Central Bedfordshire Council to consider setting up its own housing company

A wholly owned housing company is one of a number of options the local authority is considering, according to director of community services Marcel Coiffait.

“The council is trying hard to think about way it can address the supply of new homes, making sure it’s sustainable,” he told the council’s corporate resources overview and scrutiny committee.

“There is still a shortfall in the supply of affordable housing in Central Bedfordshire. We have a policy position of 30 per cent affordable. We are actually achieving on average 15 per cent.

“Our nearest neighbours are achieving higher than that, 20 per cent on average.

“Any developer can come forward and argue viability with us. The first thing that goes is the affordable housing. It’s the negotiable element.

“There’s a shortfall in affordable rentable housing, in suitable older people’s accommodation and in specialised accommodation, such as housing for the disabled.

“We know that we’ve got an issue. We’ve been thinking hard how we might intervene in the market place because it’s not doing what it should be.

“The first thing is to use planning policy to make the market do what it’s suppose to do. That is the biggest win.”

He told Thursday’s meeting: “If we can get policy compliance that will resolve a lot of our issues.

“But the trend over the last few years is that we haven’t succeeded in doing that.

“We’re hampered by national planning policy which gets in our way, so it’s our ability in getting the market to deliver that’s the challenge.

“We can use the housing revenue account to invest in more homes, such as Priory View and Houghton Regis Central.

“They are delivering new homes. They’re targeted at where we know there’s a gap in the market.”

He added: “It has the additional benefit it creates flow in the market place.

“People moving into that suitable accommodation frees up other housing in the market, which families can move into.

“Borrowing more money from the housing revenue account will lead to the delivery of more homes.”

Mr Coiffait described another potential option for the council to consider by using its land to deal with more housing directly.

“If we have land we declare is surplus, we go to the market and we sell it for what we can get for it,” he said.

“We won’t just sell the land. We’ll go out and get planning permission for it.

“We’ll put in some of the infrastructure and some of the utilities in place, and that ramps up your ability to recover value from the land.”

There’s about a tenfold increase, on average, for land with planning permission compared to without, Mr Coiffait said.

“The next stage in that asset value creation is you don’t sell it with planning, you build it out yourself,” he explained.

“You either sell it with the buildings on, it’s worth more with buildings than the cost of building them, or you potentially retain some of that stock. You rent it out.

“If you retain some buildings on that land you create a revenue stream from your asset, rather than just pure capital receipt. Any future time you can sell it.

“Coupled with that is the ability to influence what’s built on that land, how fast it’s built, and what type of tenures you might offer.”

He said: “You have much more control over what’s built, and how we can meet some of our needs for our residents in Central Bedfordshire.

“If the intention is to retain any of that stock, there are limited options because the council can only hold housing stock in the housing revenue account.

“There’s a way around it, and a number of local authorities have done this already, that is to create a company.

“There are risks about it. You enter into joint venture with someone in the private sector and you share that risk and benefit.

“Or you create a wholly owned company. A wholly owned company takes the whole of the risk, but takes the whole of the reward.”

He added: “Generally joint ventures are a 50/50 share with a commercial partner.

“We put the land in. They put an element of the capital in. But they bring the expertise to deliver it.

“It takes about 18 months to do it. Hertfordshire have just gone through this process.

“The risk is that what the council wants to do might not be what the joint partner is thinking.”

The other model is the wholly owned company, Mr Coiffait told the meeting.

“It’s been used by a number of councils, some more successfully than others,” he said.

“The company would offer the ability to work outside of the rules of the housing revenue account.

“It can offer affordable rent, it can do market sales, it can do shared ownership.

“The council as the shareholder would be in control of the strategic direction of the company and also what it does with the profits.”

He added: “It’s relatively quick to do, so six months we reckon we could set up a company.

“It allows faster decision making because it’s done within the company not the council. But it does require significant financial support.

“The company works through the council initially lending it lots of money to go and build out the sites, and that’s a new area of risk.

“Initially it will be funded by loans, and the return to the council in dividend would rise and fall depending on activity.

“Its purpose would be generating revenue through potential housing for sale. It’s not cheap. It depends on the size of ambition, but it’s likely to be at least £20m if we’re really going to give it some hope of making a difference.

“Much below that level and I would question whether it’s worth doing.”

Conservative Dunstable Manshead councillor Eugene Ghent, responsible for assets and housing delivery at the council, said: “We’ve been talking about this for a couple of years now.

“People have been saying: ‘Why don’t you get a move on?’ It’s not easy. We’ve not gone to executive this month. But I would rather be that bit later and get it right.”

Conservative Flitwick councillor Fiona Chapman said: “This is something we need to look into extremely carefully, and try and get on and do something.

“Too many times in development control we have had this business where so many affordable houses are included only for the developer to come back a couple of months later saying ‘we can’t afford it’. And we can’t do so much about that now.”

Labour Tithe Farm councillor Tony Swain said: “I would be worried by certain things. I want much more than this to make a decision.

“We need to do impact assessments and business plans. This is just an outline.

“I do feel the speculation of residents’ money is worrying, especially if things go wrong. We need a lot more information on it.”

Conservative Ampthill councillor Paul Duckett, who chairs the committee, replied: “You’re not allowed to speculate with public money. This isn’t about speculation, this is about delivery.

“A wholly owned company looks the best route forward because it gives us the control and enable us to say where we do want affordable rental housing.

“And it gives us more power over developers who turn up saying ‘we are going to build six houses’, without giving us a penny towards the local community, which they do.

“We get to keep the family silver without selling it off. The land belongs to the people, and we do need to retain it and replace it when we sell it.”

Council resources director Charles Warboys said: “I am concerned about the governance, which isn’t a view not to go ahead but to be circumspect about it.

“My concern about the governance is that without complete clarity of objective and what exactly we’re setting this up to do, we don’t know if the company approach is the right answer.

“So we need to be clear about what we’re trying to achieve.

“If we want the level of expertise that we would need, we don’t have that within the council.”

He warned: “You could well be looking at significant salaries.

“Once you’ve set up a limited company all the directors are legally obliged to act in the interests of the company.

“You might have one or more officers or members of the council on the board, but they’re not there to act in the interests of the council.”

Mr Duckett suggested: “We could as a committee express a preference to going down the wholly owned route, rather than a shared ownership.”

But Conservative Dunstable Icknield councillor David McVicar said: “I am not in favour of blocking out all the other alternatives.

“I think we need further exploration of all of these. I fully endorse the way forward that we look at all these options.

“I am not going to stick my neck on a wholly owned company at this time.”

Mr Duckett said the committee looks forward to receiving the next stages towards a preferred option, before it goes to the executive for approval or refusal.