Supplementary memorandum by Local Space
Housing Association
I have set out below the additional information
requested by the Committee.
Firstly with regard to surpluses generated by
the Local Space business model; the first point to note is that
the nature of the partnership relationship between Local Space
and LB Newham is governed in broad and specific terms by our 15
Year Framework Agreement and is designed to ensure that, within
the permitted objects of the association as an RSL, the benefits
from this T2P initiative both immediate and longer term can help
further the aims and policy objectives of the Council in benefiting
the local population. The definition of surpluses being derived
from audited accounts and the requirements to maintain certain
lender covenants.
As discussed at the Committee session, the primary
aim of the initiative is to maximise the number of long-term permanent
affordable housing that is produced. To this end the starting
expectation within the Framework Agreement is that surpluses generated
by the effective delivery of the business plan are initially considered
to acquire additional stock for the scheme or to pay down debt
earlier thus reducing the potential number of sales required at
the exit point.
However as discussed the agreement also allows
for a range of other options to be considered such as:
— The earlier conversion of some stock
to permanent affordable housing earlier
— The purchase of additional stock
as affordable housing from day one
— The amelioration of rent and I or
support for tenants under the scheme gaining access to training
or employment
— The development of other housing
related resources or services such as community centres
— Reduction of rent payable under the
lease by LBN to Local Space
— Ultimately, if none of the above
are required the transfer of funds back from the association to
LBN general funds.
As noted during the discussion, the implementation
of any or all of these additional options will have an impact
on total permanent affordable homes delivered at the end of the
scheme, by reducing the total rental stream to the association
or taking surpluses out of the model. This will result in a higher
level of debt likely to be outstanding at the end which may require
additional property sales to reduce outstanding debt to a level
that can be serviced in to the future by affordable rents. The
determination of if and how such surpluses are used is by agreement
between the association and the council.
The scheme was initially modelled to address
one key issue the huge outflow of public resources into the hands
of private landlords through the short term procurement of temporary
accommodation. Having successfully created a model that demonstrably
works and has enjoyed the support of central and local government
and crucially the private finance sector we are then able to consider
addressing some of the other concerns common to temporary accommodation
across London and elsewhere the high rent levels and impacts on
individual households. The issue of high rents and benefit dependency
of tenants housed during the temporary accommodation phase of
this initiative has been a regular feature of discussion between
LBN and Local Space from the outset.
The scheme for surplus projects kicks in following
completion of the acquisition of the 1,000 properties in March
2008. The design of a scheme for supporting homeless tenants seeking
training or employment who would otherwise be poverty-trapped
is entirely a matter for the Council but Local Space would not
unreasonably withhold consent to the use of surplus moneys for
this purpose as this clearly aids the longer term stability of
our accommodation.
The relative priority of a training and employment
subsidy scheme to combat poverty trapping would presumably depend
upon the scale of resources available and as noted above, the
council's requirements for additional temporary accommodation
or permanent affordable housing at the time. Only when the scale
of the resource to be committed and its availability is known
would it be appropriate to publish details to tenants. Even then,
we believe, targeting rather than broadcasting would be preferred.
Turning to the issue of the scale of Local Space's
acquisitions and impact on the market. I am pleased to attach
a letter from Savills giving their assessment of our purchase
activity which as you will see at a borough level they assess
at being well below the 71/2% target the association has set for
itself—peaking at a 6.2% share of flat sales in Barking
& Dagenham in the third quarter of 2006. They have calculated
this from Land Registry data on total sales however assuming a
restricted market of terraced houses and flats as they have excluded
data for detached or semi-detached house sales which are rarely
accessible to Local Space.
I have also attached to the email version of
this letter electronic copies of the more detailed and comprehensive
quarterly monitoring reports provided by Savills to the association
and our funders. However it should be noted the principle purpose
of these reports is as a check on quality, value for money and
probity of the acquisition programme along with an assessment
of performance against targets.
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