This executive decision meeting of Waltham Forest Council was scheduled to discuss the proposed acquisition of new build homes for affordable rent. The Deputy Leader (Housing and Regeneration) was asked to approve the use of Right to Buy receipts to acquire 53 newbuild homes at the Fellowship Square development. This acquisition was previously discussed at an executive decision meeting in December 2024¹.

Acquisition of New Build Homes for Affordable Housing

The report pack included a recommendation for the Deputy Leader & Portfolio Lead Member for Housing & Regeneration, Councillor Ahsan Khan to approve the use of the council’s available Right to Buy (RtB) receipts to acquire 53 newbuild homes at the Fellowship Square development (Hepworth Place), to be let as affordable housing.

It was noted that on 23 December 2024, Councillor Ahsan Khan approved an Executive Decision to use the council’s available RtB receipts to acquire 53 newbuild homes at the Fellowship Square development for affordable housing.

The report stated that this opportunity arose following an announcement by the Secretary of State for Housing, Communities and Local Government (MHCLG) that changes to the rules governing Right to Buy (RtB) receipts allowed local authorities to fund 100% of acquisition costs using RtB receipts until March 2026.

The key changes to the rules governing RtB receipts are:

• Until March 2026, local authorities can now use up to 100% of their retained RtB receipts to fund replacement affordable housing.
• RtB receipts will be permitted to be used alongside Section 106 contributions where this is required.

The report noted that the council had explored various options for acquiring additional homes using its RtB receipts to maximise the quantum of affordable housing that can be delivered under the revised rules. The most advantageous opportunity was identified at Fellowship Square, where the council agreed to acquire core 3 in Block C from its Development Partner, Countryside Properties (UK) Limited.

The breakdown of the units in Block C is as follows:

• 1B2P - 7 homes
• 2B3P - 14 homes
• 2B4P - 26 homes
• 3B5P - 6 homes
• TOTAL - 53 homes

The report stated that it was possible to agree favourable terms for the council on the basis that the deal potentially could be agreed and finalised as soon as possible.

Following the December 2024 Executive Decision, the council commissioned a Red Book valuation² for the units to be valued at social rent. The report stated that this valuation was lower than the offer that had been made to Countryside, which was based on open market value.

The report set out the justification for the decision to proceed with the acquisition at the original offer stated in the December 2024 Executive Decision. It stated that the full financial details are set out in Appendix 2 and are exempt for reasons of commercial sensitivity.

The report stated that the flexibility to utilise RtB receipts to fund 100% of acquisition costs provides the council with an opportunity to bring additional affordable homes into its portfolio. These will provide high quality permanent homes for households on the borough’s Housing Register as well as for homeless households currently living in temporary accommodation.

The report noted that a valuation was procured to support the decision to proceed with the acquisition at the proposed offer amount, which is a required part of the audit process with central government as well as determining that the council achieves value for money. It stated that Savills returned a valuation lower than the council’s proposed offer for the units.

The reason for the lower valuation of the 53 units is that they have been valued on a social rented basis by their Existing Use Value. The report stated that Existing Use Value reflects the value that the units would represent to the council in rental income over the course of the long leasehold interest that it will acquire, minus operating costs, i.e. the income the council will realise as a result of owning the units, and that Existing Use Value does not represent an open market value.

The valuation also sets out what Savills consider to be the current open market valuation of the 53 units, which is £8m higher than the council’s offer. The report stated that this demonstrates that whilst the council will not sell the units directly itself, the acquisition cost in reality represents excellent value for newbuild units.

The report stated that the financial appendix demonstrates how it would not be possible for the council to acquire comparable units for the same cost within Waltham Forest based on the sales values at similar developments in the borough, and that on average it would cost the council 20% more to acquire comparable units at another scheme of similar specification in the borough. It also noted that if the council were to buy individual units it would also not benefit from the units being located within a single block and core, and the respective management advantages that this allows for.

The report also noted the current levels of build costs in the UK, stating that house builders and Registered Providers face an uncertain operating environment as a consequence of ongoing macroeconomic shocks over the past three years, including Brexit, Covid-19, and Russia’s invasion of Ukraine. It stated that presently, high inflation, a tight labour market, and the residual impact of the pandemic on supply chains have increased costs to build, and that borrowing costs have also increased, both from substantially rising interest rates and from widening spreads on debt.

Block C is currently under construction with an anticipated practical completion date of November 2025. The report stated that Countryside Properties are currently on programme to deliver to schedule and confident of meeting that completion date, but that there is a risk that slippage to the programme could lead to the units being delayed. In this scenario the council may be unable to use 100% RTB receipts in order to fund remaining payments of the acquisition which would require borrowing to make up the shortfall.

In order to mitigate this risk, the council are undertaking 2 weekly inspections of the site including set milestones and gateways for Countryside Properties to meet.

The report stated that the acquisition is financially viable for the council within the HRA’s Medium-Term Financial Strategy (MTFS) as the units will provide a surplus in year 1 due to being funded with no borrowing.

Beyond the financial advantages of the acquisition there are numerous benefits to the council of acquiring the units, primarily the acquisition increases the council’s overall supply of social rented housing as well as increasing the council’s ownership of homes at the Fellowship Square scheme. The report stated that the delivery of new affordable housing is a strategic priority for the council.

The 53 new homes will increase the council’s housing stock, providing much needed housing for council tenants on the Housing Register and also settled accommodation for families currently in temporary accommodation. The average unit cost of temporary accommodation is £259 p.w. (£13,468 p.a.), and average waiting time for housing is about 5 years, which means that total savings per unit of social housing provided are c.£66,000.

The acquisition also protects and expedites the delivery of affordable housing at Fellowship Square and improves the viability for the continued delivery of the Fellowship Square scheme for both the council and Countryside Properties.

The report stated that this opportunity to acquire the Fellowship Square units arose due to difficulty Countryside were experiencing in disposing of affordable blocks at the development to a Registered Provider, likely because of the economic position. It stated that rather than invest in new social housing, Registered Providers are instead undertaking substantial investment into their existing stock to improve quality, building safety, and decarbonisation commitments.

The report stated that it is likely that delivery of Fellowship Square could stall and no new affordable would be delivered if Countryside relied on identifying an alternate Registered Provider, and that the acquisition by the council will therefore protect the delivery of the wider Fellowship Square programme as well as providing affordable homes through the acquisition itself.

The report stated that the exempt Financial Appendix 2 also contains detail of the specific financial implications for the council of RtB receipts not being spent in the period up to March 2026.

The report stated that due to the above reasons, it is considered that the acquisition at Fellowship Square presents the best possible opportunity to the council to maximise the benefit of available RtB receipts within the period 2024/25 – 2025/26.

Options & Alternatives Considered

The report outlined that one option would be to do nothing, but that the council is only able to use 100% of RtB receipts towards an acquisition prior to March 2026, and due to the borrowing requirements that would be necessary after this period it would not be able to undertake an acquisition of this scale. This option would therefore not provide any new affordable homes for the council.

The council could acquire homes in another location, but the council has already considered various options prior to making an offer to acquire the homes at Fellowship Square. However, due to the time sensitive nature of the requirements, no other opportunities were considered as advantageous to the council as acquiring the units at Fellowship Square.

Council Strategic Priorities

The report stated that the delivery of affordable housing is a strategic priority identified by the council’s Local Plan and critical to the borough’s identified 5-year housing supply.

It also stated that Mission Waltham Forest³ sets out how the council will make strategic investments for the greatest impact, and that this decision is being taken in line with that aspiration to ensure that an opportunity is not missed to increase housing supply in the borough without impacting the HRA.

Unlocking the delivery of new affordable homes in the borough as set out in this report will help the council meet key outcomes of the Housing Strategy 2024-2029, including:

• Outcome 2a: Increasing the supply of different types of homes so people can stay in Waltham Forest throughout their lives.
• Outcome 2b: New development provides homes for residents who need them most.

Implications

The report stated that the acquisition would be fully funded by RtB Receipts, therefore there would be no requirement for any council borrowing.

Under section 9 Housing Act 1985⁴ the council as the local housing authority has the power to provide housing accommodation by acquiring properties for that purpose.

The council has entered into an agreement with the Secretary of State under section 11(6) Local government Act 2003⁵ that enables it to retain RTB receipts. The proposed use of RtB receipts for this acquisition is in accordance with the guidance ‘Retained Right to Buy receipts and their use for replacement supply’ as updated in July 2024.

The council will enter into the necessary legal agreements with Countryside Properties to acquire the properties on the agreed terms.

An Equality and Diversity Screening template has already been completed for the Fellowship Square redevelopment and is reattached at Appendix 3. There are no further equality impacts as a result of this decision.

A Sustainability Matrix has already been completed for the Fellowship Square scheme from December 2019 when the decision to enter into the development agreement was originally made, and is reattached at Appendix 4. There are no further considerations as a result of this decision.