Filling a gap
Flintshire County Council has set up a new housing company to give it more flexibility in meeting need. Clare Budden explains the thinking behind it
NEW Homes? Yes, that IS the short name for our new housing company North East Wales Homes and it will do what it says on the tin: provide new homes to meet local need.
So why are we doing it, what is it and what will it do?
Flintshire has a relatively buoyant economy but it is quite polarised with many people working in manufacturing at below average income levels for the county and small numbers earning significantly more than the county average (see box).
So people are facing increasing difficulty in accessing affordable housing due to economic pressures, welfare reform and the challenges experienced in accessing mortgage finance. To try to find ways to address these challenges, the council had been innovating and developing new ways to achieve its affordable housing provision. However, it kept coming up against barriers to taking this forward.
Gifted homes
Over the last two years the council has reached agreement with a small number of private developers for them to gift properties as part of meeting their section 106 obligations. By the end of next year 28 properties will be built and gifted to the council’s ownership. The benefit of this arrangement is that the council has properties it can let to meet local needs for affordable housing. In addition, the properties will provide a new revenue stream, and are unencumbered assets on which the council could borrow to fund other priorities for capital funding.
To meet need in the locations where these homes are being developed the council wanted to let the properties at just below market rent. Unfortunately, the current statutory limitations which govern the council’s ability to grant tenancy agreements are very restrictive and mean that in all but exceptional circumstances the council is obliged to grant a full secure tenancy to its tenants. In addition where properties are held in the Housing Revenue Account (HRA) rents must comply with the Welsh Government rents benchmarking regime, effectively causing problems where the council wishes to charge a market or ‘affordable’ rent.
Empty homes
This issue had also proved a constraint in taking forward the management of empty homes. There has been a number of cases where an owner was happy in principle to lease their properties to the council (which had been improved with loan funding from Welsh Government), but the council again was advised that the property would either need to be let as secure tenancies, or, (if they were used for homeless people) on temporary license arrangements. The need in the area was for affordable rent, so neither option was ideal.
Private renting
The council was talking to a number of investors and private landlords to encourage growth of the private rented sector, which is increasingly becoming a tenure of choice for those unable to access mortgage finance. There were a number who were happy to invest in property but not keen to take on management responsibilities. The council is viewed as a trusted provider in this regard. In addition it made sense that where the council is working with property owners who are receiving loan funding from the public sector that it also has a management offer available.
Elderly home owners
Many home owners wish to access more suitable accommodation (for health reasons) in the county’s council stock. In some cases they are prevented from doing so as they receive insufficient priority on the council’s waiting list (they receive deduction points based on the value of their property). However, in many cases this capital value makes purchasing more suitable property very challenging.
Flintshire Council has a good supply of property suitable for older people (nearly 50 per cent of its stock) and needs additional family homes for temporary and longer term use at affordable rents. If the council were able to lease the property from the home owner for five to 10 years and let it, the council could meet identified needs while the owner would receive an income to enable them to pay rent and could be re-housed by the council into more appropriate property.
Regeneration schemes
As part of delivering town centre master plans, proposals are being developed for mixed tenure new housing developments. With traditional legal structures the council is more limited in the range of solutions it can provide as a direct provider and/or manager of new homes. Social rented homes can be provided for in the HRA but affordable rent and market rent and low cost home ownership would be challenging to deliver without a new legal structure in place.
Hence NEW Homes… NEW Homes is a company limited by shares. It has been established by Flintshire County Council, with very wide powers (it can in theory do anything it likes) but with tight oversight and scrutiny by the council (especially in its early years). It has a board of eight people made up of councillors, independent members and a senior manager in the housing service. Two board meetings have been held already and it looks, feels and operates very differently to the council.
The council made the decision to set up the company just before Christmas and it was incorporated and trading on April 3. (Watch out all – us councils can move fast too!). This amazing feat was achieved through great project management and strong and positive team work across the council (and it only cost us £4,000 in total which included purchasing a separate accounting system, developing branding, a web site and some legal advice, plus a lot of dedicated staff time in the small hours!!).
A three-year business plan has been agreed, which is fairly prudent at this stage and based on initial enquires through a very soft launch (16 in the first two weeks) may need to be more ambitious next year?
Welsh Government has supported the development of the company and has been very positive about its potential. Independent solicitors were used to navigate around state aid and other essentials. The first gifted units are in the process of being let.
We don’t see that the company as in competition with other housing providers. We are just helping to fill another gap in meeting need, particularly for the ‘squeezed middle’.
Clare Budden is head of housing at Flintshire County Council
Box: Flintshire shapshot
Employment facts
- 73% in work (3rd highest Wales)
- Average earnings £28,000
Housing market
• 73% owner occupied (67% Welsh average)
• 15% social rent
• 11.5% private rent (14% Welsh average)
House prices
• Average price of
- 2 bed house- £120,000
- 3 bed house -£144,000
Affordability
• Need to earn £23,000 to buy a two-bed lower quartile house (with 20% deposit)
- 37% households earn less than this
- Need to earn £26,000 to rent at market rents
- 43% earn less than this