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RESOLVED:
 
1. 
Note the strategic context set out in this report,
including the increasingly challenging shortages of temporary
accommodation, growing demand, rising costs, and the need to secure
longer term and more sustainable supply of temporary accommodation
properties in order to meet the Council’s statutory
obligation. 
 
2. 
Note the principles and structure of the proposed
contractual arrangement for the acquisition and letting of
properties, together with the reasoning supporting its
implementation, both as described in this report;
 
3. 
Give delegated authority to the Director of Strategic
Property Services, in consultation with the Interim Group Director,
Finance, to:
· 
negotiate the detailed terms of an Agreement for Lease
(or a broadly equivalent contractual instrument with the same
commercial effect) with the REIT (and any necessary ancillary
agreements)
· 
agree that the Council enters into the Agreement for
Lease (or a broadly equivalent contractual instrument with the same
commercial effect) with the REIT.
· 
negotiate the detailed terms of the individual leases
on each property.
 
4. 
Give delegated authority to the Director of Strategic
Property Services, in consultation with the Interim Group Director,
Finance, the authority to negotiate the detailed terms of, and the
authority to agree that the Council enters into, a management
agreement with the appointed managing agents.
 
5. 
Authorise the Acting Director of Legal, Democratic
& Electoral Services to prepare, agree, settle and sign the
necessary legal documentation to effect the proposals contained in
this report and to enter into any other ancillary legal
documentation as required.
 
REASONS FOR DECISION
 
As outlined within the report, there is a
significant need to expand the stock of longer term temporary
accommodation available to the Council. As set out within Part 7 of
the Housing Act 1996 and the Homelessness Reduction Act 2017, the
Council has a statutory duty to provide interim temporary
accommodation to homeless households to whom it has a duty to
provide permanent housing.
 
As set out in the report, the Council has an
acute and growing pressure on supply of the temporary accommodation
needed to fulfil our statutory duties. Entering into the proposed
agreement for lease of 300 properties will make a significant
contribution to the number of Temporary Accommodation units in the
Council’s long term control and at more affordable levels
than comparative short term accommodation options.
 
Whilst the 300 properties covered by the
proposed agreement will only represent an additional 30% to the
Council’s owned and leased portfolio, the number of
properties that become available through other sources is
continuing to decline, with particular shortages for family sized
accommodation - resulting in homeless residents needing to relocate
outside of the borough and often well beyond London.
 
The proposed leasing scheme will include
criteria to ensure that properties are within 75 minutes journey time by foot and public transport to
Hackney Central, helping to enable residents to retain local
connections.
 
Discussions with other potential partners as
well as Chalkhill have taken place over
a number of years however they have been around longer lease
commitments typically of 40 + years. Only our discussions with
Chalkhill have resulted in a
10 year proposal which limits the
exposure of the Council to annual inflation based rent reviews. We
also expect that an attempt to take to the market an equivalent
proposal would take in the order of 9-12 months and would not be
expected to yield improved terms considering current market
fundamentals (including recent increases in interest rates). The
risks associated with the agreement have been reviewed extensively
and are set out in detail in section 6.39. Overall they are not
considered unduly onerous considering the experience and current
property operations of the service and the mitigation options
available to the Council.
 
In order to secure good quality Temporary
Accommodation as close to Hackney as possible, and also to mitigate
the significant financial risks presented by dependency on ad hoc
spot purchasing in an increasingly challenging housing market, the
Council uses longer term 10 year lease
agreements as a core component of its Temporary Accommodation
supply strategy. The Council has a number of long term lease
agreements in place and equivalent investment models adopting REIT
structures are likely to play an important role in this part of our
supply moving forward. At the current time the only viable option
that is in a position to move into delivery is this proposal with
Chalkhill. As noted in 5.3 below, the
Council will be able to consider other viable options that come
forward where those will enable it to further reduce use of ad hoc
spot purchasing and continue to move the Temporary Accommodation
mix to that of a more sustainable long term supply.
 
DETAILS OF ALTERNATIVE OPTIONS CONSIDERED AND
REJECTED
 
Do nothing and lose this opportunity to
increase the number of Temporary Accommodation units in the
Council’s long term control at more affordable levels than
alternative short term accommodation options
 
This option has been rejected on the grounds
that it will:
· 
continue to leave the Council with significant uncertainty of
provision of temporary accommodation
· 
increase the likelihood that homeless residents will be required to
relocate outside of London for temporary accommodation
· 
increase cost pressures for the Council
· 
increase the risk of needing to use expensive bed and breakfast and
hotel accommodation
· 
leave the Council at growing risk of legal challenge for failing to
fulfil its statutory obligations under the Housing Act 1996 and the
Homelessness Reduction Act 2017
 
Raise the capital through borrowing and
purchase an equivalent portfolio directly owned by the Council
 
This option has been rejected on the grounds
that:
· 
there are significant capital and revenue implications, that are
unaffordable in the context of the wider financial pressures on the
Council (see finance comments in section 7)
· 
Officers have reviewed with colleagues in Housing Services the
potential option of the service undertaking the management of the
300 properties that will be disbursed throughout London. They have
advised that it would be very challenging and expensive for the
service to manage a portfolio of this nature given likely
distribution of properties and uncertain nature of the stock.
Housing Services have also advised that their current priority
focus is on improving the delivery of their existing services in
preparation for the new Social Housing Regulator.
 
Approach other parties operating in the sector
to enter negotiations to put together a similar proposal
 
This option has been rejected on the grounds
that:
· 
the exercise would take in the order of 9-12 months and would not
be expected to yield improved terms considering current market
fundamentals (including recent increases in interest rates)
· 
other discussions with potential partners have taken place
previously (including with Chalkhill
and other providers) but have not identified alternative options
that would be viable to be taken forward
· 
the scale of the proposed agreement, the number of short term and
bed & breakfast units currently in the temporary accommodation
portfolio (1,228 at the time of writing - see section 6 below), the
continued (and accelerating) reduction in supply, and the
increasing demand for temporary accommodation mean that this
agreement would not prevent the Council from entering into further
agreements with other providers, provided equally (or more)
favourable terms were offered.