Content

Salford City Council - Record of Decision

 
Title: Transfer of RSAP and
affordable homes developed by the Council at Eccles New Road to
Derive RP.
 
I, Councillor Jack Youd, Deputy City Mayor, in
exercise of the powers contained within the City Council’s
constitution do hereby;
 

Approve the disposal by the Council
of 8 Rough Sleeper Accommodation Programme 2021-24
(“RSAP”) self-contained supported housing apartments
and 6 affordable homes at the Eccles New Road site for Social Rent
to Dérive RP at the values set out in the report by way of
freehold transfer.
Note the use of grant funding from
unsupported borrowing to bridge the viability gap of the Eccles New
Road RSAP scheme.
Approve the lending to Dérive
RP to fund the acquisition of the 8 RSAP units and 6 affordable
homes, subject to drawdown by the Council of HCA RSAP 2021-24 grant
funding and HCA Affordable Homes Programme 2021-26
(“AHP”) grant funding.
Delegate authority to the Executive
Director of Place in consultation with the S151 officer to:
negotiate, agree, and finalise the detailed terms of the
transaction, including such arrangements on estate management,
repair and service charge and title matters.
Authorise the Shared Legal Service
to prepare all necessary documentation and to take all steps which
are required to give effect to the above recommendations.

 
The Reasons:          
 
To facilitate the sale and transfer of
completed residential units and use of Homes England RSAP and AHP
grant funding as released.
 
Assessment of Risk is medium 
 
The source of funding: Housing Capital
Programme, with loan to be repaid by Derive RP over 40 year
term.
 
Legal Advice obtained:  Kathryn Saldana and
Sarah Waite, Shared Legal Service.
 
The Council has the power to provide funding
to Derive RP under Section 24 of the Local Government Act 1988 (LGA
1988), which allows the Council to provide financial assistance for
privately let housing accommodation. Section 25 LGA 1988 requires
Secretary of State consent to the exercise by the Council of its
Section 24 LGA 1988 power.  Consent C of
the 2010 General Consents under Section 25 LGA 1988 provides the
Council with a broad consent to “provide any person with any
financial assistance for the purposes of, or in connection with,
the acquisition, construction, conversion, rehabilitation,
improvement, maintenance or management of any property which is or
is intended to be privately let as housing
accommodation”.  The Council will
rely on its power under Section 24 LGA 1988 as the legal basis for
the proposed Council loan to Derive RP to enable Derive RP to
acquire the 14 Eccles New Road Housing Units.
The Council’s Finance Team will ensure
that the terms of the proposed Council Loan to Derive RP, and the
wider terms of the Council’s disposal of the 14 Eccles New
Road Housing Units to Derive RP comply with the requirements of the
Subsidy Control Act 2022 (“SCA”).  If the Council’s Finance Team considers that
there is any element of Council “Subsidy” to Derive RP
in the terms of the Council’s disposal of these 14 Housing
Units to Derive RP, the Council’s Finance Team will ensure
that any Council “Subsidy” to Derive RP is structured
so that it is a “lawful subsidy” under the SCA and that
the Council complies with all relevant requirements of the SCA
(including, requirements for the Council to publish information in
respect of awards of Council Subsidy on the Government’
Subsidy Control Database).
The Council has been awarded GMCA GM BLF Grant
funding to support the Council to deliver the 14 Eccles New Road
Housing Units.  The Council has
contacted the GMCA to seek consent for the proposed transfer of the
freehold interest in the 14 completed Eccles New Road Housing Units
to Derive RP.
The Council has been awarded HCA AHP 2021-26
grant funding to fund the construction of 6 Social Rent Housing
Units at the Eccles New Road Site. The Council is seeking approval
from Homes England to transfer the freehold interest in the 6 units
which have been funded through AHP grant to Dérive
RP.  HE will require Dérive RP to
enter into a legal undertaking, whereby Dérive RP will
undertake to ensure that the 6 units are used for the purpose of
the provision of AHP Social Rented Housing.
The Council has been awarded HCA RSAP 2021-24
grant funding to fund the construction of 8 RSAP “move-on
accommodation” Housing Units at the Eccles New Road Site. The
Council is seeking approval from Homes England to transfer the
freehold interest in the 8 units which have been funded through
RSAP Grant to Dérive RP.  It is
expected that HE will require Dérive RP to enter into a
legal undertaking, whereby Dérive RP will undertake to
ensure that the 8 units are used for the purpose of the provision
of RSAP “move on accommodation”.

Financial Advice obtained: Alison Woods,
Commercial Finance Manager
 
The Council is currently delivering a phase of
affordable homes at the Eccles New Road site, scheduled for
completion in September 2024, which includes a mix of 8 RSAP move
on apartments and 6 AHP Social Rent homes. 
 
This is an approved scheme within the Housing
Strategy Capital programme and the transfer of housing units, as
outlined in this report, has received the approval of the board of
Dérive RP Limited.
 
Such approvals are supported by fully viable
fully business plans, which incorporate the full repayment of all
loans to Salford City Council over a 40 year period at an interest
rate of 4% on an annuity basis. 
 
Dérive RP Limited has a number of
golden rules which ensure that all schemes they take on are fully
viable without the need for working capital; this gives the council
assurance that it will be able to meet its debts in fulfilment of
the required loans.
 
The Council has previously secured the funding
outlined above to deliver this scheme and Dérive RP Limited
now seeks loan funding in a long term secured loan facility from
the Council, to fund the cost of acquisition of the 14 affordable
housing units in the development.
 
The Council has attracted Homes England
Affordable Homes Programme 2021- 26 (AHP) and Rough Sleeping
Accommodation grant funding 2021-24 (RSAP) for this  development and as part of the unit transfers to
Dérive RP Limited is seeking approval from Homes England to
discharge all associated grant conditions to Dérive RP
Limited. 
 
The Council has also been awarded GMCA GM BLF
Grant funding to support the Council to deliver the 14 Eccles New
Road Housing Units and has contacted the GMCA to seek consent for
the proposed transfer of the freehold interest in the 14 completed
Eccles New Road Housing Units to Derive RP.
 
Higher construction scheme costs for the RSAP
units, reported to Procurement Board on 31st January 2023,
alongside an increased cost of borrowing modelled at a blended rate
of 4%, negatively impacted on the original Dérive RP Limited
viability model for this scheme. 
 
The Council’s cost consultant carried
out a value for money assessment on the scheme that concluded
construction costs were reflective of the site conditions and that
above ground costs were comparable to the wider construction market
and that the higher unit costs reflected the ground conditions and
high abnormal costs associated with the scheme. 
 
To support the overall scheme viability, a
provision was made for a Council grant contribution towards the
cost of delivering the RSAP accommodation.  This provision was approved by full Council in
February 2023 as part of the Housing Strategy capital programme
(general unsupported borrowing allocation) 2023-24 and takes the
form of a Council grant to Dérive RP Limited.
 
Procurement Advice obtained: n/a
 
 
HR Advice obtained: n/a
 
 
Climate Change Advice obtained:
Mike Hemingway, Principal Officer - Climate
Change
 
The development is of a car-free design due to
the close proximity of sustainable transport links.?
 
The following documents have been used to
assist the decision process:
Public briefing report submitted to
Property/Regen Briefing on 12th August 2024
 

Contact Officer: John Nugent
(Property Services)
Asst.
Principal Development Surveyor     
Tel No
0161 779 6072
 

*          
This decision is not subject to consideration by another Lead
Member/Director

 

 

 

 

 

*          
The appropriate Scrutiny Panel to call-in the decision is the
           
Growth and Prosperity Scrutiny
Panel.

 

 
 
Signed: Councillor Jack Youd
Deputy City Mayor and Lead
Member for Finance, Support Services and Regeneration
Date 12th August
2024
 
 
*          
This decision was published on Monday 12th August
2024 .
*          
This decision will come in force at 4.00 pm on Monday 19th August unless it is
called-in in accordance with the Decision Making Process
Rules.