Nuneaton Borough Council is committed to an ongoing programme of new council housebuilding and the purchase and acquisition of existing stock.
Nuneaton Borough Council is committed to an ongoing programme of new council housebuilding and the purchase and acquisition of existing stock. The size of the programme is relatively small but helps address two key issues – the lack of affordable housing and tackling the homelessness crisis. Each specific project is robustly evaluated in terms of viability and its relationship to other corporate objectives.
Although there are many national and local policy challenges, there is a political commitment as well as support for new innovative thinking, including working with a local private sector partner on modern methods of construction.
Context
The council is the major provider of affordable housing with a stock of nearly 5,800 properties and, in addition, there are 450 leasehold units. Housing associations have 2,400 units in the area.
The council continues to experience high levels of need for affordable housing. It estimates that there is an annual shortfall of over 500 affordable homes. This has been exacerbated by an increase in the number of homelessness presentations, which is putting pressure on the general fund, and the loss of 125 properties through right to buy (RTB) in the three years to 2016/17. This supports the case for an ongoing council housebuilding programme, despite the challenges that this entails.
There is also a continuing need to invest in the existing stock, which is a high corporate priority. Over 80 per cent of the annual capital programme (currently nearly £12 million) is devoted to this issue.
Council housebuilding
Following the self-financing settlement, the council adopted a cautious approach to new council housebuilding. A two-year pilot project was undertaken between 2014/15 and 2015/16 that resulted in the completion of 47 properties. Three sites were developed – two were infill schemes and one was a larger site. The programme was deemed to be a success and received favourable feedback from local communities and tenants. As a result, there is a political commitment to continue to develop new affordable homes.
The pilot also provided essential learning for the council for future projects in terms of understanding (i) the development process and (ii) the importance of necessary skills. An in-house development team now exists to lead on the council housebuilding programme.
The current capital programme includes £1.2 million per year for new build council properties and £0.85 million for purchasing homes on the open market.
Funding and viability
Projects are currently funded through a mix of sources including:
• HRA headroom funding
• rental streams – new build council properties are let at affordable rents, 80 per cent of market rents
• Homes England grants, though these have reduced in size in recent years
• RTB receipts.
Since 2016, there has also been a policy to use planning agreements to acquire new properties and to make use of commuted sums.
As part of the HRA development and acquisition strategy (see below), the local authority intends to explore new and alternative funding mechanisms – for example it hopes to be able to bid for additional HRA headroom finance under the scheme announced by the government in autumn 2017.
Viability assessment for each project is an essential element. Basically, this involves estimates for costs covering, for instance, development, ongoing maintenance and management and rental income streams. A contingency is also built to take account of risks such as unknown development costs, which can be significant on brownfield sites. Some costs are relatively straightforward to calculate, for instance borrowing taken out to finance the development of new homes and maintenance and management. Income (rent during the payback period) is less straightforward because of the uncertainty created by the Government over the changes in rent setting policies over the last six years. The payback period is taken as 50 years as this accords with the life of the assets created.
Quality
The quality of new council housing is a significant consideration. This is because there are concerns among councillors about the size and space standards of some new private sector properties. Council properties are, therefore, built to (i) design standards set out in planning policies and (ii) wherever possible and subject to viability requirements, higher standards in terms of, for example, build quality, parking provision and garden size.
Challenges
The uncertain national policy framework is a major consideration in both the short and long-term. Factors include:
• potential impact of selling high-value voids to help fund voluntary RTB for housing association tenants – the Midlands is a pilot area from summer 2018
• roll-out of universal credit and its impact on rent arrears
• rent policy post-2025
• the Social Housing Green Paper.
At a local level, balancing different policy objectives is an important issue. A potential site may initially be earmarked for new council housebuilding, but in order to meet the requirements of the sustainable communities policy there may be a need to develop a mixed tenure approach (such as incorporating shared ownership properties). A further consideration is likely to be value for money. A mixed tenure approach may have the long-term benefit of generating a return to the local authority that can be ploughed back into council housebuilding on other sites. As the council has no experience of direct provision of shared ownership, this will require partnerships with housebuilders and housing associations.
Moving forward
A HRA development and acquisition strategy was approved in late 2017. It highlights that the council will evaluate each potential project to ensure that it delivers good quality accommodation and value for money. The projects will include both purchase of existing stock and new build.
In relation to the former, further work is being undertaken on the advantages and disadvantages of the acquisition of existing properties. A number of ‘acquisition routes’ are being investigated, including properties that previously were subject to RTB and housing association stock that is being disposed of for asset management reasons. The advantages include avoiding a lengthy development process and responding more quickly and effectively to the growing homelessness crisis. However, possible disadvantages include modernisation/repair costs and the quality/standard of some potential properties in the private sector.
In relation to the latter, the council is keen to embrace new construction methods, especially modern methods of construction (MMC). Three infill sites have been identified and a local partner with experience of MMC is involved. The focus is on off-site production with the added value elements of high-quality design, energy efficiency and supporting the local economy.
A further issue that will need to be addressed is land supply. The council may need to consider purchasing sites to ensure that homes are provided in areas where there are most needed, subject to financial viability.