Gateway to social benefits – Enfield’s housing enterprise
0For years Enfield’s need for temporary housing had been falling. But policy reform and changes in the housing market saw it start to climb once more. One of the answers was a new company – Housing Gateway. James Rolfe, Enfield Council’s director of finance and Gateway’s managing director, talks about the company’s objectives and its business model.
James Rolfe
Room151: How did Housing Gateway come about?
James Rolfe (JR): After many years years of declining numbers of families in temporary accommodation about four years ago the council started seeing increasing numbers.
That was basically as a result of changing government policies and also the housing market as it is in London. The council had to put in place a number of initiatives to manage that demand and one of those was to purchase our own properties. And the way the council does that is through Housing Gateway which then leases them back to Enfield Council.
We can do that very cost effectively. It’s financially sustainable, it’s a good financial model, but it also provides … accommodation at an affordable price for local people. It also demonstrates very clearly to the market that we can provide good quality accommodation as well.
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Inaugural FD’s Summit on housing and infrastructure development finance
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Room151: What’s the progress of Housing Gateway so far?
JR: We’ve got nearly 200 properties that we own and nearly all of those are tenanted, so we are well on our way to hitting our long-term aims.
The great majority of those [properties] are in the borough and those that aren’t are in the vicinity of the borough, within two or three miles.
What we’ve been able to do through that purchasing approach is keep families together in the local area. Families haven’t, therefore, needed to move to other parts of the country.
There is lot’s of housing activity that Enfield does, but Housing Gateway [provides] temporary accommodation. We’re basically a landlord who rents property back to the council.
In paying the rent it’s much cheaper for [the council] than if they were renting from the local private sector.
Room151: What’s the financial model?
JR: The financial modelling that was done was initially sponsored by the government. We were a pilot site when government was looking at this at the end of 2013.
It’s a classic financial model for a start-up. It looks at the income we have coming in from rent and the amount of money we need to pay out in borrowing costs, maintenance and repairs – all that sort of thing – in order to keep the properties in good condition and occupied.
So we’ve got clear targets for acquisitions, for repairs, maintenance, tenanting and bad debts. So we run it just like a private company, as if it was your money or mine being used to buy those properties ourselves.
The total loan over the five-year initial planned life of Housing Gateway was £100m. It came from bowing from the Public Works Loans Board.
There’s a small margin on it. I’ve given various bits of the financial picture but I haven’t given the whole one because the housing market is very competitive in London and we’re very careful about not sharing too much of the financial model.
What we are doing is using good commercial practice and good entrepreneurial ideas to deliver something that is of social benefit.
The company has got a board, it’s non-executive directors who bring experience in from the private sector. [The board] also has councillors and officers on it.
When we began we ran like a start up. We had the initial loan for the procurement of the properties, but we also had a working capital start up loan [included in the £100m figure] to cover the period from initial outlay to cash actually coming in from tenants.
Room151: Why a limited company?
JR: It’s not an arms length management organisation like an ALMO. It’s a private company as permitted under section 75 of the Local Government Act 2003. It’s a local government trading company. That just seemed the simplest structure for our needs. We took advice whether there were any complexities we needed to be aware of. But a straight forward local authority trading company registered with Companies House, limited by shares, owned by the local authority – there was no need to do anything more complicated.
Room151: The business model says Housing Gateway will be run in a commercial way. What does that mean?
JR: We have, on the board, directors of the company who have all the responsibilities of company directors and they are registered with Companies House.
And that means we meet on a monthly basis taking finance and review reports, and any other policy and operational issues that are of importance – and we are responsible for making sure that we have a positive cash flow, so that we are always solvent. And for making a surplus as well.
It’s just the same as running a company but always always with the focus in mind of providing accommodation that provides the temporary accommodation needs of Enfield Council.
Room151: What risks did you see?
JR: It was a classic risk analysis. There was the financial risk – all about occupancy. In the purchase decisions there’re risks of whether it meets the financial model. There’s policy decisions because the housing world is changing all the time. And there’s technical risk, as well, because when you are buying property, even housing, you’ve always got to worry about whether the properties are sound and safe.
We always do risk management, we’ve got a good risk register, we’ve had strategic risk assessment sessions with the board … and we put in place all the usual mitigating factors to ensure those risks were managed.
Ultimately, given the London housing market is rising, and there’s no sign that demand for housing is reducing, we took the view that purchasing houses within the price point in the financial model – as long we keep doing that, and we put in place the appropriate mechanisms to make sure the properties are safe – was an entirely sensible and manageable thing to do.
Over the longer term the housing market continues to grow … because Enfield is relatively inexpensive by London standards there continues to be good demand for properties in the borough.
For Housing Gateway we think for a long time to come there will be demand for the company’s properties.
We’ve got over 3,000 families in temporary accommodation and Housing Gateway has got about 200 properties. That’s an awfully big reduction before there’s no demand for Housing Gateway properties.
Within the London context the risk around the housing market itself can be easily mitigated.
I think in the short term [ the major risk] was trying a new venture that the council hadn’t done before. So, there was a big learning curve for people to face – and they really applied themselves to the task. We took external guidance and expertise to get us going initially, but Housing Gateway is now run almost entirely by council staff. It runs very well.
Room151: You have some funding from the Greater London Authority (GLA)?
JR: We have a relatively small, but very welcome, grant of about £2m [for renovations].
All of our properties require some degree of renovation. For some it may be no more than a lick of paint. For others it may be quite substantial – a new kitchen, that sort of thing. For others still, we might need to do some knocking down of internal walls to make the layout more acceptable.
The GLA grant pays for part of that but actually there is an allowance within the financial model for renovations and refurbishments. We have a budget for every property, and overall we are well within that budget.
Room151: Will you be extending the model into new build? 
JR: Housing Gateway is a company solely focused on temporary accommodation. We may, in time, develop our own properties for temporary accommodation, or we may acquire bigger properties – some multiple properties – but Housing Gateway is focused only on temporary accommodation.
What we have is a separate company called Enfield Innovations and that is the company that will offer properties at market rents … and that’s new build.
Innovations is just getting off the ground. Where Gateway is … going great guns Innovations is just starting up… . At the moment we don’t have any properties, they are due later in the year.
Room151: How did Innovations come about?
JR: Exactly the same kind of thinking – are there any opportunities to get into the market to provide good quality housing at a reasonable price point. And as a result of some major regeneration work, a developer delivered some properties the council is going to rent out at market rents.
Room151: Local authorities are currently becoming involved in housing in a number of very different ways?
JR: It varies depending on the individual location. The housing demands in London are such that councils have to take a proactive approach, whether its through planning or whether its through big regeneration programmes or facilitating [housing] directly through individual construction projects.
And because of the limited resources councils now have we have to be entrepreneurial to generate income. It’s a win win situation. There are opportunities for councils to use their commercial skills to do some really good work with a social and community benefit, and potentially raise money for the council which can be reinvested in service delivery.
Room151: Approaching 200 properties with Gateway, what have you learned
along the way
JR: That we can do this and we’ve done a really good job. That it’s possible to provide good quality property in London at a reasonable price, by London standards. And also councillors were right in having the confidence in allowing officers to let us get on and do this.
Room151: What would you say to other local authorities?
JR: You should give these things a go. You should do it in a carefully considered way but ultimately councils do have the skills, or can bring in the skills in and nurture them, to make it happen.
Room151: Is it difficult to work across two organisation, both Enfield Council and Housing Gateway?
JR: No. We’ve got very clear protocols and procedures to deal with any possible conflicts of interest. We have separate company secretaries to advise on that.
Ultimately, someone in my position is ideally placed to see the benefits to the council of having these kinds of arrangements in place. Although, I can see the risks, and that may be what you’re alluding to, actually there’s every opportunity to make it a win win.
