Transforming the local authority housing business

Transcription

1 HOUSING AND CONSULTANCY SERVICES Transforming the local authority housing business Making the most of HRA self-financing South West Housing Event April 2013 Jon Lloyd-Owen Glenn Smith

2 Introductions Who we are Broad-based housing consultancy Previously from Tribal, Sector Weedon Grant & HACAS Chapman Hendy What we do Innovative solutions to current housing problems Assist evidence-based decision-making More about you How many work for a local authority or ALMO? How many of your authorities retain a housing stock? 2

3 Focus for this session Key questions under HRA Self-financing Opportunities for authorities with retained stock Opportunities for transfer authorities Experience so far Making the most of the opportunities Meeting the opportunities Please ask questions Making sense of the evidence Pulling it all together as we go Potential new development options Filtering the options 3

4 Self-financing changes in a nutshell End to the housing subsidy system for stock-owning authorities Debt allocations based on net present value of 30 year projections of subsidy allowances & assumed rents Recognition that it costs more to manage & maintain the stock than allowed for by the subsidy management and maintenance allowances End to capital receipts pooling (replacement mechanism for RTB receipts) Rents still to be controlled centrally through social rent policy & rent convergence, but no financial mechanism for Government to encourage compliance Authorities are responsible for their own debt (within debt cap constraints) 4

5 Key questions Max debt or repay early? Max income vs. affordability? Decency or a higher standard? Is this the stock we need? What can we afford to build ourselves? How can we work with others to achieve more? HRA borrowing levels Tailored rent policy/ Affordable rents Local stock investment standard Rebalancing/ Rationalisation Self-build programme Development partnerships 5

6 Key questions Q. How many of you have started exploring these questions? Q. What interests your members and tenants most? 6

7 Experience so far We are seeing a wide variety of priorities from different clients Some are focusing primarily on new build/ supply Some are looking at investment standards Some are reviewing the suitability of their existing stock Others are concerned with rent levels Typically the approaches taken are multi-faceted 7

8 Meeting the opportunities Evidence Policy Resources 8

9 Meeting the opportunities Evidence Business Plan Stock Condition Supply Demand Policy Debt Rent Housing strategy Partnership working Resources Finance Assets People Partnerships 9

10 Making sense of the evidence Q. What information do you hold & monitor on your stock? Q. What types of analysis do members like to see? Q. How informative is that analysis? Q. What flexibility is there to present different facets of the stock? 10

11 Bedspaces Evidence stock breakdown Stock Breakdown Archetype 1 Bed 2 Beds 3 Beds 4 Beds 5 Beds 6 Beds 0 Bed 11

12 Evidence estate size Estate size bands No. Estates No. Units % of stock Average estate (units) 20 or fewer % to % to % to % or more 2 2, % 1145 All estates 72 4, % 68 Non-estate properties 4, % Total 72 8, % Properties by estate size 20 or fewer 21 to to to or more Non-estate properties 12

13 Evidence stock mix, demand & lettings % Current Stock Mix, Demand & Lettings ,000 3,500 3,000 Units & stock mix by bedrooms at years 1 and 10 2,500 2,000 1,500 1, Bedsit & 1 bed 2 bed 3 bed 4 bed Units at year 1 Units at year 10 % Mix at year 1 % Mix at year 10 40% 35% 30% 25% 20% 15% 10% 5% 0% 10 0 Bedsit & 1 bed 2 bed 3 bed 4 bed Demand Profile Current Stock Mix Lettings 13

14 Evidence - metrics Voids by Bedsize Pre 1945 small terrace houses (small: less than 70 square 5Dwellings with at least 1 void in the 2 - Pre 1945 semi detached houses last 5 years 3 - All other pre-1945 houses 6 No. Beds No % small terrace houses (small: less than 70 square % large terrace/semi-detached/detached houses houses % 7 - Post 1974 houses % 8 - Non trad houses % 9 - Pre 1945 low rise flats (1-2 storeys) % 10 - Post 1945 low rise (1-2 storeys) % 11 - Medium rise flats (3-5 storeys) 12 - High rise flats (6 or more storeys) 0 - Bedsit % 13 - Bungalows Grand Total 2, % 1 & Bedsits 1, % Voids by Archetype % of stock % of voids % of stock % of voids 14

15 Evidence financial contribution 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Archetype Contbn/ Unit - Years 1 to 20 Bedsize Contbn/ Unit - Years 1 to 20 80, ,000 80,000 60,000 40,000 20,000 Estate Contbn/ Unit - Years 1 to Bedsit 70,000 60,000 50,000 40,000 30,000 20,000 10,

16 Meeting the opportunities Evidence Policy Resources 16

17 Policy choices Rent policy 17

18 Policy choices Rent policy 18

19 Policy choices Q. To what extent have you revisited key policies under self-financing? Q. What appetite is there for change? Q. Do members know that they have greater freedom to make local policy choices? 19

20 Meeting the opportunities Evidence Policy Resources 20

21 Resourcing People Incentives Finance Assets 21

22 Resourcing People Project team Decision-makers Advisors Incentives Discounted land Planning rules Financial Finance Budget/ Balances Debt Capital receipts Assets HRA Land Dwellings Non-HRA assets 22

23 Resourcing People Project team Decision-makers Advisors Project team Steering group Skills & Remit Outcomes Partnership Profit Incentives Discounted land Planning rules Financial Finance Budget/ Balances Debt Capital receipts Actuals Business plan Sensitivities Assets HRA Land Dwellings Non-HRA assets Operational Contributing Realisable 23

24 Resourcing Q. Who are the principal decision-makers for your authority? Q. How well-equipped are they to evaluate and choose between strategic options? Q. How often do you monitor progress against the HRA business plan? Q. Which of your assets are making the greatest contribution? Q. How is the authority linking incentives to HRA self-financing at the moment? 24

25 Pulling it all together Business Plan Property-level modelling Estate/ Block level modelling Summary information Resources Housing Need Rents Stock investment Operating Costs Redevelopment options Stock attributes Metrics Land & Receipts Supply Demand 25

26 Showing the impact on the HRA ,000 Debt Profile Graph 400, , , , , , ,000 50, ,000 Base - Debt Cap Base - HRA CFR Base - Revenue Balance Scenario - Debt Cap Scenario - HRA CFR Scenario - Revenue Balance 26

27 Showing the impact on stock investment 000 Funding Provided for the Capital Programme 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - Scenario - Capital Programme Scenario - Unfunded Capital Expenditure 27

28 Pulling it all together Q. How does your authority usually pull its spending & investment plans together? Q. How often are these reviewed & updated? Q. Who is keeping these plans on course? 28

29 Development Objectives Why develop? New affordable housing Releasing under-occupied stock Stock rebalancing Management Economies Regeneration Providing quality rented housing Building the local housing business Q. What are your local objectives and priorities? 29

30 New development options HRA Direct Development Stock Reform Partnership Deferred Purchase Partnership Investor Operating Lease General Fund Development 30

31 HRA direct development Self-build using HRA borrowing capacity and revenue surpluses On HRA land infill and estate regeneration; or other council land and privately acquired land In competition with resources for stock investment needs Commuted s106 funding and RTB receipts could be applied Debt cap limits level of development Q. Does the scale of development possible under the HRA debt cap meet your Council s ambitions? 31

32 Stock Reform Development Partnership To support stock rationalisation, rebalancing and optimisation Releasing value through void stock transfer and re-investment Transfer to RP (or JV) for use as affordable rent housing Net receipt recycled to RP (JV) for investment in new homes Issues: Alternative to disposal units available to meet housing need Transfer could be to Council ALMO or SPV but consent required and GF borrowing Receipts could be used through HRA but debt cap will limit development capacity Q. Are you considering selected disposals could transfer and re-investment be an alternative? 32

33 RP Deferred Purchase Partnership Advance RP new-build for later HRA Purchase Council provides land at low-value RP builds and owns new housing to meet local needs Council has nominations HRA has future call option to purchase units Council disposal HRA Call option RP develops and finances RP owns and manages Assured Tenants 33

34 RP Deferred Purchase Partnership Affordable housing supply brought forward and increased Potential for Rolling programme of: RP development HRA purchase RP re-investment in next phase of development Land investment recovered Option to retain as affordable or dispose and take capital growth Alternative to Council land disposal Q. Would such a partnership with an RP be of interest? 34

35 Investor-Lease Development New-build investor lease-back supported by HRA Council SPV or JV develops new rental housing on its land Long lease sold to investor SPV takes finance leaseback Council HRA takes operating lease Council Joint Venture Vehicle RP/Third Party Investor Investor Lease and Lease-back Council (HRA) under-lease 35

36 Investor Lease Arrangement Issues SPV (Council) responsible for meeting lease payments from rental income Demand risk and rental movement risks with Council Could be GF development approach only or with HRA for affordable units HRA Revenue surpluses provide additional support, subject to lease treatment Q. Is the level of financial risk to the Council acceptable? Is this an alternative to GF land disposal? 36

37 General Fund Development New-build rental development using General Fund resources Council subsidiary or JV created to develop and own mixed-rental housing Council provides development finance and land Tenancies ASTs will apply (could use fixed terms) and RTB does not apply Council takes demand and rental market movement risk Option for flexi-tenure proportion of affordable flexes to assure viability over time Q. Does your Council want to be a direct provider of quality rented housing? 37

38 Development Options - Overview Ambition Local housing needs Member priorities Resources HRA Headroom and surpluses HRA and GF land assets HRA Direct Stock Reform Deferred Purchase Investor - Lease GF Rental Debt cap limit Disposal vs. Transfer and investment Advance supply and long-term growth Advance supply GF commitment GF commitment Alternative to disposal 38

39 Filtering the options Partnership Selfbuild Rent levels Plan A 39

40 Filtering the options Focus on what the council requires from its stock/ assets Agree a short list of potential strategic options Model strategic options & sensitivities through the business plan/ MTFS Assess the policies & resources required to deliver each option Use the business plan to measure what each option should deliver Present clearly the options & conclusions for decision 40

41 Any Questions? 41

42 Contacts Jon Lloyd-Owen Glenn Smith

43 Sector Sector is the trading name of Sector Treasury Services Limited, which is authorised and regulated by the Financial Conduct Authority (FCA) for the provision of the investment advisory services it provides as part of its treasury management service. Registered in England No Sector s housing and consultancy services (excluding treasury management services) are provided by Capita Business Services Ltd, registered in England no The registered office of Sector Treasury Services Ltd and Capita Business Services Ltd is 71 Victoria Street, Westminster, London SW1H 0XA. We operate as part of Capita plc. 43