Decision

Salford City Council - Record of Decision

Title: Transfer of RSAP and affordable homes developed by the Council at Eccles New Road to Derive RP.

I, Councillor Jack Youd, Deputy City Mayor, in exercise of the powers contained within the City Council’s constitution do hereby;

1. Approve the disposal by the Council of 8 Rough Sleeper Accommodation Programme 2021-24 (“RSAP”) self-contained supported housing apartments and 6 affordable homes at the Eccles New Road site for Social Rent to Dérive RP at the values set out in the report by way of freehold transfer.
2. Note the use of grant funding from unsupported borrowing to bridge the viability gap of the Eccles New Road RSAP scheme.
3. Approve the lending to Dérive RP to fund the acquisition of the 8 RSAP units and 6 affordable homes, subject to drawdown by the Council of HCA RSAP 2021-24 grant funding and HCA Affordable Homes Programme 2021-26 (“AHP”) grant funding.
4. Delegate authority to the Executive Director of Place in consultation with the S151 officer to: negotiate, agree, and finalise the detailed terms of the transaction, including such arrangements on estate management, repair and service charge and title matters.
5. Authorise the Shared Legal Service to prepare all necessary documentation and to take all steps which are required to give effect to the above recommendations.

The Reasons:          

To facilitate the sale and transfer of completed residential units and use of Homes England RSAP and AHP grant funding as released.

Assessment of Risk is medium 

The source of funding: Housing Capital Programme, with loan to be repaid by Derive RP over 40 year term.

Legal Advice obtained:  Kathryn Saldana and Sarah Waite, Shared Legal Service.

The Council has the power to provide funding to Derive RP under Section 24 of the Local Government Act 1988 (LGA 1988), which allows the Council to provide financial assistance for privately let housing accommodation. Section 25 LGA 1988 requires Secretary of State consent to the exercise by the Council of its Section 24 LGA 1988 power.  Consent C of the 2010 General Consents under Section 25 LGA 1988 provides the Council with a broad consent to “provide any person with any financial assistance for the purposes of, or in connection with, the acquisition, construction, conversion, rehabilitation, improvement, maintenance or management of any property which is or is intended to be privately let as housing accommodation”.  The Council will rely on its power under Section 24 LGA 1988 as the legal basis for the proposed Council loan to Derive RP to enable Derive RP to acquire the 14 Eccles New Road Housing Units.

The Council’s Finance Team will ensure that the terms of the proposed Council Loan to Derive RP, and the wider terms of the Council’s disposal of the 14 Eccles New Road Housing Units to Derive RP comply with the requirements of the Subsidy Control Act 2022 (“SCA”).  If the Council’s Finance Team considers that there is any element of Council “Subsidy” to Derive RP in the terms of the Council’s disposal of these 14 Housing Units to Derive RP, the Council’s Finance Team will ensure that any Council “Subsidy” to Derive RP is structured so that it is a “lawful subsidy” under the SCA and that the Council complies with all relevant requirements of the SCA (including, requirements for the Council to publish information in respect of awards of Council Subsidy on the Government’ Subsidy Control Database).

The Council has been awarded GMCA GM BLF Grant funding to support the Council to deliver the 14 Eccles New Road Housing Units.  The Council has contacted the GMCA to seek consent for the proposed transfer of the freehold interest in the 14 completed Eccles New Road Housing Units to Derive RP.

The Council has been awarded HCA AHP 2021-26 grant funding to fund the construction of 6 Social Rent Housing Units at the Eccles New Road Site. The Council is seeking approval from Homes England to transfer the freehold interest in the 6 units which have been funded through AHP grant to Dérive RP.  HE will require Dérive RP to enter into a legal undertaking, whereby Dérive RP will undertake to ensure that the 6 units are used for the purpose of the provision of AHP Social Rented Housing.

The Council has been awarded HCA RSAP 2021-24 grant funding to fund the construction of 8 RSAP “move-on accommodation” Housing Units at the Eccles New Road Site. The Council is seeking approval from Homes England to transfer the freehold interest in the 8 units which have been funded through RSAP Grant to Dérive RP.  It is expected that HE will require Dérive RP to enter into a legal undertaking, whereby Dérive RP will undertake to ensure that the 8 units are used for the purpose of the provision of RSAP “move on accommodation”.

Financial Advice obtained: Alison Woods, Commercial Finance Manager

The Council is currently delivering a phase of affordable homes at the Eccles New Road site, scheduled for completion in September 2024, which includes a mix of 8 RSAP move on apartments and 6 AHP Social Rent homes. 

This is an approved scheme within the Housing Strategy Capital programme and the transfer of housing units, as outlined in this report, has received the approval of the board of Dérive RP Limited.

Such approvals are supported by fully viable fully business plans, which incorporate the full repayment of all loans to Salford City Council over a 40 year period at an interest rate of 4% on an annuity basis. 

Dérive RP Limited has a number of golden rules which ensure that all schemes they take on are fully viable without the need for working capital; this gives the council assurance that it will be able to meet its debts in fulfilment of the required loans.

The Council has previously secured the funding outlined above to deliver this scheme and Dérive RP Limited now seeks loan funding in a long term secured loan facility from the Council, to fund the cost of acquisition of the 14 affordable housing units in the development.

The Council has attracted Homes England Affordable Homes Programme 2021- 26 (AHP) and Rough Sleeping Accommodation grant funding 2021-24 (RSAP) for this  development and as part of the unit transfers to Dérive RP Limited is seeking approval from Homes England to discharge all associated grant conditions to Dérive RP Limited. 

The Council has also been awarded GMCA GM BLF Grant funding to support the Council to deliver the 14 Eccles New Road Housing Units and has contacted the GMCA to seek consent for the proposed transfer of the freehold interest in the 14 completed Eccles New Road Housing Units to Derive RP.

Higher construction scheme costs for the RSAP units, reported to Procurement Board on 31st January 2023, alongside an increased cost of borrowing modelled at a blended rate of 4%, negatively impacted on the original Dérive RP Limited viability model for this scheme. 

The Council’s cost consultant carried out a value for money assessment on the scheme that concluded construction costs were reflective of the site conditions and that above ground costs were comparable to the wider construction market and that the higher unit costs reflected the ground conditions and high abnormal costs associated with the scheme. 

To support the overall scheme viability, a provision was made for a Council grant contribution towards the cost of delivering the RSAP accommodation.  This provision was approved by full Council in February 2023 as part of the Housing Strategy capital programme (general unsupported borrowing allocation) 2023-24 and takes the form of a Council grant to Dérive RP Limited.

Procurement Advice obtained: n/a

HR Advice obtained: n/a

Climate Change Advice obtained:

Mike Hemingway, Principal Officer - Climate Change

The development is of a car-free design due to the close proximity of sustainable transport links.?

The following documents have been used to assist the decision process:

Public briefing report submitted to Property/Regen Briefing on 12th August 2024

Contact Officer: John Nugent (Property Services)

Asst. Principal Development Surveyor     

Tel No 0161 779 6072

*           This decision is not subject to consideration by another Lead Member/Director

*           The appropriate Scrutiny Panel to call-in the decision is the

            Growth and Prosperity Scrutiny Panel.

Signed: Councillor Jack Youd

Deputy City Mayor and Lead Member for Finance, Support Services and Regeneration

Date 12th August 2024

*           This decision was published on Monday 12th August 2024 .

*           This decision will come in force at 4.00 pm on Monday 19th August unless it is called-in in accordance with the Decision Making Process Rules.