Agenda item

REPORT OF THE DEPUTY CHIEF EXECUTIVE

To inform the Committee of the investigations that have been undertaken with regard to the potential options for investing in residential property on a buy to let or development basis.

RESOLVED: That the recommendations contained in the report entitled Options for Housing Investment Company be supported.

REASON FOR DECISION: To enable the Overview and Scrutiny Committee to comment on the report entitled Options for Housing Investment Company Update prior to consideration by Cabinet.

The Deputy Chief Executive introduced the report entitled Options for Housing Investment Company.

He reminded Members that the capital programme allocated £3 million to housing investment and officers had been looking at potential options.

At the time of commissioning the business case the assumption had been that there was a need to turn capital into revenue as quickly as possible, however this assumption changed, as the waste contract came to fruition leading to significant revenue savings and the pressure on revenue being less urgent.

The starting point for the business case was the buy to let model, as that was the quickest was to generate income, however the margins were not significant enough to proceed with that model.

It was therefore proposed that different options be considered being: to convert and let existing assets and/or consider other development options either on our own or in partnership.

The advantage of development would be that the Council could retain ownership for letting or could develop and sell for a capital receipt or a combination of both.

A trading Company would need to be established in order to undertake any of the proposals.

Further consideration of this item was considered following the Part II report (Minute 98 refers).

The Deputy Chief Executive advised Members that the Cabinet Sub-Committee met last week and agreed Recommendations 2.1 and 2.2.

They recommended that Cabinet approve the principal of setting up a wholly owned holding company and trading companies for the purposes of development and letting of existing and future assets.

Members queried whether the proposed new companies would employ paid staff and whether this scenario would make the proposals unprofitable.

The Deputy Executive advised that these issues would be considered for each individual project, although it was initially unlikely that the company would have any paid employees, it would be operated by Council staff or consultants therefore the overheads would be kept as low as possible.

Any staffing considerations would be project specific, with expertise only being brought in for a particular project. There was no suggestion that a company would be set up with permanent paid employees at this point.

Members noted that the original drive for this was to provide revenue funding as quickly as possible and that this imperative had become less urgent. They queried whether consideration had been given, at the point when needing to generate income quickly had reduced, to whether housing remained the right sector to continue with or whether another sector would be more appropriate.

The Deputy Chief Executive advised that, at the point that the urgency to create revenue income changed, the outline business case was sufficiently far advanced that it did not make sense to end the project. However other investment options were being considered.

Officers continued to believe that housing options remained a potentially good investment for the Council and was one of the options that had always been considered, it was the pressures in the revenue and capital budgets that had changed. This was still an option worth considering and it was worth acknowledging that a large number of local authorities were looking at residential properties as a way to generate both revenue and capital income.

He stressed that this project was not being considered to the detriment of everything else and the Cabinet Sub-Committee noted that, although this particular project was about residential property, there were options around commercial property, which the Council already generated approximately £1 million of income per year. The market regarding commercial properties would continue to be reviewed and opportunities investigated.

Although the required revenue savings had been achieved in the sort term, there remained a budget gap and it was wise to build in additional sources of revenue income, to safeguard against any future changes therefore, the Council would also be considering new areas of service or extensions of existing services for generating income.

RESOLVED: That the recommendations contained in the report entitled Options for Housing Investment Company be supported.

REASON FOR DECISION: To enable the Overview and Scrutiny Committee to comment on the report entitled Options for Housing Investment Company Update prior to consideration by Cabinet.