Agenda item - New Homes for Neighbourhoods - Scheme Approval - Lynchet Close

Report of Executive Director Economy, Environment & Culture (copy attached).

(1)      That a decision be deferred for consideration at a reconvened meeting of the Housing & New Homes Committee. This reconvened meeting is to be scheduled to take place in time for the decision to be considered by the Policy, Resources and Growth Committee meeting on 13 July 2017.  

 

 

 8.1    The Committee considered a report of the Executive Director, Economy, Environment and Culture which included the findings of the business case for eight new council homes for rent at a primary HRA owned, grassed site at Lynchet Close, Hollingdean and sought scheme and budget approval to develop them. Being an exceptionally easy site to develop for the New Homes for Neighbourhoods programme, this scheme is projected to be self financing over 40 years and could generate a significant surplus to cross subsidise other and future schemes in the programme. The implications of various rent options, including those requested in members’ proposed amendment to the report circulated for the March Housing and New Homes Committee, were included in order for members to agree the rent levels. The report also requested approval to appropriate a small strip of land from the council’s Environmental Services department to the HRA in order to let the development proceed. The report was presented by the Estate Regeneration Project Manager.

 

8.2     The Estate Regeneration Project Manager gave a slide presentation and stressed the following:

 

• The council's Strategic Construction Partnership had worked with the Estate Regeneration Team since inception of this scheme to work up a cost efficient but robust design that would meet the council's standards for affordable housing and would be cost efficient to maintain.
• Three different construction options were modelled and costed and the cross party Estate Regeneration Member Board was consulted. They concurred with the decision to use timber frame rather than traditional block and brick construction – which brought some cost savings – and to comply with the space and accessibility standards required by the council’s Affordable Housing Brief, rather than the lower standards generally delivered by volume house builders.
• This would be the last housing scheme to be delivered through the current partnership – which was coming to the end of its procured life - and officers needed the committee’s scheme approval today in order to be able to progress it with those partners and get on site by early autumn.  
• In order to avoid delays, an application for planning consent was submitted after the last Housing & New Homes Committee meeting and officers were expecting consent imminently.

The report to this meeting included:

• The reasons for the rent policy that had been adopted by Committee in setting rents for all homes in the New Homes for Neighbourhoods new build programme to date – at the lower of 80% Market Rent or Local Housing Allowance in accordance with the Tenancy Strategy approved by Housing Committee in 2013. In practice the vast majority had been set at LHA rates, which were lower than 80% market rate.
• Details of 6 rent options for the first 4 bedroom homes to be built under this programme, and the 2 bed flats, and their implications - in response to members’ request.
• Evidence of need and demand for 4 bedroom affordable rented homes - including households currently over occupying council homes and not receiving Housing Benefit or affected by the government’s Benefit Cap who could be eligible to bid for the houses.
• Members were recommended to approve the scheme and Option 1 or 2 for the rent levels, which were the most advantageous to the HRA. There was every indication that the 4 bed houses could be let to households in housing need at both those rents.  The 2 bedroom rents would be set on the same basis as the rents for the 60+ 2 bedroom homes the Committee had already approved in the New Homes for Neighbourhoods Programme. 
• If members wished to change the council’s rent setting policy for all new build homes moving forward, then a separate report would be required that reviewed the implications of that for the whole programme and the limitations it could place on the council’s ability to develop more homes in future.

8.3     Councillor Gibson set out an amendment from the Green Group as follows:

 

          “That the recommendation ii be amended with text added as shown in bold italics, so that the report reads as follows:

 

2.1 That Housing and New Homes Committee approves:

i. The proposed scheme of eight new council homes at Lynchet Close, Brighton under the New Homes for Neighbourhoods programme;

 ii. To select one of Either Options 1 or Option 2 Four, Five and Six of the six options for scheme rent levels as set out in Appendix 3 to the report, as follows:

Option 1: All homes at Local Housing Allowance (LHA) levels of Housing Benefit or 80% market levels if lower, in accordance with rent policy for the New Homes for Neighbourhoods programme to date

Option 2: 65% Market Rate for the four bedroom houses and LHA rate for the two bedroom flats.

 

Option 4: Rents at the same level proposed for the joint venture with Hyde Housing; projected to produce a surplus of £193,000 (£2,850 per unit) for the first 40 years modelled;

 

Option 5: Rents estimated and based on a budget showing ‘break even’ over the first 40 years modelled;

Option 6: A social target rent which would entail an estimated £1,033m subsidy over the first 40 years modelled.”

 

8.4     The amendment was seconded by Councillor Phillips.

 

8.5     Councillor Gibson explained the reasons for the amendment. In relation to the 4 bed houses, Options 1 was proposing a rent of £17,000 a year, and Option 2 was proposing a rent of just under £15,000.  The middle income of people living and working in Brighton was reckoned in the Affordability Study to be about £24,000.  In the report the middle income of everyone including those working in London was around £29,000.  Councillor Gibson stressed that the council was a social landlord and he believed it was the Committee’s social responsibility to provide housing that was affordable for people on low incomes. Option 4 still provided a surplus for the HRA. Options 4 and 5 provided rent affordability for working households but still required an income approaching a middle income. He proposed these options be investigated.

 

8.6     Councillor Mears stated that she would not support either Option 1 or 2. She would also not support Option 6 as it would require a £1m subsidy from the HRA. She considered that the council had a building programme that was far too expensive, and resulted in these kinds of rent levels.

 

8.7     Councillor Bell expressed concern at the high cost of the build compared to schemes in the private sector, and stated that he would only support schemes that got people off the streets and into housing.  The Estate Regeneration Project Manager replied that the evidence of need and demand indicated that Options 1 and 2 would still house people in housing need. The decision to be made on rents related to rent policy, not construction costs. Only rent Option 5 was calculated on the cost of building the scheme.

 

8.8     Councillor Hill suggested an amendment to the amendment. She requested that the Committee consider Option 3 as the 4 bed rent level was substantially less than Option 2, but the 2 bed rents would be the same as other 2 beds in the programme.  This proposal was seconded by Councillor Moonan.

 

8.9     At this point in the proceedings (5.00pm) the Committee agreed to adjourn to discuss the proposed amendments. The Committee reconvened at 5.27pm.

 

8.10   Councillor Moonan asked if officers were able to clarify what the timescales of the existing procurement framework were and what the implications would be if a decision was made today or whether it was delayed. The Lead City Regeneration Programme Manager explained that he believed that the current partnership came to an end at the end of July 2017. As long as everything was in place by then, officers would be able to progress the scheme. If a decision was made after that date it would mean going back to the drawing board and there would be costs for abortive work, and a significant delay to the scheme.

 

8.11   Councillor Mears considered that it was safer to have a special meeting to discuss this matter. Councillor Hill commented that the report had already been delayed once already and stressed that this was the last scheme that was part of the current partnership and there was an urgent need to make a decision. She proposed an amendment for a hybrid Option 4 which would result in a reduced rent for the 4 bed houses but keep the LHA rate for the 2 bed flats. This was seconded by Councillor Moonan.

 

8.12   Councillor Gibson accepted that there was a need to make a decision before Policy, Resources & Growth Committee on 13^th July 2017 which was required to approve the scheme budget and appropriation of some Environmental Services land to the HRA. However, he objected to the rent levels proposed in the hybrid Option 4 amendment. He asked why the original Option 4 was not acceptable.

 

8.13   The Estate Regeneration Project Manager replied that Option 4 was a different approach to setting rent from the rent policy which the Committee had followed to date for all the New Homes for Neighbourhood new build schemes. Option 4 would lead the rent for 4 bed houses to be £11pw below the rents tenants were currently paying on new build 3 bedroom homes.  It would also mean that tenants in the 2 bedroom flats would pay rent £28pw below what other tenants are already paying in other 2 bedroom flats that had been built through the programme. The Committee needed to consider whether this would be seen as reasonable and fair, particularly by tenants. There had been a great deal of support from tenants for higher rent levels for the new build.  Option 4 might possibly be open to challenge. It could also make it more difficult to encourage tenants to downsize if they started to under occupy new homes. It did not make best use of the projected surpluses to the HRA from this unique site that was relatively easy to develop to cross subsidise the rest of the programme. Options 4 to 6 caused inconsistencies with rents that were already being charged to tenants in new build properties. Options 1 to 3 maintained the rate for the 2 bed flats and would allow the 4 bed rents to remain above the 3 bed rents, up to the LHA rate. 

 

8.14   Councillor Mears asked who would be likely to challenge the decision.  The Senior Lawyer stated that the legal requirement was “a local housing authority may make such reasonable charges as they determine for the tenancy or occupation of their houses”.  The challenge would come if somebody considered that the rents the council set for particular types of accommodation are not reasonable. Challenge was likely to come by way of judicial review.  To determine what was reasonable, the Committee needed to consider relevant factors and ignore irrelevant ones. The legislation did not state that the council could not charge different rents for different types of property but members needed to be careful in giving reasons for so doing.

 

8.15   Councillor Mears stated again that she considered that the build costs were too high.  She suggested that there should be an independent cost review to clarify that the council were getting value for money.  She considered that there was time to defer the report.

 

8.16   Councillor Gibson referred to relevant factors. A relevant factor could be that a site can be developed in a more cost effective way and can achieve one of the objectives of the council which is to provide truly affordable housing.   The Senior Lawyer replied that judicial review would be a matter for a judge. Her view was that it was relevant but all the factors needed to be identified. 

 

8.17   Councillor Lewry asked about the rent comparisons in Appendix 3.  Where were they compared from?  The Estate Regeneration Project Manager explained that the policy to date on new build homes was to set affordable rents following the Tenancy Strategy which the council published in 2013.  That stated that in order for affordable rents to be truly affordable they should be set at the lower of 80% of market rent or the Local Housing Allowance rate of Housing Benefit.  So Option 4 would mean a tenant of a 4 bed house at Lynchet Close would pay £11.05 pw less than a tenant of a 3 bed flat at Kite Place.

 

8.18   Councillor Hill pointed out that this was the last scheme with the current partners, after which time the council would be entering a procurement process to find a new partner, which would include some examination of build costs on future schemes.  She suggested that the council could be in a position to offer members some detailed input into the process for future schemes, based on allowing the current scheme to go ahead on the current costs. 

 

8.19   Councillor Phillips asked for the report to be deferred to a Special Housing & New Homes Committee to be called in two weeks’ time which would facilitate the officers to do the work with opposition and group leads, so that a palatable option could be brought forward ahead of PR&G Committee, which reduced the build cost and the rent costs. That work needed to be done together with opposition groups so that a consensus could be reached.

 

8.20   The Lead City Regeneration Programme Manager reported that build costs had been assured by an independent quantity surveyor.  Officers had also undertaken extensive value engineering.  Officers had reported to the Member Board in terms of different options for going forward. He therefore thought that in two weeks’ time with the current arrangement and the current scheme it was unlikely that officers could significantly reduce the costs of the scheme.  

 

8.21   The Estate Regeneration Project Manager referred to the report that went to the Estate Regeneration Member Board in January with three construction options and costings. The report went through all the reasons why the council’s build could not be compared with costs of volume house builders. It also specifically reported that the independent cost consultants to the Strategic Construction Partnership advised that the costs for the option accepted by members - the timber framed construction - were comparable to those for a four unit private timber framed development they were engaged in, and also housing associations current costs. The homes would be built to a larger and more robust standard than the private sector, in line with the council’s Affordable Housing Brief. Meanwhile, The Lead City Regeneration Programme Manager stated that it would be helpful to arrange a workshop with members in order for officers to be open about construction costs.

 

8.22   At this point in the proceedings there was a second adjournment starting at 5.55pm and re-convening at 6.21pm.

 

8.23   Councillor Mears requested a two week adjournment. Councillor Gibson supported this proposal in order to have a Special meeting within the timeframe for the report to be forwarded to Policy, Resources and Growth Committee.  Officers should focus on any possible savings in the build costs and use the opportunity to check the legal implications of Option 4, the hybrid Option 4 and Option 5. The priority should be to keep rents as low as possible in the city. 

 

8.24   The Chair asked officers what new information would be brought to the Committee if there was to be a reconvened Committee.  The Lead City Regeneration Programme Manager replied that officers had looked extensively at costs and the value engineering around this scheme. There was no additional cost information that could bring to the reconvened meeting.  Councillor Moonan commented that it was clear that costs could not be brought down on this project. When there was a new procurement partnership, there could be cross party consideration of build costs.

 

8.25   The Executive Director, Neighbourhoods, Communities & Housing stated that in relation to the costs, the council had been advised by an independent review. If costs were different from the independent review there would be a question as to why the council had agreed different costs. The Executive Director stressed that the only information that could be considered for a reconvened meeting was potential legal aspects of the discussion so far. She stressed that in any judicial review the outcome was based on the view of a judge, and it would be difficult to identify all of the legal aspects within such a short time.

 

8.26   Councillor Phillips proposed that there should be a vote on holding a Special meeting. Councillor Phillips did not think the Committee had all the legal information to hand to make a decision at today’s meeting. The Senior Lawyer advised that the constitution only allowed the Chair or Deputy Chair to call a Special meeting. There was no clear mechanism for the Committee to call for a Special meeting. It was not clear what additional information could be brought to the Committee. She had already explained about the legal requirements, the risks, and the discretion that the committee needed to exercise reasonably. She had explained that the charges that were adopted needed to be reasonable.  She had read out the relevant legislation.  It was clear from previous case law that the council could have differential rates but a decision had to be taken as to whether that was reasonable.  She could not advise if this would be vulnerable to challenge.  

 

8.27   Councillor Gibson commented that a deferral would allow members to ask a number of questions, in order to make a more informed decision.

 

8.28   The Chair asked if there was additional legal information that could be provided. The Senior Lawyer replied that precedent had been mentioned. She could look up old case law on whether differential rates could be charged and present them to the meeting. 

 

8.29   Councillor Hill stated that the purpose of the hybrid Option 4 proposal was to respond to the possible legal challenge.  There could be a challenge if there were different rates for the 2 bed homes. Councillor Mears express the view that the Conservative Group had not been properly consulted on the hybrid Option 4 proposal during the adjournments. 

 

8.30   Councillor Gibson commented that the council had previously passed an amendment about having a policy of seeking living rents and lower rents. He thought this was in the Asset Management Strategy. He asked what difference did a commitment in an official council policy and strategy that was agreed at a meeting make to the defensibility of making a decision, for example, to support Option 4.  The Senior Lawyer responded that that this was probably something that should be taken into account.

 

8.31   At this point in the proceedings it was agreed to have a short adjournment in order for the Labour amendment to be photocopied and circulated to members.

 

8.32   Following the adjournment the Chair took the amendments. Members considered the Labour amendment which was worded as follows:

 

“2.1 To select Option 3 for the 2-bed flats and Option 4 for the 4-bed houses for the scheme rent levels.”

 

8.33   Members voted on the amendment by four votes for the amendment and 5 votes against.  There was one abstention.  The amendment was not agreed.

 

8.34   Councillor Gibson informed members that he would withdraw Option 6 from the Green amendment, in order that no option would require any subsidy from the HRA. 

 

8.35   The Chair asked for legal advice on Options 4 & 5.  The Senior Lawyer explained that the council could charge different rents for different properties but the committee had discretion and that had to be exercised reasonably.  That would take into account relevant considerations. She was not convinced that the differential levels would be easy to justify should the council be challenged in legal proceedings.  However, the decision would not be illegal until a court declared it illegal. That would require a challenge probably by way of judicial review.

 

8.36   Councillor Mears asked again for another meeting to enable members to have all the legal advice so that everybody was clear on what was legal and what was not legal. She urged the Chair to use her discretion to take the matter forward in a way in which the committee could come back and reach a consensus.

 

8.37   The Chair responded that she would consider another meeting if she felt that members would not vote in exactly the same way as they had voted at this meeting. That would negate the point of having another meeting. Councillor Bell commented that if there was another meeting and he was presented with the facts as laid down by the Lead City Regeneration Programme Manager he would change his point of view and how he might potentially vote. Councillor Gibson stated that he was enthusiastic about building new council homes. He saw having another meeting a way of achieving that aim. He wanted to support a majority view that would enable those council houses to be built.  

 

8.38   The Chair stressed that if there was to be another meeting it was important to have the same membership as today’s meeting.

 

8.39   Members voted on having a reconvened meeting this was unanimously agreed.

 

8.40   RESOLVED

 

(1)            That a decision be deferred for consideration at a reconvened meeting of the Housing & New Homes Committee. This reconvened meeting is to be scheduled to take place in time for the decision to be considered by the Policy, Resources and Growth Committee meeting on 13 July 2017.