Birmingham shares best practice at Westminster Briefing

By on 02/12/2010 in News

Cabinet Member for Housing, Councillor John Lines today gave a speech to housing practitioners, local policymakers, civil servants and leading figures from within Westminster, Whitehall and Local Government on how Birmingham is delivering a range of rented housing options.

Speaking at Westminster Briefing's event on 'Meeting Housing Needs: Developing a Wider Range of Rented Housing Options' in London, Councillor Lines spoke candidly about how Birmingham is putting policy into practice:

“Thank you for inviting me here today. I should begin at the beginning, I can only speak of my own experiences which began in 2004. I was invited to become Cabinet Member for Housing for Birmingham following 20 years of Labour control which they had begun with over 100,000 council properties. I was left with less than 80,000 homes, with only 30 per cent decent, some only fit for demolition. With government branding the service a failure, a failed stock transfer which cost the City Council £13 million, tenants waiting up to a year for the most basic repairs to be carried out. They were dark days.

In the years prior to 1997, they blamed the Government for all ills, dark days indeed.

I was left with a decent homes bill of £700 million after limited demolition, no money from the Government because we were not becoming an ALMO or other transfer. We were not playing by the Government rules.  We could have done nothing and blamed Government like those before us.  I wanted to improve housing for Birmingham citizens.

We embarked on a council housing investment programme to meet the Government's decent homes standard by 2010 - Our 4th Option. To date we have achieved 98 per cent decency - achieved by (in the early years) sale of land to developers and RSLs at a 30 per cent discount which bought both homes for sale and rent. But, up until 18 months ago with few sales to developers or interest from the RSLs, we had to address the final cost by mainly prudential borrowing and sale of small parcels of land.

Having put our own house in order (2 per cent to go by March), in the meantime we had recognised the large number of empty private houses in the city - 15,000. With some small grants, working in partnership with RSLs we have reduced that number to 9,000, much progress, but much to do.

In the meantime things looked serious for some families no longer able to afford to buy in number. Rented properties were the answer. We could not afford to build the numbers required due to the rent subsidy system. We had the land - brownfield sites where council homes once stood. It is interesting to remind ourselves that when I took office in 2004 there was a positive rent subsidy, it is now to be a negative £76 million - all out of the HRA.  Thank goodness Grant Shapps is addressing this tax on tenants.

Sixteen months ago we set up the Birmingham Municipal Housing Trust, a vehicle to avoid tax, to build council homes for Birmingham citizens and the rents used to pay off debt and invest in more homes.  We would have a level playing field with RSLs shortly after the Government announced its new building policies in its final 14 months.

We began building in February this year and I set a target of 500 new homes per annum. We now have 613 new council homes in various stages of completion - all level 4 in sustainability. Our first tenants moved into their new homes in September.

All our tenants for our new homes will already have a council home, either too small or too large for their needs, with their former homes being made available for other applicants.

In the meantime, we have embarked in a retirement village new build programme, unsurpassed in the UK - five new villages.

We opened our first village in March with 220 mixed tenure homes, with 100 per cent nomination rights for the rented properties, which have enabled people leaving council homes, too large or not meeting their needs, again to be allocated for families on the waiting list.

A second village was launched 2 weeks ago, number 3 will receive planning permission in the next few weeks, with the others next year.  We have supplied the land, our partners ExtraCare Charitable Trust and HCA grant aid and in some cases RSL managed, remembering that a village needs between 5 and 7 acres of land.

Meanwhile, we have been working with Housing 21 and Lench's Trust to build 3 new large extra care schemes - 2 will be completed by Spring and the other before Christmas. We will have 100 per cent nominations rights again for the rented properties - again allowing council homes to be releases for families.

I now come to the final two vehicles we are using in Birmingham to provide new homes.

Public Land Initiative

The Local Land Initiative provides incentives to developers to bring forward new house building by de-risking sites and providing land for development at no up front cost.

The scheme seeks to provide mixed tenure development with a range of housing to suit a variety of households, with property sizes based on both strategic housing market information and local knowledge. 65% of the new homes will be for sale, but 35% will be affordable and this meets the Council's minimum threshold for provision of affordable housing. The total number of new homes for rent is 83 with the total number of new homes for sale being 151.

Some sites within the PLI portfolio are difficult to develop due to contaminated land, wayleaves and easements, and addressing poor urban design issues.

Bringing these sites forward in clusters that include more aspirational sites for developers will address these problems and ensure each site is developed.

All properties, including the outright sale will be constructed to Sustainable  Level 4, Lifetime Homes standard, Secure by Design standard and Building for Life (silver or above).

The design and quality of the properties is controlled by the City Council who secures planning permission before securing a development partner. This approach will also ensure properties for rent are indistinguishable from properties for sale.

The developers have been procured using the HCA's Developer Partner Panel with the HCA awarding up to £4.7million of gap funding to Birmingham City Council to support the PLI Programme. We contribute land to the programme and in return receive 80 debt free new Council homes.

The benefits of this approach are clear with this being the most advanced PLI in the country which has resulted in the HCA using Birmingham to launch the newly created Local Land Initiative. We will start on site in March 2011, with practical completion by September 2012. Meanwhile, homes for heroes.

We are addressing the affordable homes, we now must invest in the needs of the professional market.

Private Rented Sector Initiative

The proposed Private Rented Sector Initiative (PRSI) offers a potential for Local Authorities like Birmingham to facilitate the development of a large number of new private sector homes despite the challenging conditions of the current housing market. This initiative seeks to bring together the Local Authorities cleared land supply with significant equity investment from private sector partners to create a vehicle to develop a quantum of new homes which will make a significant contribution towards meeting the region's housing growth targets.

The house building industry is in recession, with a negative effect on the
supply chain, resulting in a high level of redundancies. The housing market has become polarised between social and market homes, and for a large number of younger people access to these segments is nigh impossible.

Whilst buy-to-lets demonstrated a need for rented accommodation, they have tended to focus on the flatted market in the city centres rather than for forming households. Higher value family homes in easy reach of the City Centres will address the needs of professional and business people working in the City to live with their families without commuting out.

Currently between 60/70% of all homes under construction are supported by HCA funding and it has become clear that there will be significant reductions in this area.

How does it work?

Pension Funds currently have capital for long term investment. Use of such funding could help support market homes, through creating long term market rent opportunities. Using such pension fund gives Local Authorities an option to maximise capital value of its land asset, influence the nature and shape of the future housing market, and an opportunity to start building homes where land is available. In return Local Authorities can have a long term revenue stream, possible capital returns and/or affordable houses in kind.

The model is based on the assumption that the new rented homes make an operating surplus which is then shared between the partners, according to the percentage of their contribution. The properties can be bought by the tenant or sold on the open market as housing demand and conditions change, in which case each partner again receives a share in proportion to its contribution.

The financial impacts of these proposals have been extensively modelled, showing that the programme is forecast to capture the current land value and achieve an uplift in value over a 30-year period.

We see the benefits of the PRSI, offering the opportunity to Kickstart development on a number of council owned sites across the midlands; benefit the economy by creating construction jobs and training; provide a quantum of new housing for people in the 25-35 age range who are unable to purchase on the open market; provides a financial return to the Local Authorities which is equivalent to the open market value of the land which the Local Authorities put into the scheme and develop 1,000 to 1,500 new private rented sector homes over the next 5 years.

I believe, with the investment and availability we will attract the business people and professionals who work in the city to stay with their families.”

Ends

Notes to editors
1. Westminster Briefings are policy-specific events aimed at providing a forum for practitioners, local policymakers and civil servants to debate key issues with leading figures from within Westminster, Whitehall and Local Government.
2. Birmingham City Council’s Cabinet is set to approve the full business case for the Private Rented Sector Initiative on 13 December 2010.

For further information, contact Belinder Kaur Lidher on 0121 303 6969

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