Agenda item

Cabinet:

1.          Agreed to the inclusion of a budget of up to £102.3m equity for the 12 Sites and Chippenham Road scheme together with a budget of £58.7m for potential land acquisition/CPO costs within the proposed HRA capital programme, noting that the HRA capital programme recommended by Cabinet on 17 February 2021, and approved by Full Council on 3 March 2021 includes the necessary capital funding to progress the regeneration.

2.     Approved the Havering and Wates Regeneration Joint Venture Business Plan dated January 2021, as contained in exempt Appendix 3.

3.      Agreed to further forward funding for the remainder of phase 1 of the 12 Site Programme up to £9.7 million;for the development of Solar, Serena and Sunrise Courts (£1.6 million [to total £17.5m]) and the Waterloo and Queen Street Estate (£8.1 million [to total £22.7m]) and delegated authority to the Director of Regeneration to enter into the necessary forward funding agreements.

4.          Approved the removal of the Farnham and Hilldene estate from the 12 site regeneration programme, noting that the scheme would be subject to a future approval by Cabinet to be taken forward under a Council-led approach.

5.          Approved the budget of up to £0.6 million to fund the remediation works on the Solar Serena Sunrise Estate and delegated authority to the Director of Regeneration in consultation with the Director of Legal and Governance to enter into contract with the Havering and Wates JVLLP to carry out the remediation works on the site, noting that the HRA capital programme recommended by Cabinet on 17 February 2021, and approved by Full Council on 3 March 2021 includes the necessary capital funding to progress the works.

6.          Delegated authority to the Director of Regeneration in consultation with the Director of Housing and Director of Legal and Governance to enter into a contract with the Havering and Wates JVLLP to provide a longstop arrangement, where the Council would acquire any open market units on the Solar Serena Sunrise estate, which remain unsold after 18 months from practical completion of the development for a value equivalent to 75.0 per cent of open market value for units earmarked for private sale and 61.6% per cent of open market value for units earmarked for shared ownership, noting that any acquisitions would be funded from the existing affordable housing HRA capital budget set aside for the scheme.

7.          Approved the budget of up to £7.0 million to fund the offer to purchase family homes (3 bed or larger) from prospective buyers on the Solar Serena Sunrise Estate, noting that the HRA capital programme recommended by Cabinet on 17 February 2021, and approved by Full Council on 3 March 2021 includes the necessary capital funding to fund the acquisitions.

8.          Delegated authority to the Director of Regeneration to enter into variations of any of the existing joint venture documentation, which is required to implement any of the recommendations, contained in the report.

9.          Delegated authority to the Director of Regeneration to consider the appropriation of land at the appropriate time at Waterloo and Queen Street Estate from the Housing Revenue Account (HRA) to the General Fund, for planning purposes and to consider the appropriation of land at the appropriate time at Waterloo and Queen Street Estate back to the HRA.

10.      Approved the budget of up to £5.0 million to fund the cost of compensation of Appropriation linked to the Waterloo and Queen Street Estate, noting that the HRA capital programme recommended by Cabinet on 17 February 2021, and approved by Full Council on 3 March 2021 includes the necessary capital funding to fund the compensation.

11.      Delegated authority to the Director of Regeneration to make all further changes to the documentation consequent on the recommendations in this report that the Director considers necessary or in his opinion appropriate from time to time

Cabinet considered an annual update of the Havering and Wates Joint Venture Business Plan.

It was explained that when Cabinet agreed to establish the Joint Venture (JV), this was on the basis that there would be regular (annual) reviews and Cabinet would be asked to agree material changes to the business plan on an annual basis, in line with the annual budget setting process. This was the third review following establishment of the JV in April 2018.

The Council’s overarching vision for setting up the Havering and Wates Joint Venture (HWR) was to facilitate the regeneration of key areas of the borough; to kick-start renewal of key town centres and estates; and deliver truly affordable homes for local people. In addition, it would ensure good quality design of buildings and places by being a joint owner of the development company, thus giving greater control over the planning process and ensure delivery of key infrastructure requirements. Any returns to the Council were being identified to fund future regeneration programmes across the borough and help fund renewal of cherished town centres across the borough at a time when the traditional high streets were under significant threat from changing consumer habits. 

Through the significant development value generated by this initiative, (approximately £1.5bn) many local businesses and residents would see economic benefits as focus  would be on maximising the number of contracts awarded to those local companies. A secondary impact of the schemes would also be to support local businesses on those high streets where the developments take place by creating greater “spending power” for those businesses to take advantage of.

For Work Package One and Chippenham Road, the key inputs into the financial models had been reviewed and externally validated. The key inputs were construction costs, expected sales revenues, land values plus other costs such as expectation on s106 and CIL payments. Areas of non-residential use had been updated as the design and planning process proceeds.

Since the approval of the 2020-21 Business Plan, there had been two key changes. On 5 August 2020 in response to the economic downturn linked to the COVID-19 pandemic, Cabinet approved the conversion of the Napier New Plymouth scheme to a 100 per cent Council owned scheme.

Elsewhere on the Cabinet agenda, the outcome of the review of the delivery options for both Chippenham Road and Farnham and Hilldene schemes had recommended proceeding with the development of both sites under an overarching master planning single design approach. However, due to the complexity and projected cost of development of Farnham and Hilldene, it was recommended that the development was undertaken directly by the Council. As a result, this site would no longer fall within the scope of the HWR programme.

The resulting increase in affordable housing from the bid stage remained significant, rising from 1,186 at the bid stage of the JV to 1,552 as part of the annual review.  This is an increase of 368 affordable homes at truly affordable prices for local people within the 12 Estates programme.

The Council, through its involvement in the JV was committed to the delivery of the highest quality homes and places for residents to live in. The goal was to set a high standard for other developers to follow. 

The increase in affordable housing and good quality design was being achieved in a Covid-19 landscape when most developers would halt work or would reduce affordable housing and family housing to protect profits.  However, with the Council’s support the joint venture has continued with the programme dedicated to providing good quality affordable family housing with enhanced design.  The additional forward funding identified within the report showed how these changes were being delivered.

The updating of these numbers in the viability models and then into the Council’s financial dashboards meant that this report was able to inform Cabinet of any changes to the expected outputs from the JV as well as informing Cabinet of any changes in the financial position of the JV and financial commitments to the JV as an investor.  This report not only informed Cabinet of changes but also was to seek approval of the new Business Plan and the expected financial commitments.

The original decision to set up the JV was informed by key indicators on the viability and outputs. Those key indicators were: overall % return, overall financial return, initial stake (Equity: borrowing and land value), impact on the MTFS from the cost of borrowing in the early years, total number of units, number of affordable housing units. These metrics are considered to be the key indicators to identify the viability, outputs and potential financial risks.

The 12 Estates programme was currently forecast to receive £48 million development return in revenue to the HRA from year 5 to 15. This figure was built into the HRA Business Plan and rent setting report that had been presented to Cabinet and was not included within the calculations for the average cost of an affordable housing unit within this report.

Cabinet:

1.          Agreed to the inclusion of a budget of up to £102.3m equity for the 12 Sites and Chippenham Road scheme together with a budget of £58.7m for potential land acquisition/CPO costs within the proposed HRA capital programme, noting that the HRA capital programme recommended by Cabinet on 17 February 2021, and approved by Full Council on 3 March 2021 includes the necessary capital funding to progress the regeneration.

2.     Approved the Havering and Wates Regeneration Joint Venture Business Plan dated January 2021, as contained in exempt Appendix 3.

3.      Agreed to further forward funding for the remainder of phase 1 of the 12 Site Programme up to £9.7 million;for the development of Solar, Serena and Sunrise Courts (£1.6 million [to total £17.5m]) and the Waterloo and Queen Street Estate (£8.1 million [to total £22.7m]) and delegated authority to the Director of Regeneration to enter into the necessary forward funding agreements.

4.          Approved the removal of the Farnham and Hilldene estate from the 12 site regeneration programme, noting that the scheme would be subject to a future approval by Cabinet to be taken forward under a Council-led approach.

5.          Approved the budget of up to £0.6 million to fund the remediation works on the Solar Serena Sunrise Estate and delegated authority to the Director of Regeneration in consultation with the Director of Legal and Governance to enter into contract with the Havering and Wates JVLLP to carry out the remediation works on the site, noting that the HRA capital programme recommended by Cabinet on 17 February 2021, and approved by Full Council on 3 March 2021 includes the necessary capital funding to progress the works.

6.          Delegated authority to the Director of Regeneration in consultation with the Director of Housing and Director of Legal and Governance to enter into a contract with the Havering and Wates JVLLP to provide a longstop arrangement, where the Council would acquire any open market units on the Solar Serena Sunrise estate, which remain unsold after 18 months from practical completion of the development for a value equivalent to 75.0 per cent of open market value for units earmarked for private sale and 61.6% per cent of open market value for units earmarked for shared ownership, noting that any acquisitions would be funded from the existing affordable housing HRA capital budget set aside for the scheme.

7.          Approved the budget of up to £7.0 million to fund the offer to purchase family homes (3 bed or larger) from prospective buyers on the Solar Serena Sunrise Estate, noting that the HRA capital programme recommended by Cabinet on 17 February 2021, and approved by Full Council on 3 March 2021 includes the necessary capital funding to fund the acquisitions.

8.          Delegated authority to the Director of Regeneration to enter into variations of any of the existing joint venture documentation, which is required to implement any of the recommendations, contained in the report.

9.          Delegated authority to the Director of Regeneration to consider the appropriation of land at the appropriate time at Waterloo and Queen Street Estate from the Housing Revenue Account (HRA) to the General Fund, for planning purposes and to consider the appropriation of land at the appropriate time at Waterloo and Queen Street Estate back to the HRA.

10.      Approved the budget of up to £5.0 million to fund the cost of compensation of Appropriation linked to the Waterloo and Queen Street Estate, noting that the HRA capital programme recommended by Cabinet on 17 February 2021, and approved by Full Council on 3 March 2021 includes the necessary capital funding to fund the compensation.

11.      Delegated authority to the Director of Regeneration to make all further changes to the documentation consequent on the recommendations in this report that the Director considers necessary or in his opinion appropriate from time to time