DD2477 Community-led housing – RUSS Community Land Trust

Type of decision: 
Director's decision
Code: 
DD2477
Date signed: 
11 May 2020
Decision by: 
Rickardo Hyatt, Assistant Director of Housing and Interim Deputy Executive Director

Executive summary

This Director Decision seeks approval for grant of £127,000 of capital funding from the Mayor’s Community Housing Fund Programme to the Rural Urban Synthesis Society (RUSS) Community Land Trust to enable the delivery of a revised scheme of 36 affordable community-led (Community Land Trust) homes in LB Lewisham.

This funding would augment £988,000 allocated to RUSS from the Mayor’s Innovation Fund and approved by the GLA (via DD2269) in August 2018. The additional funding is required to pay for work to value-engineer the project, streamline the design and undertake a re-tendering process. This additional work is needed because it has become apparent, following a recent tender exercise, that the total cost of the scheme will be far higher than originally envisaged and that, as a consequence, it needs to be refined and retendered.

Decision

That the Executive Director of Housing and Land approves:

Expenditure of £127,000 from the Community Housing Fund, to provide grant to the Rural Urban Synthesis Society Limited (RUSS) to support its delivery of affordable community-led homes.

Part 1: Non-confidential facts and advice

Introduction and background

The Mayor is committed to increasing the supply of community-led housing (CLH), believing that Londoners should be able to play a leading role in building their own communities. The London Housing Strategy sets out a target to identify a pipeline of community-led schemes with capacity to deliver 1,000 homes by 2021.

To help achieve this, he is funding the London Community-Led Housing Hub to provide support to community groups that wish to develop homes. He has also secured £38m for London from the Government’s Community Housing Fund (CHF) (approved through MD2372). The Fund, which launched in January 2019, is being allocated through a programme of continuous bidding. It will be used to facilitate the delivery of community-led homes started by April 2023. £30m of the CHF is capital and £8m is revenue. The £30m capital fund is administered by the GLA. £3.8m of the £8m revenue funding is enabling the Community Led Housing London Hub to support community groups at an early stage, with the GLA administering revenue grants for later stage pre-development costs.

In August 2018, the GLA approved a capital grant of £988,000 from the Innovation Fund to the Rural Urban Synthesis Society (RUSS) to deliver a scheme of 33 affordable homes - 14 fixed equity, 12 shared ownership, two London Living Rent and five social rent (via DD2269). The GLA grant was solely for the fixed equity and shared ownership homes, and equated to £38,000 per unit. No grant funding was provided for the London living rent and social rent units because the landlord of the units would need to be a registered provider of social housing (by virtue of section 31 of the Housing and Regeneration Act 2008) and RUSS is not a registered provider. To support RUSS with their cashflow to take the project forward, it was agreed that they would draw down the GLA funding at pre-development stage.

In 2016, RUSS signed a Development Agreement with LB Lewisham for a ‘community-led, affordable, self-build housing development’ on a derelict former school and industrial site. The project received planning permission on the 7 June 2018. To date £731,120 of the GLA’s funding has been drawn down, in line with agreed milestones. The final tranche of £256,880 was scheduled to be paid to RUSS at start on site. LB Lewisham has agreed with the GLA that if RUSS fails to comply with its obligations under the GLA funding agreement, the borough will either repay the GLA’s funding or itself procure delivery of affordable homes on the site.

RUSS have secured in principle development finance and social investment and, at the end of 2019, put the scheme out to tender. However, due to several factors, the costs outlined in the tenders that RUSS have recently received are significantly higher than originally envisaged. These factors include a significant escalation in construction costs since RUSS submitted their bid to the Innovation Fund in 2017 and the need to alter the design of and specification for the scheme to accommodate post-Grenfell amendments to building and fire regulations.

RUSS have been working with their architects and main contractor to reduce the cost of the scheme. Partly to save costs, but also to meet the new fire regulations, they propose changing the frame of the building from timber to concrete. They also now plan to redeploy an area that was originally allocated for permanent community space for housing (relocating the community space elsewhere). In addition, they propose streamlining the layout of the scheme, as there may be the potential to create three additional homes within the original footprint, which would generate additional income.

Additional work is now needed to value-engineer the project, streamline the design (partly to enable the scheme to deliver additional units), and undertake a re-tendering process (which would take place in autumn 2020). This work will cost £383,880 - £127,000 more than is remaining of the original grant. It is therefore proposed that, to enable this work to proceed, the final tranche of the original funding is brought forward to May 2020 and used for this purpose, and £127,000 of additional funding is allocated to RUSS, from the Community Housing Fund.

Objectives and expected outcomes

The proposed additional funding of £127,000 will enable RUSS to undertake the work needed to progress its scheme and potentially deliver an additional three affordable community-led homes (. Without it, RUSS believe that they would be in a default position and the entire scheme could not proceed.

Ultimately, RUSS expect to start on site in early 2021, with completion in two tranches in the summer and autumn of 2021. The scheme could potentially deliver 36 homes (two additional shared equity and one additional social rent home).

Following the work outlined above, RUSS will almost certainly still face a funding gap and require further grant funding. The GLA will consider any further funding bid at that point, in line with the methodology used to assess affordable housing bids submitted to the GLA for funding.

Equality comments

Section 149(1) of the Equality Act 2010 provides that, in the exercise of their functions, public authorities must have due regard to the need to: eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under the Equality Act 2010; advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it; and foster good relations between persons who share a relevant protected characteristic and persons who do not share it.

There is a chronic shortage of affordable housing in London and those with protected characteristics are more likely to disproportionately suffer as a result of that shortage. A full equality impact assessment was conducted to inform the development of the Mayor’s London Housing Strategy. Community-led housing generally produces decent affordable homes and is often designed to help particular groups of people and to meet community need.

By encouraging and facilitating community-led housing which meets local communities’ needs, the GLA expects to create a positive impact in equalities terms and to advance equality of opportunity for those with protected characteristics who are currently disadvantaged by the housing situation in London.

Other considerations

Bid assessment, moderation and due diligence

 

Both RUSS’s original bid (to the Innovation Fund) and this one have been assessed and moderated by officers and senior management in the Housing and Land Directorate, applying the methodology used to assess affordable housing bids to the GLA for grant funding, according to the criteria outlined in the CHF prospectus and in line with the decision-making processes in place for the Fund. Due diligence included an assessment of value for money, strategic fit with GLA priorities and review of deliverability. The assessments concluded that the project meets GLA requirements in terms of value for money, strategic fit with GLA priorities and deliverability.

 

Key risks

 

Risk description

 

Rating

Mitigating action

 

After the work proposed above has been undertaken, the total cost of the scheme/funding gap may make it poor value for money.

Medium risk

The GLA will consider any further funding bid, in line with the methodology used to assess affordable housing bids submitted to the GLA for funding.

 

LB Lewisham has underwritten the £998,000 of Innovation Fund grant, so if the scheme fails to deliver either that grant will be repaid to the GLA or LB Lewisham will deliver affordable housing on the site. However, the proposed £127,000 additional funding would be at risk to the GLA.

The COVID-19 emergency may:

  • negatively impact on deliverability of construction projects
  • result in a reduction in house prices, reducing the viability of RUSS’s scheme.
  • make development finance difficult to secure due to a potential change in loan to value and liquidity ratios

Medium risk

Under the direction of the Deputy Mayor for Housing and Residential Development, the Housing and Land team, in partnership with key stakeholders, is undertaking work to seek to enable a rapid and sustainable recovery to housing delivery following the COVID-19 emergency.

 

 

 

 

Links to Mayoral strategies and priorities

 

Policy 5.3a of the Mayor’s London Housing Strategy includes the following proposals:

‘Working with councils and others, the Mayor will support Londoners to be involved in planning and delivering new homes. This will include:

i. setting a target to identify a pipeline of community-led housing schemes by 2021, with capacity to deliver at least 1,000 homes;

ii. supporting the expansion of community-led housing schemes through a new Community-Led Housing Hub for London; and

iii. investing in community-led housing schemes and lobbying Government for a share of the national Community Housing Fund.’

 

 

Policies H2 and H12 of the Draft New London Plan include the following proposals:

Small sites should play a much greater role in housing delivery and boroughs should pro-actively support well-designed new homes on small sites through both planning decisions and plan-making in order to … support those wishing to bring forward custom, self-build and community-led housing.

To determine the appropriate mix of unit sizes in relation to the number of bedrooms for a scheme, applicants and decision-makers should have regard to … the potential for custom-build and community-led housing schemes.

 

Impact assessments and consultations

 

LB Lewisham are supportive of the proposal which is the subject of this report.

 

Declarations of interest

 

The officers involved in the drafting or clearance of this form do not have an interest to declare in accordance with the GLA’s policy on registering interests which might, or might be seen to, conflict with this Director’s Decision.   

Financial comments

This decision requests approval for expenditure of £127,000 to RUSS as grant to support the delivery of up to 36 affordable community-led homes. DD2269 approved grant funding of £998,000 to RUSS for the delivery of 33 affordable homes from the Affordable Homes Programme. This makes a total GLA funding of £1,125,000 for this scheme.

The expenditure of £127,000 will be funded from the Community Housing Fund as approved by MD2372 and is expected to be incurred over 2020/21.

Activity table

Activity

Timeline

Value-engineering and redesign

Summer 2020

Retendering

Autumn 2020

Start on site

Early 2021

First tranche of completions

Summer 2021

Second tranche of completions

August 2021


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