Agenda item

Purpose of Report

To set out more detail regarding the proposed housing company which would be wholly owned by the Council, including the proposed narrative of the business plan along with the high level financial assumptions.

Decision

That the Executive:

(1)          Approves the narrative of the business case and the detailed financial estimates of the housing company business plan, as set out in Appendix 1 of the report.

(2)          Approves the formation of a wholly owned Council company on the terms proposed in the report and at the meeting of the Executive on 29 February 2016.

Other Alternatives Considered and Rejected

Other options were explored in the formation of the company related to whether and how it could deliver new build property at sub-market rent.

Reason for Decision

The Executive had agreed, in principle, to the formation of a wholly owned housing company at its meeting on 29 February 2016, which was part of a three stranded strategy to intervene in a failing housing market and provide additional housing. The housing company would develop property, primarily operating as market rented accommodation. This would enable the company, and in turn the Council, help a section of the community respond to the many challenges they faced in the current housing market in Lincoln. It would also help in widening the tenure mix in the city and act as an exemplar in the private rented sector.

The overriding principle of the housing company’s financial modelling was that there would be no overall cost over the life of the business plan to the Council in setting up and financing the company. A consequence of this, however, was that affordable housing would not be able to be delivered through the company mechanism. The financial implications relating to the company’s business plan estimates were outlined in paragraphs 6.1 – 6.5 of the report. It was currently estimated that the prospect of the housing company, as well as providing property, could also potentially make a return for the Council’s general fund of approximately £34,000 per annum.

The housing offer from the company would be separate and different to that of the Council. In particular, the tenancy arrangements would be different to secure tenancies provided by the Council with the company essentially offering responsible managed private rented accommodation.

The narrative of the company business plan was attached to the report at Appendix A and had been modelled on developing 53 properties during the first few years of operation. Subject to a range of factors the housing company would have the potential to significantly increase its portfolio over time, with the first plan being essentially about getting the company started. The portfolio used within the model was for a scheme at Searby Road. It was emphasised that Searby Road had been used for modelling purposes only and that this location was not necessarily where development would take place.

More details on the proposal and company objectives, company structure and governance arrangements and documentation required to establish the housing company were set out in the report.

Members were supportive of the establishment of the company and were keen to see this progress, acknowledging that people in the city needed decent quality housing which this company would provide.