SUMMARY/PURPOSE
1.
This report brings forward a proposal to improve
temporary housing accommodation through the realignment of property resources
and recommends terms for an enabling transaction.
CONFIDENTIAL/EXEMPT
ITEMS
2.
The details being
proposed in this report have a degree of sensitivity in terms of
confidentiality. However, given the
transaction is proposed between a public body and registered social landlord,
both parties agree this report should be taken in open session.
BACKGROUND
3.
The situation is that there is a need to improve the
provision of temporary housing accommodation in Cowes and Ryde. The need for well maintained, decent and low
cost temporary housing represents a significant cost to the Council as Housing
Authority. The Council currently has
359 households in temporary housing on the Island and accepts 280-300 new households
as homeless per year. For the 2004/05
financial year the department spent £2,163,920 on providing temporary
accommodation.
4.
The Council’s own temporary housing accommodation
amounts to some 50 dwelling units mainly provided in five large properties,
namely Suffolk House, Totland; Hillbury House, Shanklin; Wrafton House, Ryde;
Jellico House, Ryde and Moira House, Cowes.
These five properties provide some 38 flats for temporary accommodation.
5.
Agreements are in place with the Housing Associations
to undertake the management of these properties based on protected business
tenancies. In the case of Wrafton,
Jellico and Moira Houses these agreements expire in 2006.
6.
With the coming expiry of these agreements the
opportunity is now presented for a review of this temporary housing
accommodation and a scheme has been worked up with Medina Housing Association
in respect of the three houses in Cowes and Ryde.
7.
Each property has a backlog of repairs in excess of
£200,000. Some 12 new temporary
accommodation units are being built in Ryde due for completion next year.
8.
The Medina Housing Association at the request of the
Council’s housing section is now putting forward a proposal which with the aid
of grant funding from the Housing Corporation aims to provide 16 refurbished
temporary housing units at Moira and Jellico Houses. This bid for grant funding has been submitted as a part of the
Housing Corporation bid round which closed on 21 October 2005.
9.
In bringing forward this scheme Medina Housing
Association requires a long-term interest in each property to secure Housing
Corporation funding, take a long-term view as to the management of temporary
housing and also obtain private finance for the scheme.
STRATEGIC CONTEXT
10.
The Council’s Housing Strategy has been working to
bring to an end the long term use of bed and breakfast accommodation for
families in need of temporary housing and with this now achieved the strategy
looks to improve the provision of existing temporary housing
accommodation. This scheme of work is
supported by both the emerging Local Strategic Plan, the emerging Island Plan
and local performance objectives.
11.
Without land available for temporary housing
provision, the Council is working in partnership with the local Housing
Association to provide 16 refurbished temporary housing units through grant
funding and lease arrangements.
CONSULTATION
12.
Discussions on the proposed leasing of Moira and
Jellico House have been ongoing for several months including Cabinet members,
senior officers, local members and the Housing Association. The Housing Association has also been in
discussion with the Housing Corporation and it is understood that the Housing
Corporation will look seriously at the business case for this development when
the current round of bids are considered by the Corporation.
13.
Subject to the outcome of the Cabinet’s decision, then
the Association will be consulting with tenants and managing a process whereby
the re-provision of the existing temporary accommodation can be achieved in
consensus and by working with all parties and stakeholders.
FINANCIAL/BUDGET
IMPLICATIONS
14.
The Council closed the Housing Revenue account in
January 2001 by agreement with the appropriate Government department and these
properties were appropriated to the Council’s General Fund.
15.
Whilst the existing lease arrangements produce
combined income of £12,000 with the potential for an uplift next year. It is understood that the Housing
Association plans to commit £1.35m to this project with £800,000 coming from grants
and £550,000 from private finance. The
terms being recommended for this transaction are as follows:
·
A lease of Moira House and Jellico House to be for 125
years from 1 April 2006 at a premium of £500,000 and nominal ground rent.
·
Medina Housing Association would surrender its
interest in Wrafton House, Ryde.
·
The lease will include covenants for use as to
temporary housing and restrict assignment.
·
Whilst assignment could be to another registered
social landlord, there will also be a buy back facility in favour of the
Council in case new temporary housing can be provided at another date.
·
The Council will have one hundred per cent nomination
rights.
·
Housing Association will be responsible for all
development costs and subject to Housing Corporation finance the new scheme
should be started by October 2006.
LEGAL
IMPLICATIONS
16.
The Local Government Act 1972 gives the Council power
to dispose of land and the Local Government Act 2000 extends the provision to
include the disposal of properties likely to contribute to the economy, social
and environment wellbeing of the area or people in the area.
OPTIONS
17.
The Council has four options.
(i)
To accept the offer from Medina Housing Association.
(ii)
To provide the new temporary housing accommodation.
(iii)
To refurbish the existing properties.
(iv)
To do nothing.
EVALUATION/RISK
MANAGEMENT
18.
There is an ongoing need for temporary housing
accommodation which is unlikely to diminish locally and to address this issue
the Council needs to consider providing new facilities, refurbishing existing
facilities and to do nothing does not address the need.
19.
The current lease agreements for Moira, Jellico and
Wrafton Houses afford Medina Housing Association full protection as tenant
under the Landlord and Tenant Acts.
Therefore, each lease would be renewable albeit at substantially
increased rents from the reserve rent under the current tenancy.
20.
The value of these properties in their existing use
falls to be valued on the investment basis, that is the capitalisation of the
right to receive the income. Under this
procedure the value of both Moira House and Jellico House in their current use
is estimated at £450,000-£500,000. This
has not been tested on the open market because the terms of this transaction
including a restricted lease, the cost of refurbishment and subsequent management
are not considered commercially viable for a private investor.
21.
For vacant possession to be obtained then the Council
as housing authority will need to either stop providing temporary housing
accommodation at Moira and Jellico Houses or provide this housing through some
other means such as new build.
22.
The scheme being proposed with Medina Housing
Association will also surrender the existing lease of Wrafton House. This could raise capital in the order of
£400,000. By granting Medina Housing
Association a long lease subject to a restricted use, the Council will be
protecting its freehold interest and enabling the Association to seek total
funding of £1.35m. The scheme aims to
provide the new accommodation for the long term.
23.
Whilst some concern has been expressed at perpetuating
temporary housing in large adapted houses, the Association has agreed to a buy
back process in the future should an alternative scheme become available.
24.
Should the Council choose to provide new temporary
housing accommodation, the total building cost excluding land is estimated in
excess of £1.4m for 16 units and given a total available capital receipt from
the sale of all three existing houses of some £1.2m, the Council would need to
raise additional capital resources for this option.
25.
The fourth option would be for the Council to
refurbish the existing units, lease them on a management agreement to Medina
Housing Association and receive the income.
Under this scheme the Council might achieve a net income in the order of
£40,000 per annum. However, this would
not represent a prudent payback to the cost of conversion, which is £660,000
plus fees, and makes the opportunity of inward investment to the Island through
a Housing Corporation grant the best option as set out above.
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RECOMMENDATION
26.
Option (i).
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BACKGROUND
PAPERS
27.
Executive Committee – 25 January 2001 – Closure of the
Housing Revenue Account.
28.
Adult and Community Services Select Committee – 16
September 2004 – Review of Temporary Accommodation Provision.
