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Investing in council house building - Central Bedfordshire Council

Central Bedfordshire Council has been addressing a deficit in social housing by embarking on a project to increase the number of council properties available. To date, through new build development, property conversions and acquisitions, the ambitious plan has already delivered 483 properties, and numbers continue to increase.

The challenge

The challenge that the council face is a shortage of council-owned properties. In order to resolve this and run a successful project, there are several other challenges to be resolved.

The first is the financial challenge; to sustain / increase future delivery, the council must overcome overall price increases, the rising cost of borrowing, and labour and material shortages. In our plan we have assumed that development costs and rent increases will be similar. Therefore, if rents were increased at a rate lower than costs are increasing, there will be implications on investment, the council’s debt strategy, and the capacity to deliver quality housing. The four-year 1 per cent rent cut between April 2016 to April 2020 reduced the scale of the business plan: for five years from April 2020, rents will rise by the Consumer Price Index (CPI) + 1 per cent.

Other financial challenges include the recent upward trend in interest rates and the inflationary pressures that are directly impacting on costs. In addition, the cost-of-living pressures for residents will also have an impact that could continue for several years.

A further challenge is that of the high costs of residential and nursing care homes. As a result, we developed a programme of mixed tenure Independent Living Schemes to enable people to remain in their own homes for longer. Not only does this reduce the demand on residential care and social care budgets, but also improves independence and well-being for our residents by targeting loneliness and building cohesive and sustainable communities.

We have also seen a rise in homelessness approaches since 2015-16 and addressing the resulting demand for temporary accommodation is an important part of this project. To manage additional pressure on the cost of providing temporary accommodation that peaked in 2017/18 at over £2 million, we began purchasing properties on the open market for use as council owned temporary accommodation. This avoiding the use of (and costs) bed and Breakfast, hotels and nightly lets.

Whilst recent stock condition surveys give assurance that our portfolio of council housing is generally in good condition, there are areas where our stock would benefit from modernisation or improvement. Indeed, it is important that every opportunity is taken to improve the environmental sustainability of our stock, or to make the stock more accessible to meet the needs of disabled people. The challenge for the next 30 years will be to achieve the Government’s net carbon neutral objective by 2050, and the council’s own target of 2030.

A final challenge, and an important one given the importance of the Social Housing White Paper, is to ensure that this project achieves the right balance of continuous investment to improve existing stock, alongside investment in new developments to meet the demand for homes.

The solution

The development programme over four years is structured in three ways: new build, property acquisition and property conversions / transfers. This includes:

  • 205 units delivered through new build development
  • 233 units delivered through property acquisition
  • 45 property conversions and transfers from the General Fund

Homes England funding

Central Bedfordshire Council has built a good working relationship with Homes England over recent years, with a proven track record of delivery and obtaining £12.7 million of affordable homes grant funding over the last eight years. Our Medium-Term Financial Plan (MTFP) anticipates that as the HRA continues its ambitious programme of delivery, it will maximise this source of funding.

Housing Revenue Account (HRA) Borrowing 

The abolition of the HRA Debt Cap no longer limits our borrowing to the self-financing figure of £164.995 million. The value of our housing stock has been assessed (31 March 2021) at circa £608 million (based on Existing Use value as Social Housing). Against the current borrowing of £210 million, this equates to a current debt ratio of 35 per cent, which for a landlord business is relatively low.

At a time where housing supply is constrained, this investment will enhance and increase our housing stock, whilst being aligned to and supporting the achievement of all of the council’s strategic priorities. The Investment Plan is ambitious and aligned to the council’s 2050 vision. Central Bedfordshire will continue to be a great place to live and work: a place to prosper, be proud of, and a great place to call home.

In order to make sure that our plans were fit for purpose, we worked closely with our tenants and leaseholders. They had the opportunity to influence the plan, which is important because we were able to balance the need for investment alongside the needs of our residents.

Cross service working between teams within the council, for example between the Housing Service and Adult Social Care, has ensured that the Independent Living development programme was designed to meet demand across a range of care needs and tenures, enabling potential savings in residential care and NHS costs. Most importantly, these developments provide purpose-built homes which can match the requirements of aging residents as their needs change, meaning many can remain in their homes, and their community.

Strong leadership and commitment from the senior management team and Members at the council has ensured that the resource and knowledge is in place to underpin such a substantial development programme.

The impact

One of the primary aims of this project is to help older residents be healthier and remain independent for longer, creating resilient communities and alleviating demand on residential care budgets. The delivery of high-quality Independent Living Schemes has helped the Housing Service to make best use of our stock by reducing under-occupation, facilitating moves as part of an active demand management strategy and freeing up family housing for those in need. For instance, Priory View Independent Living Scheme freed up 23 three-bedroom properties which can now be used as family homes. The impact on the residents who moved to Priory View is significant, allowing independence within a safe environment, couples to be reunited and the opportunity to live in a building designed to meet the needs of the residents.

Utilising borrowing, there is capacity to action the renewal, regeneration, and decarbonisation of our housing stock, as well as develop much needed additional affordable housing. The council has secured a low cost of capital due to an exceptional Treasury Policy, securing fixed rate debt at low rates (between 1.2 per cent and 1.52 per cent for loans taken out after self-financing).

Purchasing properties on the open market offsets the reduction in housing stock we have experienced as a result of the Right to Buy scheme. These properties are used to supply accommodation for vulnerable clients presenting as homeless, thereby saving expenditure on costly Temporary Accommodation (TA). Whilst demand for TA is likely to be met by the purchases to date, there is still an ongoing demand for supported and specialist disability accommodation and the fact remains that affordable housing demand is not likely to diminish.

The conversion of surplus care homes to provide transitional accommodation has further assisted the aims above. In time, it is hoped that these properties can be converted for general needs use, when and if the homelessness demand abates, but that is reliant upon the on-going provision of affordable housing at scale.

How is the approach being sustained?

Analysis of trends and demand demonstrates that there is an under-provision of social housing for larger families, the extent of which varies from area to area. Alongside refurbishment of acquired and existing properties, a proportion of the project budget will continue to be targeted at the conversion of three bed homes, to four or five bed homes.

We have been able to undertake substantial borrowing to deliver new affordable housing over the next 10 years (whilst still having the capability to fully repay debt over the 30-year plan period), as well as to achieve a reduced carbon footprint of the housing asset. There is a strong likelihood of borrowing beyond the 10-year horizon, to address both continuing housing need and decarbonisation.

Over the Medium-Term Financial Plan period, it is proposed that we borrow up to an additional £133 million (an average of £33.3 million per year), to facilitate a range of new build schemes and property acquisitions. We have identified seven significant new build schemes, along with a number of smaller sites on existing land where there is the potential for infill development. Examples include garage sites and pieces of land, often between existing houses, which are missed opportunities or which blight local areas.

The council’s wholly owned Development Company, New Vista Homes (NVH), has been incorporated with the aim to acquire portions of land – initially from the council’s General Fund – and to build a mixture of market sale and market rent properties, together with an element of affordable housing to be purchased by the HRA. Over time this will generate significant additionality for the Housing Revenue Account.

The new build schemes identified for future development, including additions from infill sites, are scheduled to deliver 510 units.  When added to the 240 acquisitions and 45 transfers from NVH, this equates to a potential delivery of 795 new properties over the next four years. 

Lessons learned

Key stakeholders should be involved at the early stages of the design phase to ensure the development of a suitable, high quality and detailed specification, meeting the needs of the intended client group.

Throughout the development process, technical teams and end-user operational teams need to work in partnership. Changes to the specification later in the design stage or during the construction phase can be costly and cause significant delays in bringing a project forward, therefore should a technical hitch require the specification to be changed, involve the end-user team in problem-solving towards a solution.


All Saints View New Independent Living Scheme

Priory View - Award winning unique Independent Living Scheme