Agenda item

Current Business Model of East Devon Homes - Purpose and challenges

Minutes:

The Strategic Lead – Housing, Health and Environment outlined the current business model of East Devon Homes and explained that the original purpose was to complement EDDC’s social housing role.  The housing company was established in 2017 to be wholly owned by the council with the purpose of providing housing in the general market (outside the Housing Revenue Account (HRA) and to generate a profit to provide income to the council’s general fund.  The company was established at a time when the government was encouraging innovation and many housing authorities were establishing new delivery vehicles for housing.  It sat within the council’s investment and commercialisation agenda and recognised the constraints of the HRA.

 

The vision was to deliver housing in order to meet the following objectives:

·       To meet local housing need in East Devon;

·       To allow the council to act as a key player in housing provision in the district and potentially further afield;

·       To facilitate wider stimulation of the economy through delivery of more housing;

·       To provide a more commercial dimension to the council’s delivery model;

·       To maximise the benefits of the council’s borrowing power and access to affordable finance.

 

It was noted that to date there had been no acquisitions, either due to propositions not being viable or opportunities being redirected through the HRA.

 

The Forum discussed in detail the housing company and the following points were raised:

 

·       The housing company was a great opportunity to look into long term investment in social housing.

·       Providing permanent accommodation was more cost effective than using temporary accommodation.

·       The council should consider purchasing brown field sites in the district on which to build houses.

·       Building houses could be tied in with developing skills and training and employing local people in the building industry, therefore also raising earnings and employment in the area.

·       There was an opportunity for the housing company to also deliver social good.

·       The need for affordable housing was incontestable, with a significant increase of affordable housing in the district required.

·       The housing company was not a registered provider and therefore could not bid for government funding.  However, this funding could be bid for through the HRA.

·       Affordable housing required significant subsidy.  This was possible through the HRA but not the current housing company business plan.

·       Research should be undertaken and lessons learnt from what other local authorities were doing.  It was noted that recently there had been a huge slowdown in investment from these local housing companies.

·       There should be direction from the housing company to help self builds.  The council could purchase the land and provide planning permission and then assist people to build their own homes, thus creating much needed properties and bringing people together.

·       It was important to be clear on whether the housing company was trying to achieve social good or financial reward.  The HRA was well placed to deliver social housing as it was a registered provider, therefore how could the housing company deliver housing better than the HRA.  If the aim was to provide social housing then this should be done through the HRA.

·       The HRA could be used to build houses as well as purchase them.  This had been done in the past, with expertise being bought in by the council to help deliver this.

·       There were other pressures on the HRA, such as the carbon neutral programme and tenants’ safety, which required greater investment in the existing housing stock.

·       The HRA was the best vehicle for delivering affordable housing, but the HRA was ring fenced, borrowing was limited and there were constraints it had to operate under.

·       It was vital to be clear on what the housing company was trying to achieve and focus on the skills and successful elements.  This included resourcing and whether this was available in-house and if not, then how the skills could be acquired.

·       What could the housing company do that could not be achieved by using the HRA.  Could it be possible to mould the housing company and the HRA together in the future?

·       There was a desperate need for housing that was actually affordable.

·       The social housing waiting list was huge.

·       EDDC was not a business.  It was a council, with the role of improving the lives of its residents, rather than making money.  There was a risk involved in the council acting as a business.

·       It should be recognised that the council did not have the expertise to understand the value chain in markets and should consider buying in such expertise.

·       There was an opportunity to raise ideas, such as how the council could work with self-builders or community land trusts.

·       An arm’s length, not for profit organisation could be set up that allowed any proceeds to go back to the council to help plug the gap in funding.  Local contractors and self-builders could be used with the main objective of providing social and affordable housing.

·       The forum needed to look at the objective and then look at the best vehicle to achieve it.

·       The forum should be aware of land availability and that the housing company would be competing in a tough environment against registered providers and established developers.

·       The Council had very clearly stated the provision of subsidised housing was an absolute priority, and this was stated in the Council Plan and various strategies.

 

The forum were advised to consider what it wanted to achieve and then to decide how it was going to achieve it.  It needed to take stock and set the strategic direction the council wanted to go in, and then decide how the housing company could deliver this.  It was pointed out that the Council Plan, Housing Strategy and Housing Service Plan clearly articulated the delivery of more affordable/social housing as a corporate priority.  The Housing Company was originally established to make money for the council to plug a gap in funding.  The forum should now consider what it wanted to deliver and the most appropriate way to deliver this.  It was suggested that the Service Lead – Place, Assets and Commercialisation produce a list of options and lines of enquiry for the forum to consider at its next meeting.

 

RESOLVED:  that the current business model of East Devon homes be noted by the Housing Company Task and Finish Forum.

Supporting documents: