Purpose

Cabinet is recommended to approve:
 

·      
Changing the tenure mix from 50% affordable to 100%
affordable.
 

·      
Additional HRA borrowing to fund increase in
affordable homes.

Content

Cabinet:

(1)          
approved the increase in the proportion of
affordable housing from 50% to 100%, comprising a housing mix of a
minimum of 21 social rented homes and maximum of 62 shared
ownership homes;

(2)          
approved the following funding strategy:

§  
to allocate a capital investment of £38.08m in
the General Fund to cashflow the development costs during the
construction period, noting that interest costs of £1.18m
will be accrued to be covered from General Fund reserves for up to
36 months, which will be repaid by the HRA on completion of the
works;
 

§  
to allocate a capital investment of £39.26m
from the HRA to repay the General Fund loan of £38.08m and
interest cost of £1.18m (at a 5% borrowing rate), within 36
months of the project start on site date;

 

§  
that the HRA capital investment be funded through
£14.17m of HRA borrowing, £11.73m of RtB receipts, £4.2m of GLA funding,
£8.36m of shared ownership sales, and £798k of
Brownfield Land Release Fund administered by One Public
Estate;

(3)          
agreed that works commence by the end of March 2024,
which is required to retain the GLA grant and Brownfield Land
Release Funding; and

(4)          
agreed that, subject to the decision on the future
of Sixty Bricks and as set out in paragraph 3.9 of the report, the
contract for the delivery of the Priory Court scheme be novated to
the Council. 
 

Options & Alternatives Considered

The following options have been
considered:

§ 
Option 1. Commencing the project before by March
2024, to retain the GLA grant.

§ 
Option 2. Delay the project until a future date (to
be confirmed).

§ 
Option 3 Do nothing.
 

A SWOT analysis was undertaken and considered the
following key issues:

§ 
The financial risk to the council, considering the
current financial pressures.

§ 
The council’s ability to mitigate the risks
identified.

§ 
The need for grant funding for the project to be
viable.

§ 
Value for money and social value
benefits.

§ 
Reputational implications for the
council.
 

Option 1 is considered to
be the best option because it:

·       
Can be funded through the General, with the interest
costs being paid by the HRA on completion of the project, based on
current borrowing rates.

·       
Delivers the HRA’s financial hurdles, based on
the scope and borrowing costs.

·       
Secures the GLA (£4.2m) and Brown Land Release
grant (£798k), which is critical to the viability of the
project.

·       
Delivers value for money, through the competitive
contractor procurement process that has been carried out, and
achieves cost fixity, as the works are being procured through a
fixed price contract.

·       
Provides the quickest route to providing affordable
homes to local residents at a time when
the need for affordable homes (both rented and home ownership) is
critical, particularly given the recent slow-down in housebuilding
by both the private and public sector.