Decision details
Proposed Revisions to the Deed of Settlement with Golding Homes
Decision Maker: Leader of the Council (expired)
Decision status: Recommendations approved
Is Key decision?: Yes
Is subject to call in?: Yes
Decision:
1. That the proposed revisions to the council’s Deed of Settlement with Golding Homes to deliver a programme of affordable new homes for local people be agreed.
2. That delegated authority be given 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.
3.
That delegated authority be given 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.
Reasons for the decision:
Background
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.
That
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.
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.
The
report of the Director of Regeneration and Communities on which
this decision is based, set out the historical context to the
agreement between the Council and Golding Homes, and sought
agreement to all the proposed changes requested by Golding Homes,
and the reasons for doing so.
On the
2nd February 2004, the Council and Golding Homes
(formerly Maidstone Housing Trust) entered into a number of
agreements relating to Golding Homes’ purchase of the
Council’s housing stock.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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
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.
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 |
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 |
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.
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.
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 |
|
|
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.
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.
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.
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Alternative options considered:
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.
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.
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.
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.
Details of the Committee: 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.
Representations should be made by: 30th August 2011
Report author: John Littlemore
Publication date: 30/09/2011
Date of decision: 30/09/2011
Decided: 30/09/2011 - Leader of the Council (expired)
Effective from: 08/10/2011
Accompanying Documents: