MAIDSTONE BOROUGH COUNCIL
LEADER OF THE COUNCIL
REPORT OF DIRECTOR OF REGENERATION AND COMMUNITIES
Report prepared by: Andrew Connors
Date Issued: 22nd September 2011
1. PROPOSED REVISIONS TO THE DEED OF SETTLEMENT WITH GOLDING HOMES
1.1 Key Issue for Decision
1.1.1 To consider proposed revisions to the programme of investment, as set out in the Deed of Settlement with Golding Homes, to deliver a range of affordable new homes for local people.
1.2 Recommendation of Director of Regeneration and Communities
1.2.1 That the Leader of the Council agrees to the proposed revisions to the council’s Deed of Settlement with Golding Homes, as set out in this report, to deliver a programme of affordable new homes for local people.
1.2.2 That the Leader of the Council gives delegated authority to the Director of Regeneration and Communities to agree the proposed revisions in writing with Golding Homes, in accordance with clause 2.5.8 of the Deed of Settlement.
1.2.3 That
the Leader of the Council gives delegated authority to the Head of Legal
Services to arrange for the necessary variations with respect to change of
tenure, to be undertaken on the relevant s106 agreements.
1.3
Reasons
for Recommendation
Background
1.3.1
A
previous report to the Cabinet Member for Community and Leisure Services issued
on 8th September 2011 by the Director of Regeneration and
Communities, made the Cabinet Member aware that Golding Homes were seeking the
council’s agreement to make revisions to the deed of settlement with the council.
1.3.2
The
report proposed a change to the agreement by recommending a capital grant reallocation
of £63k to help facilitate the delivery of the teenage pregnancy scheme at
Armstrong Road.
1.3.3
It
was noted that Golding Homes were seeking the council’s agreement to this
scheme in advance of the remaining proposed changes which were currently under
consideration, and would be the subject of a future Cabinet Member report. It
was therefore recommended that the £63k be taken from the overall budget agreed
as part of the revisions to the agreement with Golding Homes. The Decision
Notice was approved and signed by the Cabinet Member for Community and Leisure
Services on the 16th September 2011.
1.3.4
This
report sets out the historical context to the agreement between the council and
Golding Homes, and seeks the Cabinet Member’s agreement to all the proposed
changes requested by Golding Homes, and the reasons for doing so.
1.3.5
On
the 2nd February 2004, the council and Golding Homes (formerly
Maidstone Housing Trust) entered into a number of agreements relating to
Golding Home’s purchase of the council’s housing stock.
1.3.6
Following
this, the council and Golding Homes entered into a non-binding Memorandum of
Understanding on the 7th June 2006, the purpose of which was to
record the intentions of the council and Golding Homes to work together in
partnership for the benefit of the residents of Maidstone.
1.3.7 The memorandum envisaged a three year investment programme with Golding Homes to provide a development package of new affordable housing in the borough by March 2009. It was also the understanding that the council would expect Golding Homes to be the major recipient of any finance available in future years, and would hope to be able to support Golding Homes’ activities, subject to funds being available and identifying suitable schemes.
1.3.8 The council and Golding Homes agreed to vary the terms of the aforementioned agreements, and to terminate in its entirety the Memorandum of Understanding dated 7th June 2006, and to record their agreement in the Deed of Settlement dated 4th February 2010.
1.3.9 The agreement stated that the council would contribute the total sum of £2,340,908 to Golding Homes in respect of certain affordable housing schemes, to be delivered within certain timescales, providing a total of 246 affordable homes for local people. This equated to an average grant from the Council of just over £9k per unit.
1.3.10 The payments for individual schemes are to be paid to Golding Homes in the following two instalments:
i) 50 per cent of the relevant total sum being paid when the contractor takes possession of the relevant site in accordance with the signed main building contract.
ii) The
remaining balance of 50 per cent to be paid on the date the scheme has achieved
practical completion in accordance with the terms of the main building
contract, and is fit for occupation as a residential development, in accordance
with National House-Building Council requirements.
1.3.11
In
the cases where schemes also require funding from the Homes & Communities
Agency (HCA), the agreement specifies that the council agrees to use best
endeavours in providing Golding Homes with reasonable assistance and support in
respect of their application/bids to attract funds from the national affordable
housing pot.
1.3.12
The
agreement included the provision under clause 2.5.8, for the council to
consider any reasonable proposal, set out in writing from Golding Homes, for
the contributions (or any part thereof), to be reallocated to an alternative
affordable housing scheme, to be delivered in a similar timescale, type, size
and value. This is in the event that Golding Homes are either unable to
deliver the number of affordable housing units specified and/or to achieve
practical completion of any of the development schemes referred to in the agreement.
1.3.13
The
agreement further states that any reasonable requests by Golding Homes to
consider any reallocated payments need to be made by 31st August
2012. The council cannot unreasonably withhold its approval of such
alternative schemes, having taken into account the aforementioned requirements
set out in clause 2.5.8.
1.3.14
The
originally planned schemes for investment, as set out in the agreement are
shown in table 1 below, together with the number of units, MBC grant
contribution, original forecast for completion and long stop date for delivery
of the scheme.
1.3.15
The
long stop date, is the date specified within the agreement, by which Golding
Homes are expected to deliver the required number of affordable housing units
on each particular scheme. In the event that Golding Homes do not deliver the
number of affordable housing units on any particular scheme prior to the long
stop date, Golding Homes are obliged to repay all payments received in respect
of that scheme to the council by a specified date within the agreement.
1.3.16
Due
to the nature of the contributions and delivery mechanism, no specific
practical completion or long stop dates were set for the schemes at Headcorn
Doctors Surgery, Church Street or Woolley Road. However, Golding Homes are
still required to make any requests to the council to reallocate the
contributions (or any part thereof) for these schemes to alternative affordable
housing schemes by the 31st August 2012.
Table 1 – Originally Planned Schemes
Originally Planned Schemes |
Units |
MBC Grant |
Practical Completion Forecast |
Long Stop Date |
Bowling Green, Parkwood |
18 |
£162,000 |
2010/11 |
31st July 2011 |
Former Council Depot Armstrong Road |
96 |
£864,000 |
2011/12 |
31st July 2012 |
Former Park and Ride Site |
35 |
£315,000 |
2011/12 |
31st July 2012 |
Collington Terrace |
12 |
£108,000 |
2011/12 |
31st August 2012 |
Winch’s Garth, Staplehurst |
5 |
£45,000 |
2011/12 |
31st August 2012 |
Bell Lane Allotments, Staplehurst |
5 |
£45,000 |
2011/12 |
31st August 2012 |
Kent House, East Farleigh |
11 |
£99,000 |
2011/12 |
31st August 2012 |
Knights Way, Headcorn |
3 |
£27,000 |
2011/12 |
31st August 2012 |
Headcorn Doctors Surgery |
25 |
£351,908 |
Not applicable |
Not applicable |
Church Street |
20 |
£180,000 |
Not applicable |
Not applicable |
Woolley Road |
16 |
£144,000 |
Not applicable |
Not applicable |
Total |
246 |
£2,340,908 |
|
Proposed Revisions
1.3.17
In
accordance with the aforementioned clause 2.5.8 of the agreement, Golding Homes
have made a request in writing (dated 25th July 2011) which seeks
the council’s agreement to various revisions to the programme of investment. The
revised proposals for investment are shown in the tables below.
1.3.18
Table
2 shows
those schemes for which there is a change proposed in terms of the timescale
for delivery. There is also a change proposed with respect to the level of
investment and number of units delivered on the former council depot at
Armstrong Road and Park and Ride sites, which are shown in table 3
below.
Table 2 – Change of timescales
Scheme |
Units |
Original Practical Completion Forecast |
Long Stop Date |
Revised Practical Completion Forecast |
Former Council Depot, Armstrong Road |
75 |
2011/12 |
31st August 2012 |
June 2012 |
Former Park and Ride site
|
26 |
2011/12 |
31st July 2012 |
June 2012 |
Knights Way, Headcorn
|
3 |
2011/12 |
31st August 2012 |
June 2012 |
1.3.19
Table
3
shows those schemes where there is a reduction of grant (£558k) proposed as a
result of some schemes being reduced in unit numbers, or taken out of the
programme completely for delivery reasons.
Table 3 – Reduction of unit numbers/grant
Scheme |
Units |
Change |
Former Council Depot Armstrong Road |
-21 |
-£189,000 |
Former Park and Ride Site |
-9 |
-£81,000 |
Kent House, East Farleigh |
-11 |
-£99,000 |
Woolley Road |
-16 |
-£144,000 |
Bell Lane Allotments |
-5 |
-£45,000 |
Totals |
-62 |
-£558,000 |
1.3.20
As
can be seen from the table above, the total sum that Golding Homes have
requested to reallocate to alternative affordable housing schemes is £558k. As
previously mentioned, the reallocation of £63k of that total towards the additional
cost of providing the teenage parents supported housing scheme at Armstrong
Road has already been approved in advance of this report, under a previous separate
report to the Cabinet Member for Community and Leisure Services.
1.3.21
It
has been agreed that
the £63k be found from the overall budget agreed as part of the revisions to
the agreement with Golding Homes. As this is counted as additional expenditure
towards existing units on Armstrong Road (which will be creating no new net
replacement additions), the overall proposed revisions to the agreement result
in 62 affordable housing units, being replaced with 55 new affordable housing
units. A net loss of seven affordable housing units, being the six self
contained units being provided in the teenage parents scheme on Armstrong Road,
and the one unit that has now been converted into communal facilities for residents
of the scheme.
1.3.22
Table
4
shows the alternative affordable housing schemes which Golding Homes have
requested the sum of £558k be reallocated to.
Table 4 – Proposed Alternative Schemes
Scheme |
Units |
MBC Grant |
Position |
Practical Completion Forecast |
Armstrong Road Teenage Parents Scheme |
- |
£63,000 |
Planning consent granted. On site. |
2011/12 |
North Street, Sutton Valance |
12 |
£108,000 |
Planning consent granted. On site. |
2011/12 |
Coombe Farm Phase 3A |
20 |
£180,000 |
Planning consent granted. Ready to commence. |
2012/13 |
Bethersden Court |
11 |
£99,000 |
Planning consent granted. Ready to commence. |
2012/13 |
Finch Court |
12 |
£108,000 |
Due to Planning Committee 22nd September 2011. Out to tender. |
2012/13 |
Totals |
55 |
£558,000 |
|
|
1.3.23
There
are several changes proposed, the aim of which is to concentrate on more
strategic projects, the most certain programme in terms of delivery and the
earliest yield of new homes for the council. As can be seen, all of the proposed
alternative schemes have planning consent and are ready to start on site or
commence, with the exception of Finch Court. This is expected to go before
planning committee with a recommendation to approve with conditions on 22nd
September 2011. This report does not seek to prejudice the outcome of this
decision.
1.3.24
Should
this scheme not achieve planning consent for whatever reason, an alternative
deliverable scheme will be considered, if so requested by Golding Homes prior
to 31st August 2012, in accordance with clause 2.5.8 of the
agreement. In the event of there not being a suitable scheme to be considered,
the total sum allocated to Golding Homes will be reduced accordingly.
1.3.25
It
is important to note that the proposed changes keep to the originally agreed
total investment and payment structure for individual schemes (i.e. 50 per cent
of the total sum paid upon the contactor taking possession of the site and the
remaining balance of 50 per cent to be paid upon practical completion). The
changes sought are primarily matters of timing and tenure.
1.3.26 The s106 agreements for the Armstrong Road Depot, Park and Ride site, Headcorn surgery and North Street, Sutton Valance specifically state that the affordable homes developed should be let on Social Rents. Golding Homes now seek the council’s agreement to vary the terms of the agreements to allow the affordable homes to be let on an Affordable Rent rather than a Social Rent basis, subject to the necessary authority being given by the Tenant Services Authority. This matter is linked to the enactment of the Localism Bill, which is anticipated to happen in early 2012.
Justification
1.3.27
The
former council depot at Armstrong Road, the former Park and Ride site, Kent
House at East Farleigh, Woolley Road and Bell Lane Staplehurst are the
originally planned schemes Golding Homes are now seeking to change/stop
reallocating the sum of £558k to alternative affordable
housing schemes. Further details regarding the reasons for Golding Homes being
unable to deliver the number of affordable housing units previously specified,
and/or to achieve practical completion are given below.
1.3.28
Armstrong
Road / Park and Ride – Both schemes were originally intended to
be 100% affordable housing on a Social Rent basis. However, in order to secure
grant funding from the HCA, it was necessary for Golding Homes to incorporate some
mixed tenure on both sites. This approach was also supported by the council
for sustainability reasons and to ensure a choice of tenure.
1.3.29
The
scheme at Armstrong Road has subsequently been altered to include 21 homes for
private sale, which has led to a reduced scheme of 75 affordable housing units,
and the contribution has therefore subsequently been reduced accordingly by
£189k, from £864k to £675k. The affordable provision on the Park and Ride site
has been reduced from 35 to 26 affordable homes, with the remaining 9 homes for
private sale. The contribution has been reduced accordingly by £81k, from
£315k to £234k.
1.3.30
Kent
House, East Farleigh – This scheme has been dropped from the
programme altogether. This is due to concerns that planning consent and
delivery could be significantly delayed as a result of the requirement to
undertake a local housing needs survey, to establish the need for affordable
housing within the parish. A local housing needs scheme has already been completed
recently within East Farleigh, and therefore a further scheme at this stage is
not considered to be required.
1.3.31
Woolley
Road
– The agreement envisages the council contributing a sum of £9,000 per
affordable housing unit built on land known as Woolley Road (which is in the
council’s ownership) up to a maximum of £144,000. Or, an amount equivalent to
the proceeds that the council receives from the sale of the site to Golding
Homes, to enable the provision of no less than 16 affordable housing units.
The site however has been dropped from the programme at the council’s request
due to issues with achieving a satisfactory planning consent.
1.3.32
Bell
Lane, Staplehurst – This scheme has also been dropped from
the programme given the delays on site linked to ecological issues, provision
for the replacement of alternative allotment plots (which part of the site has
an existing use for), and subsequent uncertainty over delivery of the site.
1.3.33
Although
the overall proposed revisions result in the net loss of 7 affordable housing
units for the same expenditure, this is considered acceptable due to gaining
the valuable resource of the teenage parents’ scheme at Armstrong Road. The
council’s additional contribution towards the overall Armstrong Road
development will enable the teenage parents’ project to be delivered and
safeguard the revenue funding from the Supporting People Team at KCC.
1.3.34
The
reasons for the changes proposed also derive from a change of government policy
after May 2010, of a scale that could not have been envisaged when the original
agreement was entered into. The uncertainty over funding from the HCA since
late March 2010 has delayed consideration of alternative substitute schemes.
1.3.35
The council’s
contributions to the proposed alternative schemes and agreement to allow
conversion of various properties from Social Rent to Affordable Rent is a key
element of Golding Homes bid to the HCA for funding in the Affordable Homes
Programme Framework.
1.3.36
The
introduction of a new Affordable Rent product will allow a more diverse offer
for the range of people accessing social housing. Affordable Rent homes will be
made available to tenants up to a maximum of 80% of market rent and allocated
in the same way as social housing is at present. Golding Homes will be able to
offer Affordable Rent homes on flexible tenancies. Where tenants are eligible
for Housing Benefit it will continue to be paid in full in the same way as for
social rented properties at present.
1.3.37
The
Council has been involved in protracted negotiations with Golding Homes over
the revisions to the agreement over recent months. Negotiations regarding the
proposed revisions have effectively been brought to a conclusion by the HCA’s
announcement in July 2011 of successful bidders for the £1.8bn investment in
the Affordable Homes Programme.
1.3.38
Golding
Homes (with the council’s support and assistance), have been successful in
attracting £3,822,805 grant funding for 427 new affordable homes (381 on an
Affordable Rent basis and 46 shared ownership). On top of
this they propose converting 6 existing projects (158 homes) in their
development pipeline to Affordable Rent, which would liberate a further £7.476m
grant. This will result in Golding Homes providing 427 new homes for circa £11.3m, an average grant of £26,462 per new unit.
1.3.39 It is considered that the revisions will provide a better range of homes (more geared towards family homes and strategically important sites). The changes in tenure to Affordable Rent properties will also significantly increase the supply of rented homes that Golding Homes can provide, supporting over 200 additional new Affordable Rent homes in the next three years. Principally by the additional borrowing capacity that can be generated from the conversion of social rent properties to Affordable Rent at re-let, as well as borrowing capacity generated by the net rental income stream of the new properties developed.
1.4 Alternative Action and why not Recommended
1.4.1
The
council could choose not to approve the proposed changes, however the council
cannot unreasonably withhold its approval of alternative schemes having taken
into account the requirements set out in clause 2.5.8 of the Deed of Settlement.
This could lead to the council being challenged for not fulfilling its
obligations and not adhering to the spirit of the Deed.
1.4.2
The
overall level of investment proposed from the council towards these alternative
schemes was made known to the HCA by Golding Homes during negotiations on their
bid package to the Affordable Homes Programme Framework. The HCA is pressing
for all Framework contracts to be signed off by the end of September 2011. Golding's
investment is channeled through the RESPOND consortium framework agreement and
so all RESPOND members will need to have signed up by this date.
1.4.3
Golding
and all other RESPOND member organisations have Board
meetings scheduled for 22nd September 2011 and Golding Homes are intending
seeking Board approval to the formal terms of the grant contract at that
meeting, subject to the necessary revisions to the investment agreement with
the council being approved. This would allow them to sign the contract within
the HCA's timescale.
1.4.4 If the council was to withhold or deny its approval this would push Golding Homes outside the HCA's timetable as they could not recommend the signing of the contract whilst the changes to the investment agreement from the council were not formally agreed. This would put at risk both Golding's contract and the RESPOND one. Golding's contract is for 475 new homes (381 affordable rented homes, 46 shared ownership homes and a related programme of 48 homes for sale), including a major estate regeneration programme at Wallis Avenue.
1.5
Impact
on Corporate Objectives
1.5.1 The
scheme investment proposals outlined within the report support the council’s
priorities and outcomes identified in the Strategic Plan 2011-15 and draft
Housing Strategy 2011-15, which seeks to ensure that Maidstone is a decent
place to live, with decent affordable housing in the right place across a range
of tenures,
and that vulnerable people are assisted, and the level of deprivation is
reduced.
1.5.1 The successful implementation of the scheme will also contribute to the aims of the Sustainable Communities Strategy (SCS), by enabling the provision of affordable homes and access to good quality housing that people can afford.
1.6 Risk Management
1.6.1
The
deliverability status and progress of the schemes will be monitored on a
regular basis, and will form part of the Affordable Housing Delivery Risk
Assessment process which is undertaken on a quarterly basis. The continued
maintenance of strong and regular dialogue with Golding Homes, Finance and
Development Control will assist in this process.
1.6.2
The
risk assessment will also take into account whether there are any identified
risks which could result in increased or revised scheme costs. Any changes to
the expenditure profile of committed schemes will be monitored and reported as
part of the normal quarterly capital monitoring forecasts.
1.7 Other Implications
1.7.1
1. Financial
|
X |
2. Staffing
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3. Legal
|
X
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4. Equality Impact Needs Assessment
|
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5. Environmental/Sustainable Development
|
X |
6. Community Safety
|
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7. Human Rights Act
|
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8. Procurement
|
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9. Asset Management
|
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1.7.2
Financial
– The level of investment proposed still keeps to the originally agreed total
investment as set out within the agreement with Golding Homes, albeit at amended
timescales and over an amended range of projects. The amended timescales for
payments fit into the overall agreed budgets for the relevant financial years,
as shown at in the exempt report at Appendix A.
1.7.3 Legal – The s106 agreement for the Armstrong Road Depot, Park and Ride, Headcorn Surgery, and North Street, Sutton Valance sites specifically state that the affordable homes developed should be let on social rents. Golding Homes are now seeking to vary the terms of the s106 agreement to allow the affordable homes to be let on an Affordable Rent, rather than a Social Rent basis.
1.7.4
Environmental/sustainable
development: The alternative schemes will meet the Homes and Communities
Agency Design and Quality Standards. The units will also be built to Lifetime
Homes Standards. This will ensure the quality of the design of the new homes
is high, and they are constructed in a sustainable manner, thereby reducing the
environmental impact, with lower running costs and incorporating features that
enhance the quality of life of the occupants.
1.8 Conclusions
1.8.1 The level of investment proposed still keeps to the originally agreed total investment, albeit at amended timescales and over an amended range of projects. The substitute schemes give the most certain programme in terms of delivery, a better range of homes (more geared towards family housing) and the earliest yield of new homes for the council.
1.9 Relevant Documents
1.9.1
Appendices
Exempt Appendix A – Housing Capital Programme
1.9.2
Background
Documents
Housing Strategy 2011-15.
Sustainable Communities Strategy.
Record of Decision of the Cabinet Member for Community and Leisure Services –
Affordable Housing Capital Expenditure – Teenage Parents Supported Housing
Scheme – 16th September 2011.
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How to Comment Should you have any comments on the issue that is
being considered please contact either the relevant Officer or the Member
of the Executive who will be taking the decision. Cllr Christopher Garland Leader
of the Council Telephone:
01622 721463 E-mail:
christophergarland@maidstone.gov.uk Andrew Connors Housing
and Communities Funding Manager Telephone:
01622 602166 E-mail:
andrewconnors@maidstone.gov.uk