Agenda item

The Chair invited Simon Martin, Director of Regeneration and Housing, and Tim Richens, Managing Director Aequus Group to introduce the report.

Panel members asked the following questions and raised the following points:

Councillor Duguid asked if payments to the Council are actually a payback of loans made by the Council in the past. The officer (Aequus) stated that the £1m paid to the Council is made up of commercial interest returns topped up with dividends. The profile changes year on year.

Councillor Duguid asked if overheads are being increased to cover activity in South Gloucestershire. The officer (Aequus) stated that costs are covered by South Gloucestershire.

Councillor Duguid noted that South Gloucestershire is gaining ground as part of the portfolio and asked about North Somerset. The officer (Aequus) stated that North Somerset are doing some internal evaluation.

In response to a query regarding costs and overages, the officer (Aequus) explained that South Gloucestershire sell a site to Aequus on agreed land value, Aequus deliver the site. The profit is agreed with the shareholder and if there is overage, it is shared between Aequus and South Gloucestershire. 

Councillor Hodge asked if a fixed return is appropriate. The officer (Aequus) explained that the return can be agreed with the shareholder in larger sites. He further explained that delivery models are being considered that maximize returns to the Council. The officer (BANES) stated that a pipeline tracker is used which sets out sites. The £1m payment per year to the Council is reassessed regarding the availability of sites. The £1m is not static and will be reviewed.

Councillor Hodge asked about discounts. The officer (Aequus) explained that there is a pre agreed price at the outset and properties can be revalued if the housing market grows.

Councillor Hughes referred to the core aims of Aequus as set out in the business plan last year. He stated that there is nothing in the aims about South Gloucestershire and that it seemed that we were solving somebody else’s housing problems. He asked if there is capacity to meet these core aims and also asked if Aequus is purely commercial. The officer (Aequus) explained that a regular pipeline is needed and working with South Gloucestershire helps to smooth this. He stated that it is a delivery blend and Aequus does look to deliver aspirations and core aims. The Cabinet Member for Council Housing, Councillor Davis assured the Panel that South Gloucestershire is not at the cost of this authority. He further explained that Aequus is assisting the Council to deliver the Council Housing Building Programme and work with South Gloucestershire is not at a local cost, Aequus can do both.

Councillor Hughes asked what the advantage of Aequus is against an in-house service. The Cabinet Member explained that at the time Aequus was set up in 2015, we did not have the skill sets in-house. We would not have developed the first social rent housing without Aequus. The officer (BANES) explained that the benefits are capability, capacity, greater flexibility regarding risk management and certainty – Aequus is structured to deliver policy compliant housing. The Cabinet Member for Resources, Councillor Samuel explained that, if developments were managed in the private sector the Council would receive no profits. Aequus was set up by a Conservate administration and we have developed it but not changed the fundamental principle.

Councillor Elliott asked for more information on the difference between the risk management in Aequus and the authority. The officer (BANES) explained Aequus is set up to manage construction activity so it is easier to control the construction and delivery risk. The officer (Aequus) explained that Aequus can manage the commercial risk factor in the business case.

Councillor Duguid asked about the risk regarding risking interest rates. The officer (Aequus) explained that interest rate rises are modelled, and impacts considered.

Councillor Duguid has how many properties the Council has delivered. The Cabinet member for Council Housing stated that it is 133 units since 2019 and there are 208 further properties in the pipeline (around 190 Council houses).

Councillor Hodge asked about the ‘amber’ sectors regarding repurposing the commercial estate. The officer (Aequus) explained that a number of potential properties have been identified for repurposing but there are issues such as listed status and also the cost of some conversions which cause the ‘amber’ status.

Councillor Blackburn asked the following questions (officer responses shown in italics):

·  Is Grosvenor included in the 133? No, the 133 properties were delivered by the Council or Aequus.

·  Is Theobold House being refurbished? There was a delay in the works. It is staying in Council ownership, Aequus is delivering the works.

·  Can you explain the 10 rental units with 50% void level. There were sitting tenants as part of this acquisition. We want to get the HMO back in use, that is the 50%. Some fire compliant work is needed.

·  The £1m return for the Council is the fixed price model – are the purchasers getting a discount? Officers to find out the details and share with Panel members.

·  Can you explain MRP changes on Council loans. The Government was looking at how Council’s could lend money to its’ companies. Aequus repays money as each house is sold.

·  Do you use local estate agents. We will tender for agents for each site.

It was RESOLVED that officers be asked to draft a Terms of Reference for a group in the new administration to specifically scrutinize Aequus/companies set up by the Council. The Panel recommend that this group be set up by the new administration.