Report for consideration.  Exempt Appendices 1 and 2.

Cabinet:

1.    Approved the recommendation option 4 set out in the Report to progress the development of Napier New Plymouth as a 100 per cent Council scheme, at a total development cost of £57.370 million, and delegates the final decision on the tenure of the additional 71 units to the Director of Regeneration in consultation with the Director of Housing.

2.      Noted that the Leader of the Council, after consultation with the s151 Officer will be responsible for the approval of the revised business case for Napier New Plymouth and related viability assessment.

3.      Authorised the Director of Regeneration to take all steps necessary to negotiate and enter into variations of any of the joint venture documentation and the planning permission and associated planning obligation to the extent required to enable the implementation of Option 4.

Cabinet considered the report presented by Neil Stubbings Director of Regeneration.

In June 2016 and October 2016, Cabinet received reports which proposed to increase the number of affordable homes on housing sites owned by the Council.  As a result of the information provided to Cabinet, 12 sites vested in the HRA were identified for regeneration and Havering and Wates Joint Venture appointed to bring forward these proposals. However, the outbreak of COVID-19 has created an unprecedented situation in which the Joint Venture must consider its ability to deliver the Schemes and ensure exposure is limited.

In October 2019 the planning application for the redevelopment one of the 12 sites, Napier and New Plymouth House was submitted by the Havering and Wates Joint Venture and approved by the Council’s Strategic Planning Committee. The approved scheme proposes to deliver 197 new homes, 64% of which will be affordable, delivering 126 affordable residential units, including 87 as part of the ‘right to return’ re-provision for previous Council Tenants.

With the serious outbreak of the COVID-19 virus since the turn of the year, the Government has taken action to reduce its spread and the associated level of excess mortality has resulted in lock-down and a reduction in macro-economic activity.

The extended lockdown linked to the COVID-19 outbreak has resulted in a severe economic downturn, impacting on various sectors, household incomes and jobs. This has created a significant element of uncertainty in the housing market. Across the housing sector, it has been highlighted that assumptions on house-prices may need to be revisited and remain uncertain in the short term. RICS, in response to the COVID-19 outbreak had asked valuers to consider all circumstances where a material uncertainty declaration is appropriate. The uncertainty has been reflected in the share prices of the leading developers in the sector, which have seen a significant fall in value since the outbreak. The resulting loss of confidence has impacted on housing development and calls into question some of the assumptions underpinning the approved Havering & Wates Regeneration Business Plan. 

The uncertainty will have a material effect on sites which are scheduled to come forward for development within the next 12 months, including Napier New Plymouth (NNP), where construction was scheduled to commence at the end of April 2020. The uncertainty in house prices has eroded confidence in the projected level of sale receipts on NNP, underpinning the approved Business Plan. In response, both the Council and Wates Construction Limited (WCL) have agreed it would not be possible to proceed to construction in accordance with the Business Plan until after either the housing market returns to pre-COVID19 levels or the Council along with its JV Partner Wates Construction Limited resolves the deterioration in viability linked to COVID19.

Various options were set out in the report with Option 4, where the Council acquires all of the units being the preferred option.

Given the current uncertainty in the housing market, the Council could agree to acquire the additional 71 open market units but change the tenure. This option would eliminate the JV sales risk as the Council would commit to acquiring all the housing on the development.

This option increases the quantity of housing in the Borough at a time when the demand for affordable housing linked to COVID-19 outbreak is likely to increase. With the Council’s support, the joint venture can continue with the programme dedicated to providing good quality affordable family housing with enhanced design to meet the need of local residents.

Following discussion:

Cabinet:

1.    Approved the recommendation option 4 set out in the Report to progress the development of Napier New Plymouth as a 100 per cent Council scheme, at a total development cost of £57.370 million, and delegates the final decision on the tenure of the additional 71 units to the Director of Regeneration in consultation with the Director of Housing.

2.     Noted that the Leader of the Council, after consultation with the s151 Officer will be responsible for the approval of the revised business case for Napier New Plymouth and related viability assessment.

3.     Authorised the Director of Regeneration to take all steps necessary to negotiate and enter into variations of any of the joint venture documentation and the planning permission and associated planning obligation to the extent required to enable the implementation of Option 4.