“COUNCIL RENT HOUSING NO LONGER A PRIORITY”
(or: What Cressingham Gardens gets today, Central Hill estate gets tomorrow – part two)
The recently published criteria for assessing the options “differ significantly” from those published during that part of the consultation carried out in 2014/15 and no longer appears to prioritise council rent housing. says The People’s Plan report
“There has been a marked change in emphasis from providing council rent housing, in favour of simple densification” the report argues.
COUNCIL HOUSING
This being a ‘resumed consultation’, as confirmed by the Lambeth council regeneration team, residents would expect the aims to be the same as before.
As a result of this discrepancy, residents are unclear as to how respond to the council’s aims in this respect. There is an apparent subtext which suggests that the enterprise is motivated by financial liquidity rather than the stated, albeit regularly morphing, aims.
In the latest communications to residents, any mention of net gain homes at council rent levels appears to have disappeared.
Under Option 5, Lambeth is failing to meet its own planning requirements that it only signed off on in September 2015. (This forms the new statutory development plan for the borough until
2030.)
RENTS
Under Option 5 it is proposed that (over a period of five years) council rents will rise between 10 – 25 per cent depending on property size. While central government has specified a 4pc reduction of council rents over five years. 73pc of current council tenants will experience a 24pc rent increase.
RIGHT TO BUY
The Option 5 ‘Homes for Lambeth’ special purpose vehicle (SPV) is the highest risk structure because central government has already made statements in March 2015 that it will not tolerate SPV’s set up in order to avoid the housing revenue account or to remove the Right-to-Buy:
“The government is aware that some authorities may be using their general power of competence under the Localism Act 2011 to develop new social or affordable housing and accounting for that stock in its general fund.
“Accounting for stock in this way is not in line with government policy and if councils continue to develop social or affordable stock which they fail to account for within the housing revenue account the Secretary of State will consider issuing a direction under section 74 of the Local Government and Housing Act 1989 to bring that stock into the housing revenue account.
“Central government made statements in March 2015 indicating that removal of tenants rights would not be accepted.
“In order to be eligible for Right to Buy, local authority tenants need to have a secure tenancy. All forms of secure council tenancies are subject to the Right to Buy, including new flexible tenancies, regardless of whether they are accounted for in the local authority’s housing revenue account or the general fund.
Finally, under the Option 5 SPV, tenants lose the right to a ballot if there is a change in landlord and consequently, they will have no control or even influence over any potential sale of the SPV, which as a private company can be sold off by the council at any stage. .
The TPP does not affect existing tenants rents. They would still get the 1pc per annum rent reduction over the next four years followed by any future annual increases in line with all council rents.
FINANCIAL
Financial analysis shows that the People’s Plan can achieve at least a £7m positive NPV over 30 years and potentially as high as over £13m Net Present Value depending upon the new housing mix.
This level of financial viability exceeds the council’s Option 5, which according to Lambeth’s own numbers, achieves only a maximum £824k positive NPV, and hence provides more confidence that the viability will not be eroded over time into a loss making scenario for the council (ie negative NPV).
For example, it would only require less than 75pc of homeowners to return (ie only five fewer homeowners than currently being assumed), before the council’s redevelopment proposals turn into negative NPV territory (ie loss making).
Multiple documents provided by council officers state different figures. High value homes are unaffordable by the average Lambeth income of £28,764. This indicates that for Option 5 the majority of sales will not be to existing Lambeth residents.
Lambeth council proposes new homes are valued £150k-£350k higher i.e. up to 70pc more than existing properties. Lambeth proposed current valuations for new private homes: 1 bed flat £436,000 2 bed flat £610,000 3 bed flat £750,000 4 bed flat £863,000.
This level of market value gap will mean that many homeowners will also not be eligible
for Lambethߤs shared equity option, and be forced into more expensive shared ownership or private rental.
Option 5 requires £7.5million upfront subsidy from Lambeth council. This has been marked as a loan, though no payback is specified and access to information regarding payback terms has been refused.
Comparison of financial viability: On 16th February 2016, Lambeth council published online financial datasheets purportedly from the Airey Miller financial model for ‘Option 5: Full demolition’ which calculated a NPV (Net Present Value) of only £0.8m over 60 years.
“No full financial cash flow model has been provided by Lambeth council for review, plus most of the costs have been redacted in the financial datasheets. “No proof of additional funding has been provided for any of the council’s options.
“In an attempt to make Option 5 financially viable council officers have proposed that £7.5 million is loaned by Lambeth that has erroneously been accounted for as income in order to make the NPV calculation positive.
“We have re-created a 60 year financial model for Option 5 using the council’s datasheet assumptions, and where necessary due to either errors or redactions provided assumptions.
“Even just a 5pc increase in costs will cause the project under the council’s assumptions to be loss making and not financially viable even after 60 years. .
“When we re-created Lambeth’s Option 5 financial models using the assumptions provided by the council, it would appear that the real NPV for Option 5 is probably closer to a negative minus £20m over 60 years, increasing to a minus £30m over 30 years.
“This appears to be a result of excluded assumptions (e.g. no maintenance) and errors (e.g. recognising the £7.5m loan from Lambeth to its SPV as income).
“Lambeth has included as income in its financial datasheets a £7.5 million ‘grant’ from the Single Capital Pot that is supposedly to be repaid via the finances,but on unknown terms and on an unknown timeline.
“This ‘grant’ is in substance either a loan or an equity contribution to the SPV, it cannot be classed as income. “As such It should not be included in the NPV (Net Present Value) calculation, as it a funding source.
“Consequently, Lambeth’s calculated NPV for Option 5 would not be positive without it having recognised the £7.5m, its own capital money, as income.
“TPP requires no such subsidy from Lambeth in order to achieve a positive NPV (Net Present Value).”
The People’s Plan says their proposals minimise negative environmental and social impact; costs vastly less than the proposed £111 million for council Option 5; has a positive NPV (£6.6m) over just 30 years compared to a negative NPV ( minus £19.4m) for Option 5 over 60 years; has strong support from CGE residents, wider Lambeth residents and other groups such as homeowners at Parkview Court on Tulse Hill and homes on Trinity Rise which are also at risk of demolition.
