Agenda Item No______17______
Disposal of Council owned land
Summary:
This report seeks approval to enter into an
options agreement to dispose of five Council
owned sites to Broadland St Benedicts, a wholly
owned subsidiary of Broadland Housing
Association.
Options considered:
Three options were considered:
Option 1: Not to dispose of the six sites to
Broadland St Benedicts. This option is not
recommended as it would result in the loss of a
capital receipt of up to £1,030,000 and the
potential loss of the provision of new homes,
including homes for affordable rent, intermediate
sale and open market sale.
Option 2: Dispose of all six sites. This option is
not recommended as the non-retained housing
site is not considered appropriate for disposal at
this time.
Option 3: Recommend the disposal of the five
Retained Housing Sites to Broadland St
Benedicts.
This option is recommended as it would result in
a capital receipt of up to £1,030,000 and will
assist the delivery of approximately 88 new
homes via five Exception Housing Schemes.
Conclusions:
Broadland St Benedicts formal request to
purchase Council owned sites is to enable the
development of these sites provide new
affordable and market homes.
The market
dwellings are being provided in order to provide
the subsidy needed to make the delivery of the
affordable dwellings viable.
Broadland St
Benedicts would undertake the development of
the sites and sell the completed affordable
dwellings to Broadland Housing Association,
whilst the market dwellings would be sold on the
open market.
It is recommended that an options agreement is
completed to dispose of five sites, all of which
would be developed as Exception Housing
Schemes.
Sale of the five sites would generate a capital
receipt of up to £1,030,000, although the exact
amount will depend on the number of sites which
Broadland St Benedicts chooses to purchase and
the number of affordable and market dwellings
delivered on each site.
Recommendations:
It is recommended that:
1. An options agreement for the five
Retained Housing Sites is completed
between the Council and Broadland St
Benedicts on the terms set out in their
letter dated 29 April 2014 and the terms
contained in this report.
2. The Head of Assets and Leisure is
delegated to approve the sale of
individual sites by private treaty in
accordance with the options
agreement.
Reasons for
Recommendations:
A) To increase the provision of housing,
including affordable housing across the
district which supports the Corporate Plan.
LIST OF BACKGROUND PAPERS AS REQUIRED BY LAW
(Papers relied on the write the report and which do not contain exempt information)
Disposal, Investment and Acquisition Policy, Asset Management Plan
Cabinet Member(s)
Ward(s) affected All
Contact Officer, telephone number and email: Nicola Turner, 01263 516222,
nicola.turner@north-norfolk.gov.uk
1.
Introduction
1.1
The Council’s Asset Management Plan (AMP) is the strategic
document which provides the framework for how the Council
manages its property assets. The Council’s assets represent land
and property and operational and non-operational assets. The
Council’s assets have been acquired over a number of years using a
range of statutory powers. The AMP approved by Cabinet on 12 May
2014 is the most recent version of the AMP and covers the period
2014/15 to 2016/17.
1.2
Cabinet approved the Disposal, Investment and Acquisition Policy on
6 September 2010. This policy sets out the process for disposing,
investing in or acquiring land and property. For disposals it also sets
out the different methods of disposal, the scheme of delegation for
and the statutory powers which apply to disposals depending on
whether the disposal is for best consideration or for some other
amount.
1.3
The Council is required to ensure that its assets assist it to meet its
Corporate and Service Priorities and will therefore dispose of assets,
invest in assets or acquire new assets to meet these priorities. The
appendix to the AMP identifies all the Council’s assets, their insured
value where applicable and the forecast for revenue and capital
implications over a five year period. Included in the AMP are 30
Retained Housing Sites, these sites were retained by the Council
when the Council’s housing stock was transferred in February 2006
through Large Scale Voluntary Transfer to Victory Housing Trust (then
North Norfolk Housing Trust). The Retained Housing Sites are land
originally purchased for housing purposes. The Council has a long
history of using its housing land assets in order to support the delivery
of affordable housing and between 2006/7 and 2013/14 disposed, for
nil consideration of 158 plots which were developed to provide
affordable housing by Registered Providers.
1.4
The Council works closely with Registered Providers to deliver more
affordable housing and the disposal of housing land is a part of its
enabling role. Following the adoption of the Local Development
Framework Core Strategy, the majority of Retained Housing Sites are
in the Countryside Policy and therefore could only be developed as
Exception Housing Schemes to meet local housing need. More
recently the National Planning Policy Framework allows a small
number of market dwellings to be provided on Exception Housing
Schemes where they enable the delivery of the affordable housing. In
essence, the profit from the sale of market housing provides the
subsidy needed to make it viable to provide the affordable housing.
This new approach has meant that the Council is working with
Registered Providers and private companies to deliver Exception
Housing Schemes which will include market housing. The benefit of
this approach is that the delivery of the affordable housing is more
certain as the need for public subsidy from the Homes and
Communities Agency is removed. The Homes and Communities
Agency provides grant funding for affordable housing on a competitive
basis and this introduces uncertainty into the development process.
1.5
Registered Providers are generally not for profit organisations as they
are charities or Industrial and Provident Societies which were
established to provide affordable housing. Increasingly, however,
Registered Providers have established group structures which enable
them to carry out commercial activities through subsidiary companies,
where the surplus generated by the subsidiary is gift aided to the
Registered Provider to be used for charitable purposes. This
approach means that Registered Providers are using market
dwellings sales or market rental income to subsidise the delivery of
affordable housing.
One such Registered Provider using this
approach is Broadland Housing Association which has established a
wholly owned subsidiary, Broadland St Benedicts to carry out market
developments.
2.
Broadland St Benedicts request to purchase Council owned land.
2.1
Broadland St Benedicts has formally requested that the Council sells
the following Council owned sites as set out in Appendix N:

Land off Priory Close, Binham - (Retained Housing Site)

Part of land off Rectory Road, Edgefield - (Retained Housing
Site)

Part of land off Eagle Road, Erpingham – (Retained Housing
Site)

Land off Highfield Close, Great Ryburgh – (Retained Housing
Site)

Land off Cornish Avenue, Trunch – (Retained Housing Site)

Land off Highfield Road, Fakenham – (Free - Car Park)
2.2
Of these sites five are Retained Housing Sites and are recommended
for disposal through an options agreement. The site at Highfield
Road, Fakenham is not recommended as appropriate for disposal.
Broadland St Benedicts intention in purchasing the sites is to develop
them to provide housing of a mix of tenures including affordable
homes to rent, intermediate sale and open market. Across the five
sites it is expected that 88 new homes could be delivered, with
approximately 65% of the homes affordable and 35% for market sale.
Broadland St Benedicts will develop the sites and then sell the
completed affordable dwellings to Broadland Housing Association and
sell the market dwellings on the open market. The surplus it makes
will then be gift aided to Broadland Housing Association.
2.3
Although Broadland St Benedicts has requested to purchase the sites
they may choose not to proceed with the purchase of all the sites
depending on the outcome of an assessment of site suitability or the
outcome of a planning application. This report seeks approval to
enter into an options agreement for dispose of these sites for a total
receipt of up to £1,030,000. The total receipt received will depend on
the number of sites which Broadland St Benedicts ultimately decide to
purchase and the number of market and affordable dwellings
developed on each site. The value for each site will depend on the
number of market and affordable plots developed in that site, as the
market plots will have a higher value than the plots which will be
developed to provide affordable housing.
2.4
The terms of the purchase by Broadland St Benedicts are set out in
the letter shown at Appendix N. It should be noted that Broadland St
Benedicts has requested a deferred payment purchase for all sites
excepting the land at Binham. This means that for the four other sites,
the Council would receive its payment for the land after the dwellings
are completed and sold. The payment for the land at Binham would
be received once Broadland St Benedicts have applied for and been
granted planning permission on the land.
3
The Disposal Process
3.1
A letter has been sent to Binham, Edgefield, Erpingham, Ryburgh and
Trunch Parish Councils to advise them of Broadland St Benedicts
request to purchase land in their parish/town.
3.2
Following the Cabinet decision, the next steps are to:
a) Notify the Parish Councils of Cabinet’s decision.
b) Agree an options agreement with Broadland St Benedicts for the
purchase of the five Retained Housing Sites on the terms required
by the Council and as set out in Broadland St Benedicts letter of 29
April 2014.
c) Complete the disposals of the individual sites, following approval of
planning applications and the ending of any leases or licenses on
the sites, in accordance with the Scheme of Delegation.
It is anticipated that the first site will be disposed of by the end of
March 2015.
4
Options Considered
4.1
Option 1: Not to dispose of the six sites to Broadland St Benedicts.
This option is not recommended as it would result in the loss of a
capital receipt of up to £1,030,000 and the potential loss of the
provision of new homes, including homes for affordable rent,
intermediate sale and open market sale.
4.2
Option 2: Dispose of all six sites. This option is not recommended as
the non-retained housing site is not considered appropriate for
disposal at this time.
4.3
Option 3: Recommend the disposal of the five Retained Housing
Sites to Broadland St Benedicts.
This option is recommended as it would result in a capital receipt of
up to £1,030,000 and will assist the delivery of approximately 88 new
homes via five Exception Housing Schemes.
5
Conclusions
5.1
Broadland St Benedicts formal request to purchase Council owned
sites is to enable the development of these sites provide new
affordable and market homes. The market dwellings are being
provided in order to provide the subsidy needed to make the delivery
of the affordable dwellings viable. Broadland St Benedicts would
undertake the development of the sites and sell the completed
affordable dwellings to Broadland Housing Association, whilst the
market dwellings would be sold on the open market.
5.2
It is recommended that an options agreement is completed to dispose
of five sites, all of which would be developed as Exception Housing
Schemes.
5.3
Sale of the five sites would generate a capital receipt of up to
£1,030,000, although the exact amount will depend on the number of
sites which Broadland St Benedicts chooses to purchase and the
number of affordable and market dwellings delivered on each site.
6
Implications and Risks
6.1
Broadland St Benedicts formal request to purchase the sites includes
six conditions for the purchase, if these conditions are not met, the
sites will remain in the Council’s ownership. One condition relates to
Broadland St Benedicts obtaining planning consent on the sites, this
is a standard condition for a residential land sale. Whilst the Council
is the Local Planning Authority the decision to dispose of its land is a
separate matter and deciding to sell its land is not an exercise of its
authority as the Local Planning Authority. This is a reputational issue
for the Council and it should be clear at all times that the decision to
dispose of the sites is separate to any decision made by the Council
as Local Planning Authority to grant or refuse planning permission on
the six sites.
7
Financial Implications and Risks
7.1
Disposal of the five sites recommended for sale is likely to give rise to
a capital receipt of up to £1,030,000 for all five sites. It is made clear
in Broadland St Benedicts letter that the level of capital receipt the
Council will receive depends on the mix of dwellings for which
planning consent is received.
This is because Broadland St
Benedicts are proposing to pay the land value on a per plot basis with
a different value for the market and the affordable plots. This means
the number of dwellings which are ultimately developed, and whether
they are affordable or market dwellings will dictate the capital receipt
which is received. The amount of capital receipt received will also
depend on whether Broadland St Benedicts purchase all five sites, or
choose to purchase only some of these sites.
7.2
The disposal in this case complies with the Disposal, Investment and
Acquisition Policy (DIAP) in that it would be a disposal by private
treaty. An independent valuation of the six sites has therefore been
carried out by the DVS (District Valuer Services which is the
commercial arm of the Valuation Office Agency). The valuation was
requested on a per plot basis for both market and affordable dwellings
as well as a whole site value for each of the six sites. The DVS report
is attached as Appendices O and P. These show that the DVS has
identified (once the £150,000 valuation of the non-retained housing
site is removed) that the Council could receive a capital receipt of up
to £1,255,000, based on three sites containing market dwellings and
£1,205,000 when only two sites contain market dwellings.
7.3
As the disposal of the land is not to a Registered Provider but instead
to a private limited company, the disposal must be in accordance with
the DIAP and best consideration reasonably obtainable must be
achieved. As there is a shortfall between the value for these five sites
attributed by Broadland St Benedicts and the value identified by the
DVS, it must be considered whether the Broadland St Benedicts offer
is in fact the best consideration reasonably obtainable. The DIAP
shows that the judgement of whether best consideration reasonably
obtainable is not purely financial and can include non-monetary
considerations. In addition, the Local Government Act 1972: General
Disposal Consent 2003, allows for a disposal at under value where
the disposal is for a well-being purpose and where the under value
does not exceed £2,000,000. In this case, the disposal of the land for
the provision of affordable housing and where applicable market
housing, would result in an improvement of the supply of affordable
housing to meet the local housing need of Binham, Edgefield,
Erpingham, Great Ryburgh and Trunch and the adjoining civil
parishes. On this basis it can be considered that the provision of
affordable housing in these locations would improve the well-being of
those parts of the district and it would therefore be possible to use the
General Disposal Consent to dispose of the site at less than the DVS
valuation. The undervalue in accepting Broadland St Benedicts offer
price for these five sites would be between £175,000 and £225,000
depending on whether 2 or 3 sites are developed to provide market
dwellings. It should be noted, that the Council has previously
provided land for affordable housing for free.
7.4
Broadland St Benedicts offer for the five sites has been predicated on
the delayed payment of the land value on four of the sites (as
discussed at 2.4 above). This means that whilst the Council would
dispose of all five sites, it would, on disposal, only receive payment for
one site, the land at Binham. The capital receipt for the remaining
four sites would be received in a number of different tranches over a
number of financial years. This means that the Council will receive
the payment for the land at Edgefield, Great Ryburgh and Trunch as a
lump sum once the affordable dwellings on each site are completed.
However, for Erpingham, the Council would receive one payment
once the affordable dwellings are completed and sold to Broadland
Housing Association and a number of separate payments as each
market dwelling is completed and sold. To encourage the timely
development of the sites, it is proposed that the sites which will be
purchased on a deferred payment basis, are sold subject to a clause
which allows these sites to be returned to the Council’s ownership if
the homes are not constructed within a set number of years from the
sale of the land.
7.5
In order to mitigate against the risk that the Council would not receive
the capital receipt for the four sites which Broadland St Benedicts
wants to purchase on a deferred payment basis, the Council will
impose a charge on each site when it is disposed of. The charge will
ensure that the Council’s financial interest in the land is protected,
should the financial position of Broadland St Benedicts mean it is
unable to pay for the land.
8
Sustainability
8.1
All the new homes will be provided in accordance with current building
regulation standards as a minimum. The dwellings will also be built in
compliance with the requirements of the Council’s Core Strategy
which requires homes are built to Level 3 of the Code for Sustainable
Homes, unless there is a change which means that this would not be
required.
9
Equality and Diversity
9.1
There are no direct equality and diversity implications arising from this
proposal.
10
Section 17 Crime and Disorder considerations
10.1
There are no section 17 implications.