London borough to use housing company to boost constrained HRA output
0The London Borough of Barnet has set out proposals to boost its housing stock by channelling additional investment into a registered provider owned by its arm’s-length management organisation to complement Housing Revenue Account (HRA) funding.
A report to members of the authority’s housing and growth committee said that despite 2018’s lifting of the borrowing cap that applied to the use of HRA funds to provide new homes, Barnet could only support the delivery of 658 new council homes via that route by 2025.
3rd LATIF NORTH
March 25th, 2020, Manchester
Council treasury investment & borrowing
However, the report said the council’s preferred strategy of combining HRA funding for council homes with investment in the Opendoor Homes subsidiary of arm’s length management organisation Barnet Homes would enable the delivery of 1,700 homes over the next five years, and save more than £2.5m.
Director of growth Stephen McDonald and head of housing strategy Paul Shipway said that part of the reason Barnet was constrained in its use of HRA funds to deliver new council homes was a commitment to invest £52m in improving fire safety at existing council properties and £36m in other upgrade work.
But the directors said the authority recognised that the Opendoor Homes could deliver additional capacity above its current 341-home programme of developing affordable homes for rent on council housing land and allow the authority to take “full advantage” of its resources.
McDonald and Shipway’s report said Opendoor Homes had the potential to increase its homes count to more than 2,000 units over the next five years by a combination of new development, new acquisitions, and the transfer of 950 council-owned homes expected to become empty over the period – subject to Ministry of Housing, Communities and Local Government approval.
“As a result of this strategy and the support of Barnet Council, Opendoor Homes will become a mature and fully functioning private registered provider within the wider Barnet Council family,” the report said.
“It will be the only housing association that has Barnet as its base. It will have access to GLA grant and an increasing property portfolio that will enable it to access third-party lending to support further development.”
Some 500 of the “new” homes earmarked for Opendoor’s expansion would be existing properties the company would acquire to use as affordable temporary accommodation, supported by loan funding from Barnet.
McDonald & Shipway’s report said the move would be a cheaper alternative to existing arrangements for temporary accommodation involving the private-rented sector and would save the borough £529,000 in the years to 2024/25, part of which would come from interest on loans to Opendoor.
The figure forms part of a total of £2.51m in savings from increasing Opendoor Homes’ asset base that was identified by the report.
It included £1.90m from annual premiums related to the “trickle transfer” of council housing stock to Opendoor Homes, as individual properties became vacant.
Barnet said revenue from the transferred homes would also allow Opendoor to fund the building of new homes, and suggested 40 new properties could result from this route over the plan period.
Banet said it also expected to achieve savings of £83,000 over the five-year period through the transfer of 156 homes it had already acquired for use as temporary affordable accommodation to Opendoor.
The savings would come from the transfer of debt-management and a premium of 1.24% interest on loans made to the company, it said.
McDonald & Shipway said Barnet Homes’ development function was responsible for delivering the council’s HRA-funded new homes and Opendoor Homes’ pipeline.
They said a recent independent review by housing consultant Municipal had concluded that Barnet Homes’ new properties had a “lower average build cost than other local authorities” and had generated “positive resident feedback”.
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