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BOROUGH OF POOLE
19 OCTOBER 2015
ACQUISITIONS AND DISPOSALS WITHIN THE HOUSING REVENUE ACCOUNT:
REPORT TO THE PORTFOLIO HOLDER FOR HEALTH, SOCIAL CARE, HOUSING
AND COMMUNITIES (COUNCILLOR MRS RAMPTON)
1.0
PURPOSE
1.1
To report to the Portfolio Holder on the proposed new policy on Acquisitions and
Disposals of HRA land and buildings.
2.0
RECOMMENDATION
2.1
That the Portfolio Holder approves the new policy (as detailed at Appendix to this
Report) for recommendation to Council for approval and adoption.
3.0
BACKGROUND/INFORMATION
3.1
The Housing Strategy includes plans to invest in the provision of affordable housing.
Currently this is achieved through new build. It is also possible under provisions in
the Right Of First Refusal legislation to achieve this through buy-back opportunities.
3.2
Since the introduction of the HRA Self Financing Model in April 2012 a proportion of
Right To Buy sales income can be retained for use in acquiring properties to replace
dwellings lost through the Right To Buy process. It is now prudent to implement an
Acquisitions & Disposals Policy to enable actions to be taken in a timely manner as
these opportunities arise.
3.3
Under the retention agreement introduced as part of the Right To Buy legislation
from April 2012, the authority has opted to retain a proportion of Right To Buy sales
receipts to replace the dwellings lost through this process. Receipts from the first 5
sales in a financial year are shared between the authority and central government.
For additional sales, a proportion is retained by the authority to set aside in relation
to the debt attributable to the sale. The balance is then available to be used in line
with the current pooling arrangements and retention agreement.
3.4
Under the retention agreement, the authority is required to re-invest the retained
receipt from the sale within a 3 year time frame, using it to fund a maximum of 30%
of either a new build affordable dwelling or the purchase of an existing dwelling. The
preference will be to invest in new build dwellings where possible as this will
increase the overall supply of affordable housing in Poole. However, the shortage of
available land and the tight development timeframe mean that the ability to
purchase existing dwellings could be actively considered to increase the supply of
affordable housing within the constraints that exist.
3.5
The Housing Capital Programme does not currently incorporate additional sales
receipts as a form of funding until the receipt is realised. It will be necessary going
1
forward to include an estimated level of funding and an associated assumption of
expenditure in relation to stock growth, to ensure that we can meet obligations
under the retention agreement.
3.6
Retained Right To Buy funding will need to be allocated to either new build
schemes or strategic acquisitions, with the mix of housing provided by the HRA
reflecting the identified need for housing in Poole.
3.7
The potential for the strategic disposal of HRA Assets should also be considered
where it can assist in the viable delivery and sustainability of the plan.
3.8
This Policy sets out the criteria under which potential acquisitions and disposals
should be assessed to enable decisions to be made quickly and within appropriate
timeframes.
4.
POLICY OBJECTIVES
4.1
To increase the supply of additional affordable housing owned by the Housing
Revenue Account, recognising the demand on the housing register.
4.2
To facilitate the acquisition of property / assets that will assist in the delivery of
affordable homes and potential new build opportunities.
4.3
To facilitate the disposal of property / assets that are no longer meeting the service
or business need and where the sale receipt could be better utilised elsewhere.
4.4
To provide a framework to assess the viability and value for money of acquiring or
disposing of a specific property asset, delivering the flexibility to be able to act within
limited timescales, as opportunities arise.
5.
ACQUISITION CRITERIA
5.1
Each potential acquisition will be assessed on an individual basis. A proposed
acquisition will only be progressed if the criteria are met and value for money can be
demonstrated. The criteria is as follows:
5.1.1 A property which has had, or is suitable for, significant disabled adaptations
Consideration will be given to the purchase of a property which is suitable for
conversion or extension to create ground floor bathing facilities, level access
showers, etc or which lends itself to the installation of a through floor lift to allow
disabled access to the first floor of the property.
5.1.2 Empty property or a property in disrepair and causing concerns in the locality
Privately owned dwellings sometimes fall into disrepair for various reasons and
cause concerns in the locality. In these instances it may be viable to make an offer
to purchase the property and undertake the necessary works to improve not only
the dwelling but also the surrounding area.
2
5.1.3 A property in specific high demand at any time
For example, larger properties suitable for larger households or one bedroom
properties suitable for downsizing or properties in a geographical area of high
demand. This criterion would enable the purchase of suitable dwellings on the open
market in areas of high demand and to meet an identified housing need.
5.1.4 An existing unit on a new build site where this could increase the balance of
affordable housing
Working with developer partners and other registered providers in delivering
housing on both our own development sites and strategic growth sites, there may
be an option to acquire new build dwellings direct from the developer. Purchasing
some of the dwellings initially identified as market housing could increase the
supply of affordable housing in Poole. We would be more likely to purchase houses
than flats in this manner as there could be significant service charges attached to
the purchase of any flat on the open market or direct from a developer.
5.1.5 Leasehold flats where BOP is the freeholder
There are currently 562 leasehold flats which have been purchased under the Right
To Buy Scheme over the past 30 years. Under the terms of the lease, leaseholders
are required to pay service charges for the services and facilities that the flat
benefits from. They are also required to contribute towards the costs of major works
and improvements to their block. The contribution towards major works and
improvements in particular can be significant and the collection of the money can
prove difficult and costly. Any offer to spread or defer payments has a negative
impact on the HRA cashflow.
Buying back leasehold flats would increase the supply of affordable housing and
mitigate the impact of non recovery of major works charges. This could also result
in ownership of the entire block allowing works to commence without the need for
lengthy Section 20 consultations being carried out.
5.1.6 The purchase of land or property that would aid a new build development
Where the opportunity arises, consideration could be given to the acquisition of
land, garages or existing dwellings, where ownership of the asset would aid the
design of a potential new build site. This would allow maximisation of development
opportunities to deliver the greatest number of additional dwellings.
5.1.7 A property where the location lends itself to ease of housing management
and maintenance
Property in or around existing housing estates may prove efficient to manage and
maintain, particularly due to their locality, giving rise to consideration for purchase.
5.1.8 Any other property which it may be in the Council’s interest to purchase and
where value for money can be clearly demonstrated
From time to time there may be other opportunities to acquire an existing dwelling.
In these circumstances a business case will be prepared to demonstrate the
financial viability of any proposed acquisition.
3
6.
DISPOSAL CRITERIA
6.1
Each potential disposal will be assessed on an individual basis. A proposed
disposal will only be progressed if the criteria are met and value for money can be
demonstrated. The criteria is as follows:
6.1.1 Property where the business case indicates a negative financial contribution
For example, some blocks of flats are completely leasehold occupied. Due to
anomalies in old leases, the proportion paid by each leaseholder in service charges
and major works charges does not always equal 100% of the costs incurred.
Managing and maintaining the blocks can be difficult and time consuming and due
to the lease proportions, costs can not be fully recovered. These blocks could be
considered for disposal.
The need to invest in any dwelling to ensure that it continues to meet the desired
standard for letting purposes should be carefully considered against the potential
future rental stream for the property. If the investment need plus the cost of
management and maintenance for the property outweighs the anticipated rental
stream over the 30 year life of the business plan, the property should be actively
considered for disposal.
6.1.2 Unsuitable property location
On occasions the location of a particular dwelling makes it difficult to let, manage or
maintain. In these instances consideration should be given to strategic disposal,
particularly where the capital receipt can be used to replace the dwelling with
another/others in a preferable location.
6.1.3 Unsuitable property build
The construction of some of the housing stock is non-traditional. In some cases this
can make routine maintenance and future improvement works difficult or
impossible, particularly energy efficiency works. In some circumstances in may be
beneficial to dispose of such properties with a view to replacing the dwelling with
another of a traditional construction type.
7.
ASSESSMENT / EVALUATION CRITERIA
7.1
The ability to demonstrate value for money in respect of any acquisition or disposal
is key. The following tools may be utilised to demonstrate value for money:
7.1.1 Financial Appraisal
The decision to acquire or dispose of any property must meet the relevant criteria
as set out in this policy as well as demonstrate value for money to the Housing
Revenue Account. This value will be tested through the whole life cost of the
proposal calculated over 30 years (the lifetime of the HRA business plan).
Acquisitions
Any proposal will be expected to demonstrate that the capital outlay or cost
of purchase will be at least 75% recovered over 30 years from the additional
rents that will be received. This will ensure that the social value from taking
forward acquisitions can be demonstrated within the remaining 25%,
4
although preference will be given to those schemes that can show a higher
net gain if there are competing priorities.
Disposals
A proposal to dispose of an asset must show a positive net gain to the
Housing Revenue Account over 30 years. This will show that the reduction
is rent received is more than offset by the reduction in cost that will be
incurred, including the administration costs of disposing of the asset.
7.1.2 Independent Property Valuation
An independent property valuation will be sought using recent market place
information and ensuring that the approach mirrors that used under the right to buy
legislation.
7.1.3 Surveys
Appropriate surveys may be conducted, and could include condition, full structural,
dilapidations, ground condition and asbestos surveys. These surveys should result
in an estimate of the potential initial and future investment need for a property,
whether it be to support the proposal to dispose of or acquire the property.
7.1.4 Assessment of anticipated gain
Where an acquisition is to facilitate future development, an assessment of the
anticipated gain as a result of the purchase will need to be made. This may be best
demonstrated by the additional numbers of units that could be delivered on the site
as a direct result of the acquisition.
8.
THE POLICY
8.1
The Policy is included in Appendix A.
9.
FINANCIAL IMPLICATIONS
Funding to support acquisitions will be made available from the Housing Revenue
Account capital programme. This currently identifies £0.5m per annum for the next
10 years to support a small sites programme and individual developments with the
flexibility to respond to emerging opportunities. This policy will allow an additional
tool to be used to support the delivery of this work while not committing this level of
spend if priorities show that the funding would be better used elsewhere.
10.
LEGAL IMPLICATIONS
10.1
The Council has powers under various legislation to acquire land, hold land and
dispose of land. It is generally understood that such transactions will be to support
the Council’s overall aims, objectives and functions although this is not strictly
required as the power is not specifically subject to restrictions at first instance.
10.2
In the case of housing land the Council has clear duties as a Housing Authority and
there would be no concern over transactions undertaken in furtherance of these
duties so long as other requirements were met.
5
10.3
From the Council’s point of view land transactions must comply with the provisions
set out in Financial Regulations and in certain circumstances additional authority
from Cabinet or Council may be required. Any land acquired for general needs
housing must form part of the HRA and be accounted for accordingly. As such, land
within the HRA will also be subject to additional controls and of course where
disposals are being considered then the rights of any tenants must be considered
and dealt with in accordingly.
10.4
In relation to any disposals of land there is also a statutory duty to achieve the best
consideration (sale price) reasonably obtainable in the circumstances. There are
certain exceptions to this but specific advice should be sought from Legal Services
and Property Services if this is contemplated. Disposals of land to other Housing
Providers are also subject to certain statutory controls under the Housing Acts.
11.
EQUALITIES IMPLICATIONS
11.1
The Policy will help to increase the amount of affordable housing available in Poole.
This is of direct benefit to households with less equal access to life chances e.g.
through poverty or disability. The policy will enable the acquisition of suitable
properties, for example properties adapted or suitable for adaptation for disabilities.
12.
RISK MANAGEMENT IMPLICATIONS
12.1
The recent change of Government may lead to an update to the National Housing
Policy. This could force the sale of high value assets to support the extension of the
Right To Buy Scheme to Housing Association properties.
Report Author: Karen Toft
Contact officer: Cally Antill ext. 3440 Su Spence ext. 4428
Circulated to: Adam Richens ext. 3183, Tim martin ext. 3021.
6
APPENDIX A
POLICY CONTROL SHEET
Acquisitions & Disposals Policy
Status:
DRAFT POLICY
Reference:
Last version approved:
Version
Draft
Date
Date
Approved
Review Date
8.4.15
Author
Approved By
Karen Toft
Notes/Comments
This policy is in place to allow BOP/PHP to replace dwellings purchased under the Right
To Buy scheme and dispose of HRA Assets where this will assist in the viable delivery and
sustainability of the plan.
Legal influences on this policy:
Right To Buy Legislation, HRA self financing, Right of First Refusal.
7
Poole Housing Partnership
Acquisitions & Disposals Policy
April 2015
Introduction
The Housing Strategy include plans to invest in the provision of affordable housing.
Currently this is achieved through new build. It is also possible under the provisions of the
Right Of First Refusal legislation to achieve this through buy-back opportunities.
Since the introduction of the HRA Self Financing Model in April 2012 a proportion of Right
To Buy sales income can be retained for use in acquiring properties to replace dwellings
lost through the Right To Buy process. It is now prudent to implement an Acquisitions &
Disposals Policy to enable opportunities to be taken advantage of in a timely manner as
these opportunities arise.
The potential for strategic disposal of HRA Assets should also be considered where it can
assist in the viable delivery and sustainability of the plan.
Background
Under the retention agreement introduced as part of the Right To Buy legislation from April
2012, the authority has opted to retain a proportion of Right To Buy sales receipts to
replace the dwellings lost through this process. Receipts from the first 5 sales in a financial
year are shared between the authority and central government. For additional sales, a
proportion is retained by the authority to set aside in relation to the debt attributable to the
sale. The balance is then available to be used in line with the current pooling
arrangements and retention agreement.
Under the retention agreement, the authority is required to re-invest the retained receipt
within a 3 year time frame, using it to fund a maximum of 30% of either a new build
affordable dwelling or the purchase of an existing dwelling. The preference will be to invest
in new build dwellings where possible to increase the overall supply of affordable housing
in Poole. However, shortage in available land and the tight development timeframe mean
that the ability to purchase existing dwellings could be actively considered to increase the
supply of affordable housing within the constraints that exist.
The Housing Capital Programme does not currently incorporate additional sales receipts
as a form of funding until the receipt is realised. It will be necessary going forward to
include an estimated level of funding and an associated assumption of expenditure in
relation to stock growth, to ensure that we can meet obligations under the retention
agreement.
Retained Right To Buy funding will need to be allocated to either new build schemes or
strategic acquisitions, with the mix of housing provided by the HRA reflecting the identified
need for housing in Poole.
This Policy sets out the criteria under which potential acquisitions and disposals should be
assessed to enable decisions to be made quickly and within appropriate timeframes.
8
Financial Background
Funding to support acquisitions will be made available from the Housing Revenue Account
capital programme. This identifies £0.5m per annum for the next 10 years to support a
small sites programme and individual developments with the flexibility to respond to
emerging opportunities. This policy will allow an additional tool to be used to support the
delivery of this work while not committing this level of spend if priorities show that the
funding would be better used elsewhere.
Policy Objectives
The objectives of this Policy are:

To increase the supply of additional affordable housing owned by the Housing
Revenue Account, recognising the increased demand on the housing register whilst
providing opportunity to re-balance the mix of housing owned by BOP.

To facilitate the acquisition of property / assets that will assist in the delivery of
affordable homes and potential new build opportunities.

To facilitate the disposal of property / assets that are no longer meeting the service of
business need and where the sale receipt could be better utilised elsewhere.

To provide a framework to assess the viability and value for money of acquiring or
disposing off a specific property asset, delivering the flexibility to be able to act within
limited timescales, as opportunities arise.
Acquisition Criteria
Each potential acquisition will be assessed on an individual basis. A proposed acquisition
will only be progressed if the criteria are met and value for money can be demonstrated.
The criteria is as follows:
1. A property which has had, or is particularly suitable for, significant disabled
adaptations
Consideration will be given to the purchase of a property which is suitable for
conversion or extension to create ground floor bathing facilities, level access
showers, etc or which lends itself to the installation of a through floor lift to allow
disabled access to the first floor of the property.
2. Empty property or a property in disrepair which is causing concerns in the
locality
Privately owned dwellings sometimes fall into disrepair for various reasons and
cause concerns in the locality. In these instances it may be viable to make an offer
to purchase the property and undertake the necessary works to improve not only
the dwelling but also the surrounding area.
9
3. A property in specific high demand at any time
For example, larger properties suitable for larger households or one bedroom
properties suitable for downsizing or properties in a geographical area of high
demand. This criterion would enable the purchase of suitable dwellings on the open
market in areas of high demand and to meet an identified housing need.
4. An existing unit on a new build site where this could increase the balance of
affordable housing
Working with developer partners and other registered providers in delivering
housing on both our own development sites and the strategic growth sites, there
may be an option to acquire new build dwellings direct from the developer.
Purchasing some of the dwellings initially identified as market housing could
increase the supply of affordable housing in Poole. We would be more likely to
purchase houses than flats in this manner, as there could be significant service
charges attached to the purchase of any flat on the open market or direct from a
developer.
5. Leasehold flats where BOP is the freeholder
There are currently 562 leasehold flats which have been purchased under the Right
To Buy Scheme over the past 30 years. Under the terms of the lease, leaseholders
are required to pay service charges for services and facilities that the flat benefits
from. They are also required to contribute towards the costs of major works and
improvements to their block. The contribution towards major works and
improvements can be significant and the collection of the money can then prove
difficult and costly. Any offer to spread or defer payments has a negative impact on
the HRA cashflow.
Buying back the leasehold flats would increase the supply of affordable housing and
mitigate the impact of non recovery of major works charges. This could also result
in ownership of the entire block allowing works to commence without the need for
lengthy Section 20 consultations to be carried out.
6. The purchase of land or property that would aid a new build development
Where the opportunity arises, consideration could be given to the acquisition of
land, garages or existing dwellings, where ownership of the asset would aid the
design or a potential new build site. This would allow maximisation of development
opportunities to deliver the greatest number of additional dwellings.
7. A property where the location lends itself to ease of housing management
and maintenance
Property in or around existing housing estates may prove efficient to manage and
maintain, particularly due to their locality, giving rise to consideration for purchase.
8. Any other property which it may be in the Council’s interest to repurchase
and where value for money can be clearly demonstrated
From time to time there may be other opportunities to acquire an existing dwelling.
In these circumstances a business case will be prepared to demonstrate the
financial viability of any proposed acquisition.
10
Disposal Criteria
Each potential disposal will be assessed on an individual basis. A proposed disposal will
only be progressed if the criteria are met and value for money can be demonstrated. The
criteria is as follows:
1. Property where the business case indicates a negative financial contribution
Some blocks of flats are completely leasehold occupied. Due to anomalies in old
leases, the proportion paid by each leaseholder in service charges and major works
charges does not always equal 100% of the costs incurred. Managing and
maintaining the blocks can be difficult and time consuming and due to the lease
proportions, costs can not be fully recovered. These blocks could be considered for
disposal.
The need to invest in any dwelling to ensure that it continues to meet the desired
standard for letting purposes should be carefully considered against the potential
future rental stream for the property. If the investment need plus the cost of
management and maintenance for the property outweighs the anticipated rental
stream over the 30 year life of the business plan, the property should be actively
considered for disposal.
2. Unsuitable property location
On occasions the location of a particular dwelling makes it difficult to let, manage or
maintain. In these instances consideration should be given to strategic disposal,
particularly where the capital receipt can be used to replace the dwelling with
another/others in a preferable location.
3. Unsuitable property build
The construction of some of the housing stock is non-traditional. In some cases this
can make routine maintenance and future improvement works difficult or
impossible, particularly energy efficiency works. In some circumstances in may be
beneficial to dispose of such properties with a view to replacing the dwelling with
another of a traditional construction type.
Assessment / Evaluation Criteria
The ability to demonstrate value for money in respect of any acquisition or disposal is key.
The following tools may be utilised to demonstrate value for money:
1. Financial Appraisal
The decision to acquire or dispose of any property must meet the relevant criteria
as set out in this policy as well as demonstrate value for money to the Housing
Revenue Account. This value will be tested through the whole life cost of the
proposal calculated over 30 years (the lifetime of the HRA business plan).
Acquisitions
Any proposal will be expected to demonstrate that the capital outlay or cost of
purchase will be at least 75% recovered over 30 years from the additional rents
that will be received. This will ensure that the social value from taking forward
acquisitions can be demonstrated within the remaining 25%, although
preference will be given to those schemes that can show a higher net gain if
there are competing priorities.
11
Disposals
A proposal to dispose of an asset must show a positive net gain to the Housing
Revenue Account over 30 years. This will show that the reduction is rent
received is more than offset by the reduction in cost that will be incurred,
including the administration costs of disposing of the asset.
2. Independent Property Valuation
An independent property valuation will be sought using recent market place
comparables to ensure validity and reflecting the process used to dispose of assets
under the right to buy approach
3. Surveys
Appropriate surveys may be conducted, and could include condition, full structural,
dilapidations, ground condition and asbestos surveys. These surveys should result
in an estimate of the potential initial and future investment need for a property,
whether it be to support the proposal to dispose or acquire the property.
4. Assessment of anticipated gain
Where an acquisition is to facilitate future development, an assessment of the
anticipated gain as a result of the purchase will need to be made. This may be best
demonstrated by the additional numbers of units that could be delivered on the site
as a direct result of the acquisition.
12