To consider the above report
The Chief Executive, Duncan Sharkey, explained that urgent decisions were not regular occurrences but there was provision in the constitution to take such action following consultation with the Chairman of the relevant Overview and Scrutiny Panel. In taking the decision, he had consulted with the Chairman of the Infrastructure O&S Panel and the Mayor as Chairman of Council, as normally such an addition to the capital programme would come to full Council. The Leader of the Council, Group Leaders and the Chairman of the Corporate O&S Panel were also notified. The decision was urgent because the council only had a certain number of days’ notice of the auction. The council had been successful at auction in purchasing the property at a figure lower than it would have been prepared to pay. The property would be used by the housing team and also offered a savings opportunity.
The Mayor explained that there would now be an opportunity for Members to ask questions of the Chief Executive.
Councillor W. Da Costa asked for clarity on the authority for the decision, which he believed to be the homelessness and rough sleeping strategy. He asked how many families were in temporary accommodation after the extra 10 units that had been acquired. Councillor W. Da Costa commented that the current local authority housing rate meant the ten units would equate to £113,000 but the report said the council was only getting £95,000-96,000 which would suggest a 2-month non-occupancy rate during the period. He would have expected the extra increment of 56% for temporary accommodation to be much higher. Councillor W. Da Costa requested confirmation of the rate of return. In relation to the environmental case he asked whether the refurbishment would look to use carbon neutral processes and would an ecologist be asked to look at biodiversity enhancements. In terms of ongoing operations, he asked if the property would have net zero energy use.
Duncan Sharkey responded that the decision supported both the current and emerging strategy to look to improve the quality of and control the council had over accommodation and reduce costs. The current figures were 250 homeless households in temporary accommodation, down from 268 in December 2020. The purchase did not change the figures as the council already used eight of the nine available units. Part of the rationale to purchase the property was the potential to purchase further units in future. Mr Sharkey confirmed that the provision that was made for voids and bad debt was 4% of the income costs. He also pointed out that the appraisal and the finances were different things. The appraisal made clear that had the council paid the maximum it had been prepared to go to, the payback would have been around 20 years. The council would be borrowing over a longer term thereby reducing the minimum repayment provision and the interest in the short term and inflation would eat away at those figures over time. The property did pay for itself in appraisal terms over a 20-year period and made a return on top. The figures Councillor W. Da Costa quoted were at the assumed level of local housing allowance that the council wanted to pay rather than the current private sector rate which could be £100-£150 more. In relation to sustainability, the council would look to do as much as it could on biodiversity and energy efficiency, as it did with all council properties. It was important to bear in mind that older residential properties were unlikely to get to passive house standards but as technology improved improvements would be made.
Councillor Werner asked what the benefit was of transferring the property to the RBWM Property Company and why has this been part of the urgent decision when it was only the authorisation to purchase at auction that was needed. The urgent decision allowed for an upper bidding limit of £1.4m with on costs of £.147m, giving a total capital funding requirement of £1.6m, however the winning bid was only £1.2m therefore he asked why Council was still asked to add £1.6m to the capital programme. Councillor Werner asked if the council was planning to house families with children in areas that were not self-contained. He asked if the council had an exemption from the requirement not to house families in such conditions for more than 6 weeks, i.e. would the B&B cease to be classed as privately owned. In relation to sustainability, he asked for the energy efficiency rating of the building and whether the refurbishment costs took into account appropriate measures. Councillor Werner also commented that he was aware that some neighbours had expressed concern about anti-social behaviour associated with the property and asked what additional safeguards had been put in.
Duncan Sharkey responded that the transfer to the Property Company was in the decision because it was needed for the appraisal. Before seeking Secretary of State approval for the transfer, the council would make sure the property was held in the best way for the taxpayer and resident. The decision to add £1.6m to the capital programme had already been made prior to the auction. The paper was reporting that this had already happened. The expectation was that the balance would be handed back by the end of the financial year. However, if there was a need for investment, for example to improve energy efficiency that may be something the capital programme board would be happy to do. A very small allowance had been made in oncosts for refurbishment of £1000 per room and a small sum for general repairs. Duncan Sharkey explained this was before any detailed survey had been undertaken.
Councillor Hill asked how the council had arrived at the price it was prepared to pay and the estimates for refurbishment. If it did not work, he also asked for details of the exit strategy.
Duncan Sharkey explained that the estimates for the bid were based on the appraisal for the use of the property as temporary accommodation. This was calculated by looking at what the council currently paid for accommodation and the amount it would pay in future. The appraisal was based on likely income based on local authority housing rates. Any tenant eligible for housing benefit would be expected to make a claim. £1.2m was the reserve price therefore any lower bid would have been unsuccessful. The exit strategy if the council decided the property would not be operated in future would be disposal. It had an ongoing use as a B&B or potential conversion as a residential property.
It was confirmed that the current energy efficiency rating for the property was EPC – rating C which complied with all regulations to let the building.
Councillor Davey commented that in 2011 the cedar tree outside the property was going to be chopped down as there was talk of subsidence. He therefore asked if this was an issue in the building survey.
Duncan Sharkey explained that on the timeframe available it had not been possible to undertake a comprehensive survey. A visual inspection had not detected significant subsidence other than normal settling for a property of that age. The council would have some warranty from the auction house and vendor for certain issues.
Councillor L. Jones asked if, when the appropriate place to hold the property was being considered, that the wider finance situation would be taken into account including corporation tax.
Duncan Sharkey confirmed that the work would be undertaken in full. The Property Company had been set up to allow the council to manage residential accommodation. A review of the Property Company was underway, but he hoped that the desire to hold stock would remain as an objective. The benefit of transfer would ensure better management by experienced residential managers.
Councillor Rayner explained that the property was in her ward. It was important to house people in temporary accommodation as close to home as possible. Since the report had been published, she had been contacted by a number of concerned residents as the property was opposite a primary school. The residents had put in contact with the relevant officers and Lead Member to address the concerns. A meeting had been held earlier that day with the school.
Councillor McWilliams commented that the decision showed the council putting its principles into action to support vulnerable people. Three years previously the borough had been condemned for its approach to homelessness. Now it was buying stock to deliver services at lower cost. The covid situation would unfortunately increase the rates of homelessness, particularly when the furlough scheme and eviction ban ended. Councillor McWilliams explained that the council would look to establish a residents meeting to address the concerns raised. The meeting with the school leadership earlier that day had been productive. Comprehensive risk assessments for all new residents would be undertaken.
Councillor Johnson commented that the decision was supportive of the broader strategy to ensure an ongoing package of support and deal with the current levels of homelessness and any future growth. There was a need to be fleet of foot in property acquisition, however such an urgent decision would be the exception rather than the rule.
It was proposed by Councillor Johnson, seconded by Councillor McWilliams, and
RESOLVED UNANIMOUSLY: That Council notes that the urgent decision has been taken and that up to £1,611,500 is added to the 2021/2022 Capital Programme.
- Urgent Decision, item 102. PDF 247 KB
- Restricted enclosure View the reasons why document 102./2 is restricted