(Cabinet Member with Special Responsibility Councillor Jackson)
Cabinet received a joint report from the Director for Communities and the Environment and Director for Economic Growth and Regeneration to update members on the findings of the specialist legal and finance advice sought on options to set up the Housing LATCo (Local Authority Trading Company) and to recommend to Cabinet that they approve the establishment of the Housing LATCo.
The options, options analysis, including risk assessment and officer preferred option, were set out in the report as follows:
Option 1: Approve the establishment of the proposed Housing LATCo
Advantages: Will allow a blend of prudential borrowing through the General Fund and HRA to deliver the strategic housing projects identified. Offers potential to create mixed tenure schemes, cross subsidises affordable housing and can create surpluses which could address the future years budget deficit. Diversifies the council’s existing housing portfolio. The council is more able to meet a growing local housing need.
Disadvantages: Set up and operational running costs will be required. There will be capacity issues within the existing workforce in terms of support services with new skill sets needed.
Risks: New area of business for the council with different forms of tenure being provided. Demand for housing products although demand data suggests this would be low risk. Different governance arrangements in place. It could be some time before the LATCo is able to create surpluses. Property values can go down as well as up. The costs associated with producing zero carbon homes could mean schemes are marginal/unviable.
Option 2: Do not approve the establishment of the proposed Housing LATCo.
Advantages: No direct financial risk or exposure to the council. Some outputs could still be achieved through partnerships/the council acting in an enabling capacity.
Disadvantages: The council is not delivering a its key housing and regeneration priorities, growing and diversifying its housing portfolio to meet a wide range of housing need or proactively contributing to climate change through the provision of its own zero carbon homes. Surpluses could only be created through other forms of commercial investments which do not generate the same social value.
Risks: The HRA would be the only source of borrowing with limited headroom. There would be limited scope to provide holistic solutions to regeneration priorities. In areas like the West End, other costs associated with ASB/fly tipping, health inequalities and fuel poverty are likely to increase.
The officer preferred option is Option 1. This is the only mechanism that will allow the council to bring all of their key strategic housing projects into fruition. Investment into housing development cannot be seen as risk free, and house prices and values can fluctuate but as this is a vehicle which will assumes a longer term investment plan, the Savills report clearly demonstrates the successes achieved through housing investment vehicles, and that a scheme of acquisitions in Morecambe can be delivered viably if a longer borrowing period is assumed.
Cabinet approval was required to set up the new Housing LATCo taking account of the specialist legal and financial advice obtained, committing a further £50K to appoint Trowers to undertake the necessary actions and preparation of legal documentation, and to delegate authority to the Chief Executive in consultation with the Leader and Portfolio Holder for Housing to agree the composition of the Board of Directors and the arrangements for the council to discharge its role as Shareholder of the Housing LATCo and report back to Cabinet for consideration and approval.
Councillor Jackson proposed, seconded by Councillor Hamilton-Cox:-
“That the recommendations, as set out in the report, be approved.”
Councillors then voted:-
Resolved unanimously:
(1) That Cabinet approve the establishment of a wholly owned company (Housing LATCo) limited by shares and delegate authority to the Chief Executive in consultation with the Section 151 Officer to take all necessary steps to incorporate the company, and enter into all necessary documents to facilitate the company’s operation including the Articles of Association, Shareholder Agreement, Loan Agreement, Services Agreement and Secondment Agreement.
(2) That Cabinet delegate authority to the Chief Executive in consultation with the Leader and Portfolio Holder for Housing to agree the composition of the Board of Directors and the arrangements for the council to discharge its role as Shareholder of the Housing LATCo.
(3) That a further budget of £50K is approved to re-appoint Trowers & Hamlins LLP to provide the necessary legal advice and prepare the documentation.
Officers responsible for effecting the decision:
Chief Executive
Director for Economic Growth & Regeneration
Director for Communities and the Environment
Section 151 Officer
Reasons for making the decision:
The decision is consistent with the Council Priorities including Happy and Healthy Communities, a Sustainable District, and an Inclusive and Prosperous Local Economy. The decision is also consistent with the Local Plan and will contribute towards the provision of housing to meet a locally identified need and opportunities to increase the choice and supply of affordable housing. The Housing Strategy will provide the necessary framework to deliver the strategic housing priorities identified.