Further review for Local Housing Company

On Monday 5 November, Stratford-on-Avon District Council's Cabinet will further consider the case for establishing a Local Housing Company (LHC) following the delivery of the Strategic Investment Case by GVA.  

The District Council has been examining options for intervening in the local housing market since July 2015. In September 2017 a detailed report was requested by The Cabinet to look at the possibility of creating a Local Housing Company. The report, considered by Cabinet on 24 April 2018, confirmed the strategic objectives for the Local Housing Company but it did not address specific financial and governance considerations.  

This subsequent report, to be presented to Cabinet, examines in more detail the financial implications of establishing a Local Housing Company in the buy to let market. In it, a number of key concerns have been identified.

Key concerns are:

• The impact of recent changes in legislation relating to the capitalisation of local authority projects.
• The nature of the local housing market in Stratford District and how this impacts on the margin for a return on investment for the Council.
• The poor prospect of the District Council being able to achieve the key objective of delivering more affordable houses for the District through a LHC. 

The Cabinet will therefore, be considering that the Local Housing Company is not established solely on the basis of buy-to-let funded through borrowing.  

Cllr Tony Jefferson, Leader of Stratford-on-Avon District Council says: "The reality is that the returns are limited and the risks high. We have to act responsibly with taxpayer's money."

Cllr Mark Cargill, Deputy Leader says: "The review undertaken by GVA has been beneficial in helping us to understand better the challenging housing market in which the District Council wishes to operate. It demonstrates that, given our high housing costs and moderate rental return in the affordable sector plus our limited land and financial resources, borrowing costs would preclude making sufficient financial return solely on a buy to let basis and that could harm the Council's investment.  

"The District Council remains committed to delivering its own affordable homes, but will not put taxpayer's money at risk.  

"It is apparent to me that we now focus on other development areas not contained within this report such as gaining external funding and partnering with external organisations.  Whatever happens, it will happen quickly."

The Cabinet will be considering the following actions:

• To reconvene the member Working Group to review the strategic housing objectives that the District Council is seeking to achieve.

To consider a wider range of options which may include:

• Establishment of Housing Company on an alternative model, for instance actively developing housing stock.
• Working with developers on the provision of housing stock.
• Working with a Registered Provider in partnership to deliver stock, this may be achieved through a direct investment.
• Reviewing opportunities to work in partnership with another local authority which has already established a housing company.
• Identifying the level of risk that the District Council is prepared to consider in seeking to generate a return and contribute towards affordable housing.

It is anticipated that this review will be completed by February 2019 with further recommendations to The Cabinet.