600 new social homes for Havering – the truth.

Havering council recently announced a new scheme that was due to deliver up to 600 new homes for residents on our waiting list. The scheme meant the council entering into a 40 year deal with a company that had no completed developments and limited publicly visible financial history.

This was not a deal that was done following scrutiny by councillors. The HRA administration felt it was right to go straight to their Cabinet and approve it. It was mentioned in earlier scrutiny meetings, but as a single line as opposed to a fully costed and proposed plan. To make matters worse, it only appeared on the council's forward plan 30 days before the Cabinet vote. That is the bare legal minimum, and nowhere near enough time for proper scrutiny of a 40 year commitment.

Given the above, I joined a number of other councillors in calling in the decision. This meant that the council could not implement it until we had given it some extra attention.

Following the scrutiny, I am supportive of the scheme. Here's why, and what we found.

Who it benefits

Addressing this one right away, before the "it'll be boat people" brigade gets into the comment section.

Havering's housing register is tightly controlled and based on strict eligibility criteria. To even get on the list, someone usually has to have lived in Havering for a few years, demonstrate a clear need (such as overcrowding or homelessness), and prove that they cannot afford private housing. A points system then prioritises those with the greatest needs and local connections.

Crucially, the policy explicitly excludes people who are not legally settled in the UK. Someone subject to immigration control, those who don't pass the residence test, and those with no right to live in the UK are not eligible.

It is the Home Office that houses those who have applied for refugee status. The Home Office might house them in Havering, but it wouldn't be using Havering's housing allocation to do that.

This means, quite simply, that these new homes are for those already in the borough, on our waiting list and in need.

So, what about hospitals, GPs etc?

Infrastructure is obviously important. But these 600 homes are not 600 new families. They are people already in Havering, so already using the hospital and GPs and schools. These homes are not going to add to the pressure.

The developer does have to make contributions to the NHS, schools etc.

Think of it this way. If you and your family live in a house that is too small, or in a B&B, and then someone builds a house for you in the same town, do you only then start to use the local NHS and schools? No, of course not. You may even use them less, as poor living conditions cause a lot of health and social problems.

How the scheme works

The company involved is going to buy land in Havering that already has planning permission. This could include, for example, the Angel Way car park.

As we know, the Angel Way car park development is planned for no affordable homes and this is because they cannot make it work financially. This company says it can.

The company talks to the council, asks them what types of homes they need (such as 2 bed, 3 bed etc.) and then puts in an application to amend the existing planning permission to match that need. Havering then agrees to rent the homes for 40 years.

The rent will be at what is known as the LHA rate. Basically, the rent cost will be whatever housing benefit pays. In theory this means that Havering doesn't have a net cost. At the moment Havering has to top up housing benefit to help council housing tenants pay rent.

Because the developer is getting 40 years of guaranteed rent, they can secure funding from a pension fund investor. The company claims JP Morgan is involved in providing that funding, though this was not independently verified by the council during the scrutiny process. I would like to see that resolved before any contract is signed.

Other developers don't usually work this way, choosing to sell or rent on the open market. This makes their income uncertain. This is why this model can work where others cannot.

It is not a totally unique idea. Legal and General use a broadly similar funding model, but the key difference is that they lend against completed buildings they own, with the risk sitting with them rather than the council. Here, some of that risk sits with Havering, which is why scrutiny mattered.

What are the risks?

Havering council is on the hook for the rent.

By entering into this scheme, the council is saying that it is confident that we will need these homes for the next 40 years. If the flats are left empty then we still have to pay the rent. When the flats are in use they don't really cost us, as housing benefit covers the rent.

My colleagues and I identified that if the company doesn't get the changes to planning permission that it wants, the council can be left with properties it doesn't need. For example, some developments focus massively on 1 or 2 bed flats, but we usually need 3 or 4 bed homes.

Anyone can apply for planning permission on a piece of land, so nothing stops the company from applying for the change in planning permission before they buy the land and lock Havering into a 40 year contract.

I made a very simple suggestion. That we put in the contract exactly that, requiring the developer to get the new planning permission before we are locked in. It seemed that both the developer and council officers felt this was workable.

The HRA councillors, however, voted against that.

I also suggested that we do not enter into a contract until the keys are in our hands, so we are not paying rent on a property we cannot put someone in. This sounds obvious, but we know some flats in Romford are completed but empty. If we are guaranteeing rent then we could be on the hook.

The council officers said they would look to get that into the contract.

In conclusion.

Havering is now going to enter into this contract, which should have an impact on our housing waiting list. But it is going to take a few years to see this in action. We have agreed to an initial 70 or so homes, and each new batch of homes will need to be looked at individually as to whether we actually need them.

My fear is that these homes do not appear. But that is not a risk to Havering. If they do not build, then we do not have to pay.

I am worried that 40 years is too long a contract. However, the reality is that the housing crisis we have is generational. The council has other housing schemes, but they can leave these if they are not needed. Some of these are office conversions, which I hate, so I would hope that means Havering ditches those in favour of properly built homes.

This deal did not appear good until we scrutinised it, and this is a perfect example of where poor communication and a dislike of scrutiny causes problems.

The HRA administration had a chance to be open and transparent about this, to properly talk it through before signing anything, and to get people on board. They had a chance to explain how it works and how the homes cannot be used for those waiting for refugee status. They had a chance to explain that it is not 600 new families, and so will not add pressure onto the NHS or local services.

Instead, they decided to talk to themselves behind closed doors and wave it through.

I hope that whoever runs Havering next learns that the public wants details and scrutiny before decisions are made, not after.

Given that the Angel Way development, which is funded by and built by the council, features no affordable homes... I'll be suggesting that this company take over the site, and make it 100% social housing. That's what we actually need!