiting to see what the Developers provided.
Infrastructure and green spaces were highlighted as key elements in the consideration of future developments. Developers would generally try to maximise their profits by building as many houses as possible on a piece of land. Whilst this could be controlled in part through the planning process, and HDV would enable the Council to specify exactly what to build and would not exceed the numbers identified for a site in the Local Plan.
Particular concern was raised with regard to the impact of more housing on the transport infrastructure, education provision and Council services. Primary school numbers were rising and inevitably more secondary school places would be required in the town. Planning work was being undertaken with the Education Service and the Department for Education (DfE) to ensure that any new school provision would be built in the appropriate location, with housing requirements, road infrastructure and services factored in to those plans.
In terms of revenue, the Council would initially lend money to the HDV Company which would use it to purchase land from the Council and then offer it to a Developer. Infrastructure costs, house types, green spaces, would all form part of the cost solution that would eventually return the cost of the property. In addition, the Company would make a profit and the governance of the Company would determine how the profit was utilised. There were currently a number of plots of land in private ownership which had stalled due to lack of funding. The Company could purchase that land and develop it accordingly for the desired house types.
AGREED as follows that:
1. The information provided was received and noted.
2. The Panels investigations would focus on Housing Delivery Vehicles.
3. Draft Terms of Reference for the scrutiny review would be presented at the next meeting for approval.