• Home
  • About
  • Subscribe
  • LATIF
  • Conferences
  • Dashboard
  • Edit My Profile
  • Log In
  • Logout
  • Register
  • Edit this post

Room 151

  • 151 BRIEF

    What's New?

  • EAPF criticised for water company investments

    August 10, 2022

  • Welsh pension fund confirms £50m investment in clean energy

    August 10, 2022

  • Inflation ‘disastrous’ for local services, warns LGA

    August 10, 2022

  • Consultation opens into care charging reforms

    August 9, 2022

  • ADASS survey: ‘worst fears confirmed for adult social care’

    August 5, 2022

  • GMCA to unlock funds for home energy-efficiency upgrades

    August 4, 2022

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews
  • Briefs

Finance chief urges auditor scrutiny of PRS models

0
  • by Gavin Hinks
  • in Development · Funding
  • — 22 Sep, 2016

Local authority finance chiefs have been warned to have the financial models of their housing and infrastructure developments independently audited to avoid the risk of errors before projects get under way.

The caution was issued by Jonathan Bunt, strategic director at Barking and Dagenham Council, while reflecting on his authority’s development of homes for the private rented sector.

He said that a mistake was found in the model for the council’s first project for 477 units on previously contaminated land.

“We had a hugely complex financial model… albeit it was a prudent model. But the single biggest piece of advice when you are exposed to this is to have the model audited by someone independent.

“I insisted on it and they found an error. It wasn’t huge and we fixed it. But [among] the range of things it’s worth getting sacked for, an error in someone else’s spreadsheet is not one of them…”

Bunt was speaking at the inaugural Room151 FD’s Summit on housing and infrastructure development finance. At the event, held at the London Stock Exchange, Bunt also revealed that Barking and Dagenham had placed the properties with its own housing team to let, but the department was still fully developing its distinct offer to dealing with properties going into the private rented market.

Bunt said that during a second phase of development in the borough, a small number of units had been unlet when the development was completed, reducing potential year one profits.

“That journey with our housing department has been an interesting one in getting them to understand the concept of private rented housing – and the expectation that goes with that, distinct from how we maybe work with social tenants. It is a journey we are still on,” said Bunt.

Barking and Dagenham has now completed two housing development phases, the second comprised of 144 units. All the properties are let at sub market rents, predominantly at 80% of market rent but with some available at 50% and 65%.

The first project was developed with institutional funder Long Harbour while the second was completed using a loan from the European Investment Bank. The council is now working on a third phase but has also identified a much larger ambition with a draft plan in the pipeline and potential schemes valued at up to £750m.

Bunt said: “We believe by investing money at scale we can generate net revenue cash for the borough that will help with financial sustainability, aid physical regeneration and help fund front line services.”

Bunt said before the development began the council had worked to clarify to the Audit Commission that it was not social housing and should therefore not be accounted for under the Housing Revenue Account.

“We did a lot of the legwork for the other local authorities that came after us in getting that treatment clear,” said Bunt.

He said that using an institutional funder on the initial deal had helped establish the distinction with social housing.

“In our conversations with the Audit Commission and DCLG, the use of an institutional funder, rather than a traditional local authority source like PWLB, helped put some distance in their minds between what we were doing and the HRA. That was quite important.”

Bunt said councils wishing to follow the example of Barking and Dagenham should consider a close-knit and empowered team to drive projects to completion.
But he also recommended sound tax advice for development projects.

“Make sure you get the right tax advice. It seems expensive but it will repay you umpteen times over,” said Bunt.

Get the Room151 Newsletter

Share

You may also like...

  • Simon Clarke: councils need to ‘prioritise’ spending to deliver core services 4th Jul, 2022
  • Stewardship of public funds: the way forward 18th Feb, 2022
  • Impact Awards: Case studies reveal ‘vital contribution’ of finance 25th Mar, 2021
  • Is local government funding “broken”? 12th Feb, 2021

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • 151 BRIEFS – WHAT’s NEW?

    • Inflation ‘disastrous’ for local services, warns LGA
    • Consultation opens into care charging reforms
    • ADASS survey: ‘worst fears confirmed for adult social care’
    • GMCA to unlock funds for home energy-efficiency upgrades
    • Levelling up committee calls for urgent boost to social care funding
  • Room151’s LGPS Roundtables

    Biodiversity
    Valuations & Risk
    LGPS Women

  • Room151’s LGPS Roundtables

    Biodiversity
    LGPS Women
    Valuations & Risk
  • Latest tweets

    Room151 12 hours ago

    Which LGPS pools and funds are attending the LGPS Investment Forum on Nov 2 & the LGPS Private Markets Forum on Nov 1st? Answer here: lnkd.in/eDHU8tuy pic.twitter.com/D3gd63Rh7F

    Room151 1 day ago

    LGPS and levelling up: nothing to fear but fear itself: There have been a number of objections to government plans for LGPS funds to invest 5% of their assets in local projects. But George Graham says these objections can be[...] dlvr.it/SWL7vt pic.twitter.com/ebwBEkZTy4

    Room151 1 day ago

    George Graham @SYpensions @bordertocoast channels his inner FDR in a call for local government pension funds to avoid the fear factor and embrace levelling up #LGPS #localgov room151.co.uk/local-governme…

    Room151 2 days ago

    Changes to rules on capital receipts raise wider questions: Stephen Kitching argues that DLUHC’s latest rule changes are part of a series following on from revisions to MRP guidance and the purchase of commercial property. He questions whether… dlvr.it/SWGqKC pic.twitter.com/Ycr5hWZDPk

    Room151 5 days ago

    ‘No ifs, no buts’: the Bank of England continues its battle with inflation: Partner Content: CCLA Investment Management’s Robert Evans discusses the MPC’s 0.5% increase in the Official Bank Rate and its ongoing commitment to the 2% inflation target… dlvr.it/SW7SNC pic.twitter.com/ryOzYRSNA9

    Room151 6 days ago

    DLUHC changes rules on flexible use of capital receipts: The levelling up secretary has written to all council leaders to amend the rules concerning the flexible use of capital receipts to fund transformation projects. In his letter, Greg Clark[...] dlvr.it/SW3jyX pic.twitter.com/KEhSSaMITl

    Room151 1 week ago

    Local audit and financial reporting: let’s take back control: Mazars’ Suresh Patel suggests three steps that auditors and council finance teams should take to help get financial reporting and local audit back on track. Following my recent appearance… dlvr.it/SW0PfV pic.twitter.com/miL7pjukce

    Room151 1 week ago

    The case for residential investment: income, impact and resilience: Partner Content: Emma Gullifer from Columbia Threadneedle discusses the options for pension funds looking to invest in residential property including the Build-to-Rent market.… dlvr.it/SVzKwN pic.twitter.com/hdgZ4zKt4H

    Room151 1 week ago

    Draft accounts: delays continue despite deadline dash: Dan Bates discusses the latest data on the publication of local authority accounts and examines why so many councils missed the 31 July deadline. Sunday 31 July 2022 was the[...] dlvr.it/SVx2ZT pic.twitter.com/gdELhD3Yis

  • Register to become a Room151 user

  • Previous story CIPFA’s risk study registration: Losing interest in treasury management?
  • Next story News round-up: Manchester development deal, multi-year settlement offer, business rates powers, LGPS guidance

© Copyright 2022 Room 151. Typegrid Theme by WPBandit.

0 shares