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To consider the Executive Director’s Report No. ED1806 (copy attached) following on from the previous Advisory Board on 30th August (Minutes attached). At the meeting officers will also provide a supporting presentation setting out the financial implications of a range of tenure mix as requested at the last meeting of the Advisory Board.
The Chairman welcomed Members to the meeting, the purpose of which was to continue the Board’s consideration of the business case and set out the Financial Case and Management Case for the creation of a wholly owned local housing company. The strategic, economic and commercial case for establishing a local housing company had been considered by the Board on 30th August, 2018. The Board considered the Executive Director (Customers, Digital and Rushmoor 2020) Report No. ED1806 and received a presentation from Karen Edwards, Executive Director (Customers, Digital and Rushmoor 2020), Sally Ravenhill (Housing Enabling and Development Manager) and Martin Dawson (Project Accountant).
(1) Financial Case
The Board was advised that the Financial Case considered the likely funding and affordability issues for both the Council and the housing company. This had been undertaken by building a model based on a set of assumptions (14 potential sites, 52 potential units – land and properties currently in the ownership of the Council). This notional portfolio of development and rental properties had then been fed through that model. Members were advised that the actual programme that the company would deliver could be very different. Some sites might drop out of the programme and some new sites might be added, the company could also sell some existing properties or purchase additional units.
The initial modelling had been based on all units being for private market rent and this had been considered the option most likely to provide the best level of financial return to the company. The Board had identified at the previous meeting that it would wish to see the impacts of a range of tenure mix and, therefore, modelling had been undertaken on a range of tenure mixes to demonstrate the effect of developing some units as affordable and/or social housing.
The development of the model had involved a range of Council officers, who had been supported by external advisors with housing development, financial and tax expertise. The modelling assumptions and principles had been subject to review throughout the preparation of the business case. The key areas considered included: annual projected cash flow, corporation tax and accounting implications for the wholly owned company. The cash flow implications for the Council’s General Fund had also been modelled alongside the wholly owned company cash flows. It was noted that once Members had finished their consideration of the business case and officers had prepared the initial business plan, it was intended to test both of these externally with an organisation familiar with the operation of similar companies prior to consideration by the Cabinet.
The model worked on the basis that the Council would invest in the company by transferring land and a small number of completed homes from its General Fund in return for shares in the company. The Council would also loan money to the company to finance its development activities. It was noted that the Council would take security over the company’s assets to protect its investment. The Report set out the key ... view the full minutes text for item 16.