Cate geM@CTn Tu Ta tes BIAIRIN|
Pon TTT
Assets, Regeneration and Growth
Committee
27 November 2017
Open Market Purchases of Affordable
Housing
Title
Report of | Councillor Daniel Thomas
Wards | All
Status | Public
Urgent | No
Key | Yes
Appendix A — Outline Business Case: Acquisitions
Programme (Phase 3)
Nick Lowther, Head of Growth & New Initiatives, Barnet
Homes. nick.lowther@bamethomes.org, 020 8359 6002
Enclosures
Officer Contact Details
Summary
With a lack of housing supply, high private sector rent levels and the impact of welfare
reforms’, the last few years have been testing for all Local Authorities which have seen
increased level of demand in terms of homeless applications and numbers in temporary
accommodation are high which has placed pressure on already limited housing supply.
To help provide affordable housing solutions, Barnet Homes has developed and delivered
a raft of solutions, including developing successful cost effective long-ierm temporary
accommodation solutions. This proposal seeks to build upon the successes and
framework established through the first two phases of the acquisitions programme to
deliver a greater volume of affordable housing solutions utilising private investment.
Recommendations
1. That the Committee approve the outline business case for the Acquisitions
Programme (Phase 3) in Appendix A
2. That the authorisation of leases of individual properties under the parameters set
out in Appendix A be delegated to the Deputy Chief Executive Officer14
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2.4
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WHY THIS REPORT IS NEEDED
Due to continuing high demand for housing and rising housing costs, the
number of households in temporary accommodation has continued to remain
high and currently stands at 2,675.
The cost of providing temporary accommodation for homeless applicants in
London currently stands at approximately £3,400 per annum net for each new
household placed in a 2 bedroomed property
To help provide affordable housing solutions, Barnet Homes has developed
and delivered a range of solutions, including developing successful cost
effective long-term temporary accommodation solutions. The proposed
scheme is part of a comprehensive set of mitigations designed to help
address long-term General Fund budget pressures.
REASONS FOR RECOMMENDATIONS,
The utilisation of investment to acquire additional affordable accommodation
will provide the opportunity to increase affordable housing supply relatively
quickly at a lower long-term cost than other temporary accommodation
alternatives.
The accommodation will be used as temporary housing, and Barnet Homes
will work with households to help them secure more settled accommodation in
the longer term,
Existing temporary accommodation rates mean that for each new household
placed in 2-bed emergency temporary accommodation costs the Council
approximately £2,400 net per annum. With bad debt provision and
management costs factored in, this figure increases to approximately £3,400
net per annum, per household.
Whilst the market in London continues to be buoyant our experience to date
has evidenced that there is a supply of units available on the open market that
can be delivered at more affordable levels than temporary accommodation.
Delivery of the Open Market Purchases of Affordable Housing has a number
of benefits, not least the ability to deliver revenue benefits against alternative
temporary accommodation options, eradicate exposure to inflationary
increases in the cost of providing accommodation, afford similar financial
benefits to alternative General Fund borrowing options, and provide greater
opportunity to reduce long-term General Fund costs.3.41
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5.1
5.14
5.13
ALTERNATIVE OPTIONS CONSIDERED AND NOT RECOMMENDED
In developing the business case, other options were considered. These
included utilising private investment to deliver affordable housing outside
London. However, feedback and our analysis of options (see Appendix A)
indicated that the option highlighted below (4.1) was preferable.
POST DECISION IMPLEMENTATION
The programme focuses on the acquisition of approximately 300 properties
purchased from Q4 2017/18 onwards funded by private investment funds and
leased to the London Borough of Barnet on a lease of 40 years, with assets
reverting to the Council for £1 upon expiry of the lease term.
Units will be procured on the open market and purchases would be funded by
a socially responsible investment fund, Cheyne Capital Management UK LLP
Barnet Homes will provide a full management service for properties
purchased and units would be used to provide long-term temporary
accommodation, let at 100% of the relevant Local Housing Allowance rate.
The rent payable to the fund would be set at 3.4% of the total capital outlay for
the property per year. These figures would be CPI index linked.
The properties let through this model could also be let at open market rents
and provide the Council the opportunity for a profit sharing arrangement by
letting a proportion of the properties through the Barnet Group's subsidiary
company, Bumblebee Lettings Ltd with the Council receiving 50% of the
increased net revenue over and above the Local Housing Allowance rate.
IMPLICATIONS OF DECISION
Corporate Priorities and Performance
This approach aligns with the London Borough of Barnet's Housing Strategy
2015-2028 that aims to increase the supply of affordable housing available to
homeless households and encourage institutional investment in the private
rented sector.
Properties acquired would be delivered at a lower cost over a 40 year period
than existing methods of providing temporary accommodation, thus reducing
pressure on the Councils General Fund.
Properties let through this method could be used for temporary
accommodation for homeless household or have the potential to be used for