Agenda item

Committee received a presentation from Nick Stylianou. Assistant Director Homes, Neighbourhoods and Public Health on the New Build budget, funding and challenges. The following points were highlighted:

·       Meeting was advised that a significant of funding of new build programme goes towards cost of new build schemes ( which consists of construction cost, fees, on-costs for marketing and CIL and risks and contingency).

·       In addition to above, funding goes towards ongoing costs for repairs and maintenance, major works, management and capital financing/debt repayments.

·       Sources of funding for new build homes include PWLB borrowing, Right To Buy 1-4-1 receipts, CIL/S106 and open market sales, of which the first two provides between 85-90% of funds.

·       Ongoing income received such as rental income funds ongoing costs and potential future sales/staircasing of shared ownership.

·       Rents over the last few years have been capped for a number of years and with inflation and high construction cost it has been challenging.

·       It was noted that cost of borrowing has increased, for example the Public Loan Works Board (PWLB) 40 year maturity rate rose from 2.06% to 5.49% between December 2021 to November 2023. Meeting was advised that in terms of HRA concession, 40bp discount although ends in 2025 which is to e welcomed it is too soon for many of the projects in the pipeline.

·       Other restrictions include the RTB receipts for example for the spring budget, although Council can use receipts to fund up to 50% of eligible spend incurred, resources are finite. However from 2024/25 Municipal year Treasury will keep 20-25% of receipts.

·       There are restrictions on using RTB receipts with other external funding (GLA grant/DLUHC grant).

·       Viability issues hinders building new homes as government rent caps impact ability to fund future debt, management and maintenance.

·       It should be noted that the requirement to subsidise new build borrowing is to the detriment of Major works/Decent Homes.

·       Despite challenges, Islington Council is committed to delivering new homes, The current programme is delivering 162 Homes (including shared ownership) and the existing and new pipe line the council has a target of 750 new social rented homes.

·       In light of the current financial challenges, that over the last 12 months the Council has conducted a comprehensive review of its New Homes programme, reallocating constrained funds on most viable schemes and ensuring that it continues to build new affordable homes to meet council target.

·       Major pipeline schemes such as the Finsbury Leisure Centre, Bemberton South and Vorley Road, of which £118.08m has been allocated and the additional OMS units, there will be £118.608m short borrowing until sales complete.

·       Meeting was advised that there is a budget of £20.2m to bring various schemes to planning and funded from HRA reserves.

·       Meeting was reminded of the challenges to delivering new affordable homes and includes complexity of schemes (planning and building restrictions in Islington, availability of land and site access);challenging legislative issues( fire and building safety); impact of depressed housing market (with reduced private sales values and falling demand); inflationary pressure and historic lack of central government investment in council house building.

·       In overcoming the above challenges a number of sector wide actions have been taken such as lobbying central government in terms of greater flexibility on funding; simultaneous use of RTB and GLA grant which will ensure affordability; retaining 100% of RTB receipts as RTB has resulted over a long period in the reduction of affordable housing stock and long term rent policy which impacts scheme viability as rents fund ongoing costs of new builds

·       Islington has undertaken a number of actions to address its challenges and they include, a review of scheme affordability; identifying alternative funding sources; consider opportunities across GF sources; assign dedicated Programme Management Officers to lead on designing and implementing programme assurance framework, introducing new scheme of delegations and update gateway process and additional capital programme financial scrutiny.

·       In response to a question on abandoned projects and in particular Block D on Parkview Estate, Executive Member acknowledged that prior to the decision being taken by the Executive in March residents had been kept abreast of developments over a 12month period.

·       Executive Member, Finance, Planning and Performance noted that Committee will be provided a detailed breakdown of the construction of this particular abandoned projects including Parkview Estate to include planning, site preparation etc. and also for live cases that are successful. Chair requested that this be shared with Committee however noting that this had been considered at Executive in March.

·       On concerns about the longevity of new build homes, the Executive Member stated that there is no evidence that people don’t want to live in Islington as homes are affordable to rent, that the decision to build private homes for sale is to subsidise the building of social housing.

·       On the suggestion of relocating the loss of the 3/4 bedroom to other blocks on either Parkview Estate or to other developments, the Corporate Director indicated that this suggestion will be taken away, noting that other developments in the borough were delivering such tenures.

·       In response to concerns that the New Build Team had not been transparent through with the review and whether there is competency issues with the team which came into light with the Parkview Estate, the Corporate Director acknowledged that there were issues which could be shared with Committee at a future meeting , that as stewards of considerable amount of public monies this is taken seriously, noting that the reason for the abandoned project was due to a serious legal challenge. Meeting was advised that things are getting better, that the capability of the team is clear that we have addressed the issues around resident’s engagement that council has invested in 3 new roles to address.

·       In response to the £6m that it cost the Council with the abandoned projects, the Corporate Director acknowledged that the ceased schemes are regarded as write offs, noting that there are a number of live schemes that are deemed successful