Bath & North East Somerset Council
DECISION MAKER:	Cllr Vic Pritchard, Cabinet Member for Adult Social Services & Housing; Cllr Malcolm Hanney, Cabinet Member for Resources
DECISION DATE:	On or after 20th October 2007	PAPER NUMBER		1
TITLE:	Housing Capital Programme 2008/09	EXECUTIVE FORWARD PLAN REFERENCE:
		E	1691
WARD:	All
AN OPEN PUBLIC ITEM
List of attachments to this report: Appendix 1a - Affordable Housing Need and Demand Analysis and Modelling of Affordable Housing Options of Assumed Target of 375 Units over 5 Years Appendix 1b - Modelling Affordable Housing Options 2008 -2010 Capital Bid Programme Appendix 2 - Summary Capital Programme Current Programme and New Bids Appendix 3 - Benchmark of LA Expenditure on Affordable Housing 2005/06

1 THE ISSUE

1.1 This report seeks agreement for submission of funding bids to the Housing Corporation in November 2007. It goes on to outline a number of options that would form the basis of a strategy for housing capital investment in the medium-term.

2 RECOMMENDATION

The Cabinet members are asked to agree:

2.1 The bid set out in Appendix 2 be submitted to the Housing Corporation in accordance with the timetable once it has been confirmed, subject to any final amendments arising from changes to housing policy/funding announced between the date of decision and submission of bid, to be recommended by the Director of Adult Social Services & Housing and agreed by the Cabinet Members.

2.2 That allowance is made for the Strategic Housing Market Assessment findings, which will be due in 2008, to influence the Council's future affordable housing Supplementary Planning Document (SPD) and its funding strategy from 2009 onwards.

3 FINANCIAL IMPLICATIONS

3.1 These are contained throughout the report and appendices.

3.2 The Housing Capital Budget for 2007/08 is set at £4.545M. The budget for future years has not yet been set but the Councils indicative financial plan includes approximately £4.628m each financial year including the allocation for BWR.

3.3 This bid will, in principle, commit the Council to £5.342m of capital funding for new schemes over the next three years in addition to the funding for BWR. The Housing Corporation goes through a process of prioritisation in light of all bids received and it is unlikely that all the schemes making up the bid set out in Appendix 2 will secure Housing Corporation funding and/or, in turn, require Local Authority grant funding. In the event that all schemes are successful this will add a further £2.219m to the indicative financial plan shown in Appendix 2 for 2008/09 and 2009/10.

3.4 The revenue impact of the programme is £30,000 in 2008/09 but a total of £210,000 by 2010/11 based on all schemes being approved and completed. This is based on the additional capital above the council indicative programme. This sum will need to be included within the financial plan for Adult Social Services and Housing.

3.5 From 1999 the Council set a Capital Programme for Housing of £3m each year for five years as part of the agreement for Stock Transfer. This was part of the commitment to deliver 600 affordable homes by the end of 2005. There is now no obligation for the Council to set a specific level of Housing Capital Budget to meet social housing commitments although the Council does have a requirement to match fund the disabled facilities grant capital allocation by 40% which amounts to £251,333 per annum.

3.6 Appendix 3 to this report sets out benchmarking information on a) total Local Authority expenditure on affordable housing in 2005/06; and b) average Local Authority funding per dwelling in 2005/06. This information shows that within its Group, Bath & North East Somerset made the greatest investment in affordable housing (£2m) with North Somerset Unitary Authority making the next highest investment (£1.9m). Comparing average investment per dwelling, Bath & North East Somerset ranked 6 out of 8 within its group (£36,000 per dwelling compared with the highest per dwelling investment of £93,000 per dwelling in the East Riding of Yorkshire).

3.7 Clearly, the benchmarking information contained in Appendix 3 represents a one-year "snapshot". Local Authority capital investment in new affordable housing does vary year-on-year. In part, the level of investment will reflect whether or not a transfer of the Local Authority's housing stock has taken place and what agreements/promises were made as part of any stock transfer about the re-investment of the capital receipt. In the case of Bath & North East Somerset, the investment made in 2005/06 represents the final year of the Council's commitment to deliver 600 new affordable homes as outlined in paragraph 3.6.

4 THE REPORT

4.1 Housing Corporation Bidding Round

4.2 The deadline for submission of bids for Housing Corporation funding for 2008/09-09/10 is early November 2007 (date yet to be published). As is usually the case, the bidding process requires supporting information from the Local Authority, which includes indicative commitment of the Local Authority's own resources and confirmation of "fit" with the Housing Strategy and other strategic priorities.

4.3 The challenge for this particular bidding round is to take account of proposals outlined in the Housing Green paper; anticipate the outcome of the Autumn Comprehensive Spending Review; and reflect any planned changes in local priorities in light of a change of political administration following the May 2007 local elections and/or other local or national policy shifts, including progress towards integration with the Primary Care Trust.

4.4 Given the relatively recent publication of the Housing Green Paper and the possible changes in legislation/guidance and funding that are likely to result, the timing for this Housing Corporation funding bidding round is not ideal. To some extent this has been recognised by the fact that the Housing Corporation has already confirmed that grant funding will only be allocated to schemes with a high probability of delivery with the remainder of the funding held back for allocation in 2008 (process and timetable yet to be confirmed).

4.5 Attached at Appendix 2 is a financial summary of the current programme and planned programme for 2007/08 to 2009/10. This sets out the financial commitment that will be made for the next three financial years including the proposed bid to the housing corporation. The next comprehensive bidding round will be during 2009/10 and at this time it will be necessary to review commitments in light of the agreed strategy and to take account of any significant changes in Government policy.

4.6 Housing Green Paper

4.7 The Housing Green Paper "Homes for the Future: more affordable, more sustainable" was published on 23 July 2007. The consultation period ends on 15 October.

4.8 The Green Paper sets out an ambitious agenda to increase the supply of housing and speed up the delivery of new homes through the planning process. Some of the key points raised by the paper include:

> Raising the annual housing-building target from 200,000 per year to 240,000 up until 2010, with more public sector land to be used for new homes;

> Launch of a prospectus for five new eco towns and villages with invitations to councils to bid;

>

Consultation on new powers for councils to set up Housing Development Companies for building more affordable homes. The Government is seeking views on allowing councils to keep rents from any new social units built, and retaining right-to-buy receipts from then in the future;

> Councils that deliver more houses than expected will get more money in the form of a new Housing and Planning Delivery Grant;

> A3300 million for Community Infrastructure Funds in growth areas, points and new eco towns;

> Further consultation to be undertaken on Planning Gain Supplement;

> Implementation of measures to speed up the planning system.

4.9 The Comprehensive Spending Review 2007 will be the first opportunity for the Government to set out how it will support the proposals in the Green Paper, including a significant increase in public investment in new social housing.

4.10 Further clarity on the final shape of the Housing White Paper and subsequent Act and on the outcome of the Comprehensive Spending Review will be too late to take account of in the bid to the Housing Corporation in November 2007 unless the timetable for bid submission slips further. However, in light of the decision to hold back a proportion of Housing Corporation grant funding until next year, there may be an opportunity to refine or adjust bids during 2008/09.

4.11 The Need for Affordable Housing

4.12 The need for affordable housing was detailed in the "Housing Need & Affordability Assessment" undertaken by Professor Glen Bramley of Heriot-Watt University in May 2005. This calculated the average net need for affordable housing across Bath & North East Somerset as 664 units per year for the three-year period, 2006 to 2009 and is made up as follows:

Bath City 268

Keynsham 97

Norton-Radstock 180

NE Somerset Rural 119

Total 664

4.13 This net need is after the available supply of affordable housing re-lets has been exhausted. These figures reflect Professor Bramley's assumption that there will be a decline in housing market values during the period leading up to 2009. Market values have in fact risen by approximately 6% annually (Land Register) in the area, which means that the need is significantly higher then assumed by Bramley.

4.14 To put the Bramley need figures that estimate the need for 664 units per year into context, housing data shows that a total of 610 new affordable housing units were provided during the 7 year period between 1999 - 2006 which equates to and average of 87 units each year. If affordable housing development were to continue at this rate, there would be a shortfall of 577 units annually.

4.15 The Regional Spatial Strategy (RSS) for the South West will set the strategic planning framework across the South West for the twenty year period to 2026. The draft RSS was published in June 2006 and it is anticipated that following an Examination in Public (EIP) the RSS will be approved in 2008.

4.16 The draft RSS sets out the spatial strategy to guide future development and also the policy framework on key issues including housing, economic development, the environment and transport. The draft RSS proposes a total of 775 new dwellings per year across Bath & North East Somerset from 2006 to 2026 making a total of 15,500. This 775 is broken down geographically as follows:

> within Bath urban area = 300 (6,000 in total)

> urban extension south of BATH & North East Somerset = 75 (1,500)

> urban extension south east of Bristol in Bath & North East Somerset area = 300 (6,000)

> remainder of Bath & North East Somerset = 100 (2,000)

4.17 The affordable housing policy H1 of the draft RSS seeks to ensure that 30 -60% of all housing provided is affordable. If this policy remains unchanged in the approved RSS it would provide Bath & North East Somerset Council with the opportunity to potentially seek a much higher proportion of affordable housing through its Local Development Documents if this can be justified by local studies of Housing Need.

4.18 Types of Affordable Housing

4.19 Taking the current number of households on the Council's Housing Register as a crude measure of housing need there are, at the time of writing, nearly 6,000 households on the register of which 4,883 live within the Bath & North East Somerset area. This figure is increasing by around 100 households per month and it is therefore unlikely that the Council will, in the foreseeable future, fully address the housing needs of the area. Within this overall figure, the level of housing need varies from those with the most extreme form of housing need, which is homelessness, to those whose need could be characterised as "aspirational", for example, people who wish to move to a better location or who want a house with a garden rather than a flat.

4.20 In order to consider the possible approaches to meeting housing need, it is helpful to clarify the different types of affordable housing and also to understand that whilst one approach might be to only address the most severe form of housing need, housing aimed at preventing an escalation of housing need can form an important part of a long-term strategy.

4.21 Social Rented - Housing that is subsidised by Government or, through planning policy, by the developer or more likely the land owner and thus provided at rents considerably lower than market rent. Social rented housing generally is only accessible to those people with a high level of housing need, including those who are homeless.

4.22 Intermediate Market Rent - Housing at rents above those of social rent but below market rents. Most usually accessed by households who have insufficient housing need to access social rented housing but also insufficient household income to rent or buy at full market value or even intermediate home ownership (as described in paragraph 4.23).

4.23 Intermediate Home Ownership - housing bought as part of a shared ownership/equity share scheme, whereby the purchaser - at least initially - buys a proportion of the equity in a home, while the remaining share is owned by a Housing Association or other agency. There are a range of Shared Equity products on the market including Social Home Buy; New Build Home Buy or Shared Ownership; and Existing Home Buy

4.24 Discounted Sale - housing with a discount for the purchaser on its market price. The purchaser buys the whole home at a reduced rate. The resale is normally restricted by means of covenant and therefore remains discounted in perpetuity.

4.25 Key Worker Accommodation which includes New Build Home Buy and Intermediate Affordable Rent. The definition of key workers varies over time and location depending on local priorities and workforce needs but generally include nurses, social workers, teachers and members of the police and fire services.

4.26 Supported Housing - a range of housing provided with support and/or care services designed to promote independence and accessible to people with a range of support/care needs including older people, adults with learning difficulties and mental health needs. Most supported housing is social rented but there is also some need for intermediate market rent or home ownership.

4.27 Delivery of Affordable Housing

4.28 Some new affordable housing is delivered by the market without intervention by the Local Authority. "Starter homes" would fall into this category. However, given market values in Bath & North East Somerset, starter homes sold through the open market are only "affordable" to households with an income significantly above the national average.

4.29 A proportion of new affordable housing is delivered without direct public subsidy through planning policy as detailed in paragraphs 4.30-4.39. Delivery of affordable housing through planning policy does, however, have implications in respect of the effective use of resources. There is a limit to the extent to which the priorities of the Local Authority and other key partners can be met from planning gain. In order, for example, to delivery new affordable housing, it may be necessary to accept that a new school/road/community hall will not be delivered at the cost of the Developer.

4.30 Bath & North East Somerset Local Planning Policy

4.31 Existing Planning Policy Framework - The Bath & North East Somerset Local Plan is due to be adopted in September 2007. The Local Plan and the Affordable Housing Supplementary Planning Guidance (SPG) 2003 provide the current policy framework for securing affordable housing through the planning system.

4.32 Affordable Housing on large sites - Policy HG.8 of the Local Plan enables the Local Authority to negotiate with developers to secure 35% of new housing on development sites to be affordable through section 106 agreements. Current thresholds that trigger negotiations are as follows:

> For Bath, Keynsham, Norton-Radstock, Saltford, Peasedown St John and Paulton - 15 or more dwellings or residential sites of 0.5 hectare or more;

> For villages with a population of less than 3,000 where there are limited development opportunities - 10 or more dwellings or residential sites of 0.5 hectare or more.

4.33 The current SPG states that the Council will aim to achieve 30% affordable housing on all section 106 sites that fall within the threshold with an 80/20 split between social rented and low cost home ownership. The Local Plan Inspector, in her report recognised an increased need for affordable housing and recommended that the Council ask for a 35% contribution with a 75/25 split between social rented and low cost home ownership. This recommendation was adopted for planning control purpose in October 2006 and supersedes the statement in the current SPG. Consequently the SPG requires updating to reflect current policy.

4.34 The Council's aim is that affordable housing shall be delivered without public subsidy thereby allowing any available Social Housing Grant to be targeted elsewhere enabling the delivery of more units overall. This aim is supported by the current SPG and the Local Plan. Developers are encouraged to work with Partnering Registered Social Landlords (RSLs) in delivering affordable housing. This will ensure that the affordable housing is occupied by those who are registered on the Council's Housing Register and have been assessed as being in housing need.

4.35 Exceptions sites - The Local Plan also sets out a rural "exceptions policy" whereby "affordable housing may be acceptable on small sites, within and/or adjoining existing identified villages which would not normally be granted planning permission for residential development." This is designed to enable affordable housing to be delivered in smaller villages where development opportunities are limited and there is a strong need for housing for local people.

4.36

Table 1 Projected delivery from Local Plan Allocations for Plan Period 2006/11

Site Location

Overall no of dwellings

35% Affordable

Bath Sites

*Bath Western Riverside

*450

*157

Land rear of Englishcombe Lane

45

16

Lower Bristol Road

50

17

Sub Total

545

190

Keynsham Sites

Charlton Park

90

31

South West Keynsham

500

175

Sub Total

590

206

Norton Radstock Sites

Radstock Railway Land

50

17

Kilmerston Road

34

12

Welton Packaging Factory

100

35

Land at Combe End Area

30

10

Land at Cauletts Close

90

31

Paulton Print Factory

200

70

Land at Wellow Lane, Peasedown St John

90

31

Sub Total

594

206

Villages with a population of less than 3000

Bannerdown, Batheaston

14

5

Radfords, Chew Stoke

30

10

Brookside, Farmborough

30

10

Sub Total

74

25

Total

1803

627

*Reflects 5 year period. The scheme will deliver significantly more units over its lifetime.

Note: Some of these schemes have not yet been secured through the Planning Process. The total number may therefore change including the level of affordable housing contribution. Any deviation from the Council's Affordable Housing Policy requirement will be subject to a rigorous financial viability study. It is expected that all units will be delivered without grant funding, unless there is strong evidence that the scheme will become financially unviable without this aid.

4.37 Future Review of Planning Policy

4.38 While these policies provide a reasonable framework and are facilitating more affordable dwellings to be developed through the planning system, housing needs continue to be pressing. National planning policy on housing (PPS3 and PPS1) and the RSS will provide a new strategic policy framework. The Planning & Compensation Act 2004 introduces the need for a new suite of planning policy documents termed the Local Development Framework which will replace the Local Plan in due course.

4.39 The emerging LDF will be supported by a host of Supplementary Planning Documents (SPD) with one being specific for the delivery of affordable housing.

4.40 Use of public land and property holdings

4.41 Alongside planning requirements land ownership is central to enabling the development of affordable housing. In an extremely buoyant property market Housing Associations are often unable to compete with private developers in acquiring sites. This presents an acute difficulty in Bath City but a factor that also affects the remainder of the district to varying degrees.

4.42 Public organisations can dispose of land at less than market value in return for a community gain under best value principles. Affordable housing is an obvious community gain. However, as with delivery of affordable housing through planning gain, use of public land holdings and other public assets is not without resource implications. All public agencies are under pressure to maximize the use of their assets. This includes selling land or sites at market value to help reduce pressure on budgets and such an approach is very attractive in an area like Bath & North East Somerset given its high land and property values. Furthermore, the Council's property assets generate rental income, which supports the Council's overall revenue budgets. Clearly, property assets disposed of on the open market or to enable the development of new affordable housing cease to generate rental income. As with decisions about use of planning gain, decisions about the disposal/use of public assets require sophisticated balancing of priorities to maximise overall use of resources.

4.43 Capital Investment/Grant Funding

4.44 Despite effective use of the mechanisms for delivery of affordable housing described in paragraphs 4.27-4.42 above, if the gap between the demand for and supply of affordable housing is not to increase year on year, it will be necessary for both Local and Central Government to subsidise new affordable housing through capital investment in the form of allocation of grant funding.

4.45 Housing Corporation Funding

4.46 The Government has recognised the affordable housing crisis across the South West by increasing the capital funding during the period 2008-2011. The South West Regional Housing Strategy prioritises funding for new affordable housing which is reflected in the Housing Corporation's allocations for 2006-2008. A total of £4.947 million has been allocated to affordable housing schemes in Bath & North East Somerset for this period and this allocation will help to fund the provision of 169 units.

4.47 Local Authority Housing Capital Programme - Social Housing

4.48 In Bath & North East Somerset, capital investment in new affordable housing not only directly supports the delivery of a key local priority, it also has wider benefits. In particular, the development of community based supported living schemes as an alternative to residential and nursing care placements is a key plank of both the mental health service transformation programme and of the Commissioning Strategy for Adults with Learning Difficulties.

4.49 Delivery of new supported housing not only achieves better outcomes for people, it also achieves more effective use of resources than can be achieved through a disproportionate use of residential or nursing care. The provision of new extra care schemes for older people as part of the Council's Community Resource Centre Programme has already started to deliver the twin objectives of better quality services and more effective use of resources. In particular, older people have been able to move from expensive residential and nursing care placements into their own homes at St John's Court extra care scheme. Two further extra care schemes in Midsomer Norton and Keynsham will open in 2008.

4.50 New affordable housing also helps enable the Council to meet its statutory responsibilities to homeless households in a cost effective way. For those households whose homelessness is not preventable and who cannot be supported in accessing private accommodation, social rented housing may be the only viable solution. Given the pressure on social rented housing, it is rarely possible for homeless households to access long-term social rented housing on an emergency basis. It may, as a consequence, be necessary to provide temporary accommodation, which is both expensive and unsustainable.

4.51 In recent years the Council has made huge strides in reducing the use of temporary accommodation. This, through the achievement of a Public Service Agreement Stretch Target for preventing homelessness and reducing the use of temporary accommodation, along with action to reduce fire safety incidents with the home, "won" the Council £500,000 of the total £2m performance reward grant. Also, from peak use of temporary accommodation to current use of temporary accommodation the estimated annual cost of providing temporary accommodation in fulfilment of the Council's statutory responsibilities has dropped by £250,000¹ .

4.52 An important factor in achieving this improvement in performance was access to social rented housing. If the supply of new affordable housing does not keep pace with the increase in demand then there will almost certainly be an increase in need for temporary accommodation and a result budget pressure. Indeed there is already some evidence to suggest that the recent increase numbers in Temporary Accommodation could be attributed to a recent reduction in suitable accommodation.

4.53 Even with capital investment, the Council's ability to determine the exact nature and location of new affordable housing is constrained by a number of factors, including planning policy, land supply (both in terms of suitability for residential development and location), and market forces. However, within these constraints the Council can take variations in approach to target its capital investment to achieve the best possible outcomes. An analysis and options appraisal is set out in Appendices 1a and b.

4.54

The Options Appraisal models, a five-year period from 2008 to 2013 and a target of 1,000 new affordable homes has been used. Within this overall target, the assumption has been made that 625 new affordable homes will be delivered without public subsidy² , leaving a five-year target for delivery with subsidy of 375 units.

4.55 Clearly, the achievement of even this target would not keep pace with the need for affordable housing and it would be necessary to pursue other mechanisms for delivering affordable housing, including those considered in this report.

4.56 Options Appraisal

4.57 Appendix 1a and b sets out a detailed analysis of the Housing Corporation bid set out in Appendix 2 and of the options to vary this bid and the approach in future years.

4.58 On the basis of this options appraisal, which is summarised in Section 6 of Appendix 1b, the conclusion and recommendation is that the bid set out in Appendix 2 should be submitted as it is. However, it is also recommended that that allowance is made for the Strategic Housing Market Assessment findings, which will be due in 2008, to influence the Council's future affordable housing Supplementary Planning Document (SPD) and its funding strategy from 2009 onwards.

4.59 Local Authority Capital Programme - Disabled Facilities Grant and Housing Renewal/Improvement

4.60 While this paper has concentrated on the provision of affordable housing it is important to remember that Housing Capital is also invested within the areas of Disabled Facilities Grants (DFGs) and Private Sector Renewal with the aim of meeting our wider local strategic housing priorities. Funding for these activities is provided by grants from the Government Office for the South West.

4.61 In the case of DFGs these are mandatory grants to fund adaptations to the homes of disabled residents. They are funded at a rate of 60% from a specific (DFG) grant allocation grant and 40% from Council resources. These are mandatory grants with the Council having no discretion over entitlement, with allocations proposed reflecting current demands. This year's allocation was £377,000. The Council's contribution is therefore £251,333.

4.62 Our Private Sector Renewal activities include offering a package of highly targeted loans and grants to assist low income elderly, disabled or otherwise vulnerable residents to remain in their own homes, undertaking essential repairs, improving energy efficiency and enhancing security. These enable the Council to meet Government and Regional private sector housing renewal priorities, including PSA7 which states that by 2010 no more than 30% of the stock in the private sector and occupied by vulnerable residents should fail to meet the Decent Homes Standard. These activities are more fully detailed in the Housing Renewal Policy. This year the Council received an allocation of £849,073 for this activity, though only £500,000 of this funding has been allocated for these activities as agreed by the Executive Member for Community Safety Housing and Consumer Services in March this year.

5 RISK MANAGEMENT

5.1 The report author and Cabinet member have fully reviewed the risk assessment related to the issue and recommendations, in compliance with the Council's decision making risk management guidance.

6 RATIONALE

6.1 Although there are ways of delivering affordable housing that do not require Capital investment or other forms of public subsidy, if the gap between the demand for and supply of affordable housing is not to increase year on year, it is necessary for the Council to subsidise new affordable housing through capital investment in the form of allocation of grant funding.

6.2 Historically, investment made by the Council in new affordable housing has been matched by Central Government investment and this is likely to be the case in the medium term.

6.3 The Council's capital investment in affordable housing not only levers in funding from other sources, it also supports wider strategies and plans and the effective use of revenue funding. This is particularly the case for the provision of social care and meeting the Council's statutory responsibilities to homeless households.

7 OTHER OPTIONS CONSIDERED

7.1 This report includes a number of approaches to targeting the Council's capital investment in the delivery of affordable housing in the medium term.

8 CONSULTATION

8.1 Cabinet members; Section 151 Finance Officer; Chief Executive; Monitoring Officer

8.2 Primarily through informal briefing meetings.

9 ISSUES TO CONSIDER IN REACHING THE DECISION

9.1 Social Inclusion; Sustainability; Property; Equality (age, race, disability, religion/belief, gender, sexual orientation); Corporate; Other Legal Considerations.

10 ADVICE SOUGHT

10.1 The Council's Monitoring Officer (Council Solicitor) and Section 151 Officer (Strategic Director - Support Services) have had the opportunity to input to this report and have cleared it for publication.

Contact person	Jane Shayler, Telephone: 01225 396120
Background papers	Housing Green Paper "Homes for the Future: more affordable, more sustainable" published on 23 July 2007
Please contact the report author if you need to access this report in an alternative format

1 Reduction from 14,000 household nights to 7,000 nights at a cost of £35 per night per household.

2 This projection is based on the assumption that the number of affordable housing units delivered each year through planning gain will remain static, see paragraph 4.36 for 2006-11 projections.