Agenda item

The Committee considered a report on proposals by the Council for the establishment of a Council Owned Local Housing Company (The Company) as a development vehicle to accelerate house building within Carmarthenshire and increase the supply of much needed additional homes, whilst also creating jobs, training and apprenticeship opportunities, supporting the supply chain and delivering the Council’s regeneration ambitions. The Company, if established, would complement the continuing use of the Housing Revenue Account’s resources to commission new homes (where it was appropriate to do so) and would also support the Council’s Affordable Housing Commitment of March 2016 for alternative housing delivery options to increase the number of homes within the County.

The Committee was advised that The Company would be wholly owned by the Council, would not involve the transfer of any of the Council’s existing housing stock (which would continue to be managed and maintained by the Council) or the TUPE (Transfer of Undertakings Protection of Employees) of existing staff.

The Committee noted that the report detailed the arrangements for establishing the Company and contained seven recommendations for its consideration and endorsement, if appropriate, to the Executive Board. Those arrangements would include the appointment of five company directors, the preparation of a business plan for approval by the Council together with initial set up costs.

The following questions/issues were raised on the report:-

·        In response to a question on the development role of the proposed company, the Head of Housing and Public Protection advised it would act as a development vehicle to facilitate the construction of good quality housing within Carmarthenshire via a variety of means/tenure to enable local people to access the housing ladder and could, for example, include homes for sale, rent, sharehold, leasehold and rent to buy. The Company itself would be separate from the Council, operated by five directors, and would not involve the transfer of any council staff.

The Company prior to becoming operational would initially be required to produce a development procedure detailing a range of procedures to ensure the delivery of quality homes through contracting arrangements with local builders and adopting its own ‘Quality Assurance’. Secondly, it would need to develop a formal Business Plan, for Council’s approval, detailing the initial start-up arrangements in relation to any land/ loans/staff it may receive from the council and payback arrangements.

·        Reference was made to page 7 of the report and point 5 thereof relating to the wage to house price ratio of 5:1 in some parts of the county, with the  Council’s Housing Choice Register recording a significant amount of unmet housing need, especially so in the rural areas where property values were high with limited supply. Clarification was sought on how the new company could address that inequality.

The Head of Housing and Public Protection confirmed that housing shortages in the rural sector were particularly acute, the reasons for which were varied and could include the past sale of council properties, the lack of affordable homes or the wrong types of tenure. As part of discussions on how that shortfall could be addressed, work had been undertaken in conjunction with five rural communities to assess local need in their areas, how that could be quantified and peoples aspirations for different types of tenure.

Having regard to those assessments, he reminded the Committee of the Council’s limitations in addressing housing difficulties throughout the County, not just in the rural areas, but that it had, in an attempt to alleviate those difficulties, suspended the right to buy legislation. The new company, by operating outside of the limitations placed upon local authorities, would be able to provide low cost housing solely for local people.

·        In response to a question on whether any new homes would be of innovative low carbon design and build, the Head of Housing and Public Protection advised that the new company would have the opportunity to both look at alternative types of provision and have the freedom to work with local companies/builders to offer a range of different products based on local requirements, planning considerations and market values. It would also be able to work with local builders to create apprenticeships, thereby extending the local skill base.

·        Reference was made to the Council’s endeavours to participate in, and encourage private property owners to return some of the estimated 2,000 empty residential properties in the County to habitable use, and whether the new company would undertake a similar role.

The Head of Housing and Public Protection advised that, typically, the new company would not be venturing into that field as that was, primarily, a housing function.  He re-affirmed that the purpose of the new company would be to act as a development vehicle to facilitate the provision of new low cost homes, as detailed within its business plan

·        Section 106 Agreements were used throughout the County as a means of raising additional finance towards the provision of affordable homes. Would the new company have access to those funds to assist in kick starting housing development?

The Head of Housing and Public Protection advised that any decision on the allocation of Section 106 funding to the company would be a matter for the Council to determine. Currently, funding derived from those agreements in most wards was generally small and had been utilised to buy back properties for social rent. To date, those funds had assisted in the purchase of 60 properties, 13 of which had been in the rural areas.

·        Whilst an expression of support was received for the principle of the company’s establishment, clarification was sought on whether the company would also be building for social housing. If so, how would that operate and would those properties be maintained by the Housing Revenue Account?

The Head of Housing and Public Protection advised that the intent of the company would be to provide a balanced portfolio of properties, as detailed within its business plan, and should any rented properties be provided they could be managed and allocated by the Housing Department under agency arrangements.  Those properties could also be sold to the HRA, but with the proviso any sale would be dependent upon grant funding, and the properties complying with the CHS standards. As the company’s intent was to build homes for sale to supplement social housing provision, the council would need to determine whether any profit made by the company should be re-invested in building more homes or, returned to the Council.

·        The Committee’s attention was drawn to a recent advertisement for the sale of council owned land for development purposes and whether that could be considered short sighted having regard to the current proposal.

The Head of Housing and Public Protection reminded the committee of his earlier comment on the development of a business plan for the company, and reported that a member of the Council’s Property Division would be involved in its development when consideration would be given to identifying land in the Council’s ownership which could be made available to the company to develop.

·        References were made to the importance of the company being profitable and to whether the Council or the Executive Board would make the final decision on its establishment.

The Head of Housing and Public Protection reported that he understood establishment of the Company was an Executive Decision and fell within the remit of the Executive Board. However, acceptance of the Business Plan was a Council Function.

·        Reference was made to the proposal for the company’s Board of Directors to have 5 directors, comprising one member, two officers and two independents and to whether consideration should be given to increasing the level of member representation.

The Head of Housing and Public Protection reported that legal advice obtained on the Board’s composition stated the more elected members appointed, the less independent it would become, have less freedom and the appearance of being a council body. As such, the more direct control the council exercised over the company, the more it would have to abide by its rules and the regulations and legislation governing public bodies including adherence to procurement policies thereby, affecting its ability to operate locally and employ local builders.

The appointment of the proposed 5 directors mirrored the establishment of similar local authority owned companies. Those appointed would need to have the appropriate knowledge and skills to be directors and also have construction skills. There would be limitations on the type of director appointed for example, the staff representative could not be the Section 151 Officer due to a conflict of interest. If the Committee felt a different board make up was appropriate, that would need to be referred to the Executive Board for determination.

Arising from the above, a view was expressed supporting the appointment of 5 directors on the basis increasing that number could make the Board unwieldy and potentially impact on its ability to meet its core objectives and remain viable.

·        As the company would be independent of the Council, clarification was sought on what level of control could be exercised over it if it was considered to be operating not in accordance with its principles/not delivering its established aims.

The Head of Housing and Public Protection reminded the Committee that Council, as the sole shareholder, had responsibility for appointing the company Directors who, in turn, had a legal responsibility to the company. The Council had the power to appoint and change those Directors if that was considered to be appropriate for example if the company was not achieving its delivery targets, as identified within the performance reports submitted to the shareholder.  The key underpinning document in that regard was the Shareholders Agreement reflecting the relationship between the company and the Council. The company would only be allowed to operate in a certain way and would require the shareholders consent to operate outside of its stated parameters for example, it would not be allowed to borrow large sums of money or purchase land outside of the County without the shareholders consent.

·        Reference was made to the use of the Council’s staff in the company’s initial establishment and to whether that would be ongoing or, if their participation could be considered to be a conflict of interest.

The Head of Housing and Public Protection advised that it was imperative the establishment of the company was financially viable/operationally sustainable and in that regard, use would be made of existing council staff with the relevant skills and expertise during the initial set-up period. Where those skills were not available in-house, external services would be commissioned. If, however, after the initial operating period, it became evident the company would need to employ staff that would need to be referred to the Council for consideration. He re-affirmed the position that the establishment of the company would not involve the transfer of any of the council’s employees’ and they would remain in the Council’s employ.

·        In response to a question relating to secure tenancies, the Head of Housing and Public Protection advised that the council’s tenants had secure tenancies detailing their rights and responsibilities which were greater than that provided by the private sector. As the proposed company was not a public body, it would not be able to provide secure tenancies. However, if it were to develop properties for rent that were subsequently sold back to the Council, the tenancy agreement would convert to a secure tenancy.

·        Arising from the above, a question was asked on whether the company could establish its own lettings company and introduce control measures to protect tenants from eviction and their subsequent presentation to the Council as homeless

The Head of Housing and Public Protection reminded the Committee that the Council currently operated a lettings agency which it was trying to further develop. There had been no discussion on the company being involved in lettings, with its primary function being to develop sites for the provision of affordable housing. If at some time properties were developed for let it was anticipated they would be channelled through the council’s lettings agency.

Arising from the above, clarification was sought on whether the Business Plan would be sufficiently robust to ensure the company’s primary role was to develop properties and not compete with the Council’s lettings role.

The Head of Housing and Public Protection in response referred the Committee to point 17 on Page 67 of the report in relation to the production of an annual business plan that prohibited any amendment thereto without the Council’s prior consent.

·        Reference was made to the assumption the Council would make some of its landholdings available to the company to develop. Clarification was sought on whether the company would have to purchase land privately if council land was not made available.

The Head of Housing and Public Protection confirmed that initially the company would not be seeking to follow that route, with the emphasis being on developing council land. However, that would not preclude liaison/partnerships with the private sector in the long term.

·        In response to a question as to where the final decision would be made on which sites would be developed and any priority listing accorded thereto the Committee was advised those would be made by the Directors, according to the development potential and viability of each site.

·        Reference was made to the submission of the Business Plan to the Council, as part of the budget proposals and a view expressed the Council should receive a presentation on that plan.

·        Reference was made to the proposals for the company to invest approximately £50m in developing homes within the County and clarification sought on how it would raise that level of funding.

The Head of Housing and Public Protection advised that whilst the money would be expended over a period of time an assumption had been made it would be raised by the County Council via the Public Works Loan Board under a formal loan agreement with the Company.

·        In response to a question on the remuneration of the 5 Directors, the Head of Housing and Public Protection believed the elected member and staff directors would not receive any remuneration, but that the two external directors may.

·        In response to a question, the Head of Housing and Public Protection confirmed that as the company would not be bound by the Council’s procurement rules, it would be able to appoint local builders to undertake developments on a site specific basis, subject to compliance with its procurement strategy

UNANIMOUSLY RESOLVED THAT IT BE RECOMMENDED TO THE EXECUTIVE BOARD THAT:-