Innovation in council housebuilding - Stoke-on-Trent

Stoke-on-Trent City Council is an ambitious local authority, with a housing policy focused on maximising use of the HRA and council assets to support existing communities and as a tool to lever in matching support from Government, the third sector and private developers.


Stoke-on-Trent City Council is an ambitious local authority, with a housing policy focused on maximising use of the HRA and council assets to support existing communities and as a tool to lever in matching support from Government, the third sector and private developers. Housing growth is forecast to deliver 791 new homes across all tenures by 2019/20, with another 980 in the years beyond. The council’s own development and regeneration programme is expected to deliver a further 350 new homes over the next three to five years. In the absence of Government restrictions, the council estimates that it could build 200 new homes per year, amounting to 6,000 over the course of its 30-year HRA business plan, at a cost of £715 million. Its development company, Fortior Homes, will contribute 400 homes by 2019.

Context

The six towns making up Stoke-on-Trent suffered economic difficulties in the 1990s through industrial decline and depopulation. It was part of the government-sponsored housing market renewal pathfinder regeneration programme that ended abruptly in 2011. Today, house prices remain relatively affordable by national standards, though rising fairly quickly. Average incomes remain low at just over £20,000. The council has found it difficult to attract housing associations and private developers to the small sites available for housebuilding.

The council has set out two main priorities: to attract and keep younger professionals, such as those working at the local hospital, and to provide for the existing ageing population. To achieve these aims it regards place shaping and confidence building as crucial. It is leading with its own regeneration and new build programme, while offering opportunities to private developers. Much of the activity will be in the form of regeneration, removing outdated and unpopular stock and remodelling town centres.

The council has taken a series of initiatives to position itself for growth. It pioneered the successful homesteading ‘£1 houses’, now called the ‘reviving communities’ scheme. This saw 33 households become homeowners, helping to stabilise a deprived community, demonstrated through a reduction in crime and anti-social behaviour. A second phase attracted 516 applicants. Twenty-five long-term empty properties will be acquired and refurbished using the council’s housing repairs company (Unitas) for handover to successful applicants for a £1 deposit and a 10-15 year loan, which will pay for the costs of acquisition and refurbishment.

Stoke-on-Trent also achieved MHCLG housing zone funding to facilitate working with developers on brownfield land and gained ‘custom build vanguard’ status. Its successful £10 million housing infrastructure fund bid will deliver land remediation on nine sites identified around Burslem town centre, which could hold 1,100 homes but had stalled because of contamination and stability issues.

Recognising the growth of the private rented sector, the council has proposed selective licensing in 14 deprived areas containing over 3,000 properties. The areas have been identified using mosaic 2016 data as streets with low-demand properties and accommodating the most deprived residents, and areas with social issues. This initiative aims to improve individual properties and the community through a reduction in crime and anti-social behaviour.

Overall, the council has a strong community leadership focus and a proactive approach to partnership working. 

Council housebuilding

The council has a stock of about 18,500 homes, mostly meeting decent homes standards. It has a development company, Fortior Homes, and a repairs company, Unitas.

Some sheltered housing is very outdated and becoming unpopular, but there is strong demand for older people’s housing: the council’s strategy found a shortfall of 900 homes of this type. Three existing outdated schemes are to be demolished and redeveloped as new supported or extra care standard housing.

An estate of six high- and low-rise blocks is also problematic. The council plans a multi-agency approach to refurbish three blocks, with one block transferring to Fortior for market renting. Low-rise blocks will be demolished and replaced with HRA social housing, affordable rent, market rent and private sale.

A further mixed tenure development will see a town centre remodelled to create flats, general housing, bungalows and a dementia centre.

Funding and resources

For its HRA and Fortior development, the council is drawing on a mix of available funding and resources:

 

• HRA headroom

• HRA reserves

• HRA and general fund land

• new homes bonus

• right-to-buy  receipts

• borrowing by Fortior Homes

• HCA/Homes England grant.

The council has decided to run down its £25 million HRA reserves in order to increase the funding available, though it will retain at least £5 million.

Significantly, it is also in negotiation with financial institutions on a leaseback funding package for one of the schemes, either to extend what can be achieved or to replace some HRA building if Government restrictions remain in place. Here, the financial institution would lend capital, the council would build and retain the freehold and take a 40-year lease on the housing. The homes would be let on assured tenancies with council management, with the housing reverting to the local authority at the end of the lease.

Additional motivations

The council’s primary focus is place shaping. However, its programme will deliver a number of other benefits.

Confidence in the market: the council has held events and produced a brochure designed to underpin its commitment to local development, with the aim of encouraging the private sector to commit equally. It is marketing itself as a “commercial council: well governed and fit for purpose, driving efficiency". Its approach is designed to maximise the ‘Stoke pound’, keeping investment locally and boosting the economy. This is reinforced via a requirement of 70 per cent local labour and 70 per cent local supply chain on council new build contracts, and channelling investment via its council company, Unitas.

Appraising existing stock: the HRA building programme rests on freeing up land and assets for redevelopment. With much of the existing sheltered housing stock being outdated (including bedsits and shared bathrooms), the council needs to provide better quality for its older residents, in line with its older persons’ strategy. This in turn has prompted a review of all the stock with an eye to longer-term investment decisions.

High-quality design: the need to achieve value for money on the existing stock and realise economies on repairs where possible have reinforced the need to achieve high quality in the new stock, to minimise future costs. With strong current demand coming from younger single people wanting one-bedroom homes, the council has designed some smaller homes to be adaptable, so that they can easily convert to having an extra bedroom as new families form.

Challenges

The familiar problem of restrictions on the HRA is strongly present in Stoke-on-Trent. The debt cap of £182 million and existing debt of £164 million leave little headroom. Rent reductions and restrictions on usable RTB receipts further constrain spending.

RTB sales continue to erode the stock, challenging the economics of the HRA (though the usable portion of the receipt does contribute to development). Sales are expected to reduce the stock by 3,889 over the 30-year business plan period.

Benefits and opportunities

Although the area had benefited from involvement of a variety of government and other agencies, and strategies were in place, it was still felt to be under-performing. Then, said one interviewee, the council “flipped into delivery and implementation mode” with the HRA and Fortior and progress began very quickly. Now with a performance-driven culture and political buy-in, the council and its companies are increasingly taking bold decisions in place shaping.

The council set up an in-house repairs company, Unitas, which is taking over repairs and maintenance of the HRA stock in 2018 and is forecast to cut costs, freeing up further resources. An efficiency gain of £4.5 million per year is anticipated. Unitas will also look to take on repairs for Fortior. Recently the council put forward plans to maximise use of Unitas and is considering placing all its housing management and housing growth functions into the company.

Fortior is taking a role in place shaping by adopting a similar approach to reviving communities in buying off-the-shelf in poorer areas and refurbishing the homes via Unitas for private renting.

The new HRA housing will generate income over the long term and replace some housing lost through RTB. Similarly, the Fortior-led housing will generate income from market rents and from sales and will also explore the formation of a registered provider.

Stoke-on-Trent is also considering expanding selling its services to other councils and organisations, which would bring in revenue.

Development process

The council anticipated sensitivities around its development plans. It secured Government funding for a community-led master planning exercise for plans to redevelop an estate of high- and low-rise blocks. This helped secure community buy-in at the start, and community consultation has continued.

As the land holder, the council is able to initiate development work using its own architects. Within the communities department, an officer each for HRA and Fortior development leads the work. A strategic asset management board within the council brings together all parties. One of its functions is to assess whether Fortior is the right developer for each site; if it is, a service-level agreement is drawn up, preserving its independence from the council.

At political level, the council is currently governed by a coalition of city independents and Conservatives, which has endorsed the growth programme. It is considering plans to expand the remit of Unitas and has embarked on a consultation exercise to pass all housing functions across.

Fortior Homes is commercial driven with a social heart and has two independent board members, including a former senior Homes and Communities Agency officer and a senior officer from MHCLG.