Cabinet
4 July 2011
Agenda Item No______8_______
NORTH NORFOLK COASTAL CHANGE PATHFINDER; BUY TO LEASE PROJECT
Summary:
Conclusions:
Recommendations:
This report outlines the Pathfinder ‘Buy to Lease Project’, provides a
succinct but comprehensive account of the investigations completed
by the Pathfinder property agents ‘Bruton Knowles’ and draws the
conclusion that the Council should not proceed with the
implementation of the Buy to Lease scheme. The report then lists the
other options which could potentially meet the project objectives and
details the further tasks the Pathfinder team will need to complete to
conclude this investigation.
Following the in-depth investigation into the Buy to Lease Scheme, the
constraints, long term risks and liabilities for the Council are
considered to be too great, therefore the Council should not
implement the scheme. The project has generated a great deal of
learning which will be reported back to Defra to assist with formulating
national coastal policies.
The Pathfinder team will continue to investigate the feasibility and
possible application of alternative approaches. A resource for buyers
and sellers will also be developed with activities implemented to
develop local property agent’s understanding of coastal property
issues.
It is recommended that Cabinet does not implement the Pathfinder
Buy to Lease scheme on the basis of the evaluation conducted by
Bruton Knowles on behalf of the Council.
Cabinet member(s):
All
Contact Officer, telephone number,
and e-mail:
1.
Ward(s) affected:
Happisburgh & coastal wards
Rob Goodliffe, 01263 516321, Rob.Goodliffe@northnorfolk.gov.uk
Summary
1.1. This report outlines the Pathfinder ‘Buy to Lease Project’, provides a succinct
but comprehensive account of the investigations completed by the Pathfinder
property agents ‘Bruton Knowles’ and draws the conclusion that the Council
should not proceed with the implementation of the Buy to Lease scheme.
The report then lists the other options which could potentially meet the project
objectives and details the further tasks the Pathfinder team will need to
complete to conclude this investigation.
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2.
4 July 2011
Introduction
2.1. The Pathfinder Buy to Lease project was initiated to investigate whether a
methodology could be developed by which the Council could purchase
properties in the 2025-2050 erosion zones and lease them back to either the
existing owner, or another party. Such a proposal was included within the
Council’s submission to government for Pathfinder funding.
2.2. The project proposal sought to ensure that these properties continued to be
maintained and used for their remaining lifetime, thereby reducing levels of
blight through lack of investment, whilst enabling the residents to make
choices about their lives with some financial security and peace of mind
about the future.
2.3. Bruton Knowles, the property agents for the Pathfinder Project were engaged
to appraise the options for Buy to Lease. This report outlines the findings of
the Bruton Knowles appraisal and notes other approaches which were
considered for final reporting to Defra.
3.
Buy to Lease
3.1. Practical considerations, risks and liabilities
3.1.1. Bruton Knowles completed a detailed report which compares and
contrasts different approaches in which buy to lease could be implemented.
This explores the detailed considerations; a summary of which is bulleted
below. The models used were based around future property use, rental
values, property repairs, property valuation and whether an opportunity
exists at the end of the property’s life to replace the dwellings (under policy
EN12 of the LDF Core Strategy).
•
One key issue was whether any other organisations were willing to take on the
management of purchased properties, thereby releasing NNDC from day to
day management. Following informal discussions with Registered Social
Landlords and the Housing Team, it was considered unlikely that any social
housing provider would be in a position to own/manage the properties
purchased due to the type/condition of the houses in question.
•
Further legal constraints arise from the Housing Act 1985, which would
necessitate leases having a term of at least 21 years.
•
It is not certain from any scheme that properties can be maintained as it is
either difficult to justify, or, enforce.
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4 July 2011
•
Due to the limited budget the scheme would probably only have been able to
apply to one or two properties. Such a small-scale trial would have provided
limited benefit to the lessons to be learnt from Pathfinder.
•
The aspirations and personal circumstances of those likely to be in a position
to take part in such as scheme varied widely.
•
If central government treasury discounting is applied to the models, then,
financially, they break even, at best.
•
There may be substantial breaks in the tenancies. If no tenant could be found,
then there may be a substantial loss.
3.2. Appraisal of the Buy to Lease Scheme
3.2.1. The Buy to Lease investigations found that when using an investment
model and without factoring in the management costs or void rental periods,
when the ‘EN12 opportunity value’ is applied, the model is financially self
supporting. If the EN12 value is not available, financial viability is reduced
(although still viable in all but one of the models assessed by Bruton
Knowles). However, if practically implemented, there is no guarantee that
these returns would be realised.
3.2.2. Based on an ‘ideal hypothetical financial model’ the scheme could work
financially and be legally possible. However, the scheme could only proceed
if it is sufficiently attractive to potential vendors and if the other practical
considerations, risks and long-term liabilities are also acceptable to the
Council.
3.2.3. Bruton Knowles have advised NNDC that the ‘Buy to Lease’ scheme
would be a highly challenging experience and would not advise the adoption
of the scheme.
4.
Other options for consideration
4.1. The investigation of the Buy to Lease scheme contains important lessons which
will be reported back to Defra. The Pathfinder Team have also investigated other
options which may meet some or all of the objectives of the project. These
options include:
•
Secured/delayed purchase
•
Property value underwriting
•
Provision of assistance to owners to facilitate a sale
•
Purchase and sale
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4 July 2011
•
Property maintenance grant
•
Supplemental payments on completion of private sale
•
Furthering of local agent’s understanding of the key issues
•
Buyer and sellers guide
4.2. The Pathfinder team will continue to investigate the possible methods of these for
inclusion in the final report to Defra.
4.3. Activities to develop local property agent’s knowledge of coastal change and the
influence this has on coastal properties should certainly be undertaken. The
team will also investigate the development of an online resource for members of
the public who either wish to sell or purchase coastal properties, in conjunction
with the Government’s Coastal Erosion Risk mapping project.
5.
Budget and financial management
5.1. The Buy to Lease project has a capital budget of £170,000. To date
approximately £9,000 has been spent or committed to complete the
investigations. As proposed, the project will not implement a property
purchase scheme and therefore all the transactions to date must be
accounted as revenue. The revenue element can be accounted for through a
reallocation between the capital and revenue within the Pathfinder
programme.
5.2. The completion of the further investigations, activities with local agents and
the development of an online buyers/sellers guide will only require a relatively
small sum from the project budget. The remaining funds will be reallocated
as appropriate to other Pathfinder budgets.
6.
Risks
6.1. Through not implementing the buy to lease scheme the Council is responding
appropriately to the long term risks and liabilities associated with the
approach. The risks and reasons for not implementing will be fed back to
Defra, with recommendations as to methods in which such as scheme could
operate successfully.
6.2. Some members of the public who wished to be part of a buy to lease scheme
may be disappointed that the scheme is not implemented, this may impact on
the Councils reputation; however no commitments have ever been made on
this.
7.
Sustainability
7.1. There are considered to be no impacts on sustainability resulting from the
recommendations in this report.
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8.
4 July 2011
Equality and Diversity
8.1. The assistance to facilitate properties sales through increasing local agent
knowledge and by development of a buyers/sellers toolkit will benefit all
coastal communities in North Norfolk and those intending to move into the
area.
9.
Crime and Disorder
9.1. There are no known crime and disorder issues.
10. Conclusions
10.1.
Following the in-depth investigation into the Buy to Lease Scheme, the
constraints, long term risks and liabilities for the Council are considered to be
too great, therefore the Council should not implement the scheme. The
project has generated a great deal of learning which will be reported back to
Defra to assist with formulating national coastal policies.
10.2.
The Pathfinder team will continue to investigate the feasibility and
possible application of alternative approaches. A resource for buyers and
sellers will also be developed with activities implemented to develop local
property agent’s understanding of coastal property issues.
11. Recommendations
11.1.
It is recommended that Cabinet does not implement the Pathfinder Buy
to Lease scheme on the basis of the evaluation conducted by Bruton
Knowles on behalf of the Council.