Decision Maker:

Outcome: Recommendations Approved

Is Key Decision?: No

Is Callable In?: No

Date of Decision: April 28, 2025

Purpose:

Content: RESOLVED:   1.  The acceptance of the grant of £6,594,250 from the Department for Energy Security and Net Zero’s Public Sector Decarbonisation Scheme (PSDS4) managed by Salix Finance to support decarbonisation of a portfolio of Corporate properties and agreement to enter into a grant agreement and associated documents with the applicable parties in respect of such funding was approved.   2.  The investment of £3.7m from the Capital Programme in undertaking the projects to match the award of £6.6m as set out in para 3.1 above was approved.   3.  The acceptance of an additional funding allocation of £1.1m from the Local Authority Housing Fund Round 3 and approval of the amendment to the existing Memorandum of Understanding (MOU) with the Ministry of Housing, Communities and Local Government (MHCLG) were approved.  This amendment is included as Exempt Appendix 6 in this report.   4.  The acceptance of the part-surrender by ISHA of the land leased to them at 82 and 82A Weymouth Terrace shown for identification purposes edged red on the plan at Appendix 2, was authorised.   5.  Authority was delegated to the Group Director, Finance and Corporate Resources to agree all commercial terms relating to this surrender.   6.  Authority was delegated to the Director of Legal, Democratic and Electoral Services to agree, settle and sign legal documentation to effect proposals contained in this report and to enter into any other ancillary legal documentation as required.   7.  The Council entering into the Letter of Indemnity with NU Technology and Learning Centres (Hackney) Limited in respect of refurbishment works at Hackney Central Library, in the form annexed to this report at Exempt Appendix 7, was approved.   8.  Delegating to the Director, Legal, Democratic and Electoral Services the authority to make and accept any amendments required to finalise the letter on the basis that these amendments do not materially change the financial or risk profile.   9.  The s106 scheme summarised below and set out in section 11 was noted:   S106 2025/26 £'000 2026/27 £'000 Total Capital 41 41 82 Total S106 Capital for noting 41 41 82     REASONS FOR DECISION   The decisions required are necessary in order that the schemes within the Council’s approved Capital programme can be delivered and necessary to approve the property proposals as set out in this report.   In most cases, resources have already been allocated to the capital schemes as part of the budget setting exercise but spending approval is required in order for the scheme to proceed. Where, however, resources have not previously been allocated, resource approval is requested in this report.   To facilitate financial management and control of the Council's finances.   Acceptance of Public Sector Decarbonisation Scheme Grant award: The Council has declared a Climate Emergency and is committed to achieving net-zero carbon emissions in Council operations by 2030.  An important part of achieving this commitment will be to decarbonise heat in Council operated buildings. The Climate Action Plan (CAP) adopted in 2023 included specific action on decarbonisation of heat and the project funded by this grant will save 659 tCO2e per year across 9 schools. Accepting this grant and implementing a further PSDS project will represent a further step to implementing the CAP. The overall project will also renew the heating systems in these buildings which would have been required in any case over the next 2-5 years and therefore this proposal represents an advance of capital investment to facilitate receipt of grant which lowers carbon and reduces the overall cost of the capital investment.   Local Authority Housing Fund Round 3 (LAHF3) Grant Additional Funds: LAHF3 funding is being provided to support local authorities to acquire good quality, and better value for money TA for families owed a homelessness duty by local authorities, all properties acquired must be within the borough. This is aimed at reducing the usage of poor-quality bed and breakfast accommodation and to enable local authorities to grow their asset base and help manage local housing pressures on an ongoing basis. Hackney has forecast a net spend on temporary accommodation rental expenditure alone to exceed £28m in the financial year 2024/25, in comparison to £8m for 2023/24 and £2.5m for 2022/23. Purchasing properties through the LAHF3 scheme will go some way to alleviating this pressure and rising costs.   The Council has the existing budget, authorities and workforce in place through the existing LAHF programme to accommodate these additional units.   Proposed Part surrender of lease by Islington & Shoreditch Housing Association (ISHA) for car parking land at 82 and 82A Weymouth Terrace, Haggerston:,  This approval is requested for the part-surrender of an existing long lease held by ISHA (Title number EGL342452) for the purpose of assembling land for the Council’s Weymouth Court housing development project. The lease comprises residential properties and adjacent land (all of which is in Council freehold ownership under Title numbers LN245452, EGL454526 and EGL454525) known as 82 to 92 Weymouth Terrace in St Marys Estate, Haggerston. The piece to be surrendered is a small area of land comprising two car parking spaces adjacent to 82 and 82A Weymouth Terrace. See Appendix 1. Consolidation of this piece of land will unify the Council’s control of the project site known as Weymouth Court within Hackney’s New Homes Programme (NHP), and secure the associated benefits. See Appendix 2 for the project redline boundary.   The payment and costs associated shall be funded from the £10m pre-development budget approved by Cabinet in December 2022 (Key Decision CHE S142) for the NHP. To form the NHP, a comprehensive ‘Asset Review’ of all the Council’s housing land was undertaken, identifying fifteen ‘anchor’ locations with the potential for new Council homes. The parameters of the review “to focus on Council owned land not requiring the demolition of existing dwellings, and with no net loss of green space” generally means that land acquisition is not expected to be required. That said, a small number of opportunities have arisen to gain control of land in order to optimise the development sites, of which this is one.   The land in question comprises two former car parking spaces directly to the rear of 82 and 82A Weymouth Terrace. The land is within the demise of ISHA’s long lease, the underlying freehold of which is owned by the Council. It is not proposed that the piece of land itself is built open, but the removal of the parking spaces and associated rights from the ISHA lease enables the vehicular route accessing the land to be redeveloped in line with the scheme design. It has the further benefit of creating a car-free residential courtyard to be enjoyed by residents of both the existing and new-build homes.    This approach responds to the need to optimise Council housing development proposals, in the context of increasingly scarce developable Council-owned land and the increasing cost and complexity of residential construction. It will also have the benefit of clarifying the public realm extent to enable high quality, accessible and safe improvements to the areas around the anticipated development, thereby preventing the land becoming a magnet for ASB such as fly tipping, and prevent ongoing vehicular access compromising the proposed development size and layout.   This proposal supports the Council’s priorities for social housing delivery, the creation of liveable and safe neighbourhoods, and making best use of Council resources.   ISHA has been engaged and a price for the part-surrender has been negotiated subject to governance by both parties. The agreed premium is £20k plus costs estimated in the region of £10k. This is in the context of a housing development delivering 18 new social homes and surrounding improvements, at an estimated total development cost in the region of £10.9m.   Hackney Central Library Refurbishment - Authority to enter into a Letter of Indemnity: The Hackney Central library opened to the public in 2002, and while the building and facilities have been subject to the maintenance regimes of the PFI contract, the internal library facilities have not received any investment since then, and as a consequence, the fabric, layout and facilities are in need of being updated.   In 2022, LBH successfully applied to the Levelling Up Fund (LUF) for funding for a number of complementary projects aimed at transforming Hackney Town Centre. The refurbishment of the library is one of the projects and it was awarded a grant of £385,000. This amount has been augmented by other Council funds to give a total of £810,000 for the refurbishment works.   The TLC was designed, built, funded and is operated under a PFI type contract. This means that although LBH is the freeholder, the building is under the control of a SPV and in order for LBH to deliver significant refurbishment works, it is required to enter into a legal agreement with the SPV beforehand.   Entering into the LoI will allow LBH more control over the design and instalment process, in particular, the ability to appoint its preferred design and installation contractor, and achieve greater value for money compared to the alternative outlined below. It is acknowledged that choosing this option does transfer additional contractual and financial risk to the Council, however taking a holistic perspective, the recommended option is the most appropriate option to progress with.   DETAILS OF ALTERNATIVE OPTIONS CONSIDERED AND REJECTED   Successful Decarbonisation Grant award Regarding the proposal to accept £6,6m of funding from the Public Sector Decarbonisation Scheme (PSDS), the alternative is not to accept this grant. This would mean missing out on this opportunity, and important decarbonisation projects would either not go ahead as planned or we would need to reprioritise and displace existing projects on the capital programme.   Local Authority Housing Fund Round 3 (LAHF3) Grant Additional Funds: Due to the significant financial pressures placed upon the Council by temporary accommodation, the Council is seeking additional grant to be used for the acquisition of properties. If we chose not to proceed, we would forgo this grant funding which could go some way in alleviating the financial pressures faced by the Council both currently and in the long term.   Proposed Part surrender of lease by Islington & Shoreditch Housing Association (ISHA) for car parking land at 82 and 82A Weymouth Terrace, Haggerston: The alternative option is not to acquire control over the land in question. This option has been rejected because it risks unacceptably compromising the regeneration and new homes potential of the site. It would fail to maximise the financial and non-financial benefits of the opportunity, including optimising the number and quality of new homes and surrounding improvements to the public areas on the estate. Further, it would prevent the Council from making optimum use of its existing land asset at St Marys Estate.   Hackney Central Library Refurbishment - Authority to enter into a Letter of Indemnity:  A detailed exercise was undertaken in 2024 to consider the most appropriate option to design and deliver the refurbishment works. This was to ensure that there was sufficient flexibility to select LBH’s preferred designer, which party would be responsible for both design and construction risk, as well as procurement, delivery and overall value for money.   The alternative option would have been for the SPV to carry out the detailed design, procure a contractor and deliver the works. This option would have transferred more contractual and financial risk to the SPV, but at a significant financial cost and loss of control to LBH.   A critical factor to note in making the assessment is the type of works proposed. The more complex the works, the more opportunity there is for risk to arise. The proposed works are largely limited to the replacement of the existing Furniture, Fixtures & Fittings (FF&E), the installation of a new meeting room and the relocation of floor boxes and small power. There are no structural works, no major changes to either the existing building systems or services, nor impacts on fire compartmentation. All these types of works would have resulted in a higher risk profile and the alternative option most likely being selected.   The recommendation at paragraph 3.7 of this report is made after consideration of the scope of the proposed works, the risks, and the mitigations available to the Council. In summary, the recommended option has been selected due to the principal reasons set out below:   ·  It reduces the risk that LBH would fail the value for money requirement set out by the Department for Leveling Up Housing and Communities (DLUHC). If the Council failed this criteria, the LUF grant would have been  withdrawn leaving a shortfall of £385,000. The alternative option set out below would have cost the Council between £130k - £150k more in delivery costs which would have been challenging to justify to DLUHC. These additional costs are a consequence of the existing PFI structure and how the SPV would have procured the works.  The financial risks associated with LBH’s preferred option, are not relevant to DLUHC’s value for money assessment.   ·  It reduces the risk of the Council not being able to select its preferred specialist design and installation contractor. The type of specialist design and installation contractor preferred by the Council for the works proposed, tend to be small, nimble, niche companies and it is known that these types of companies sometimes have difficulty in passing a SPV’s procurement criteria. SPVs tend to appoint larger, generalist type companies who can accept the more onerous contractual terms resulting from the PFI structure. Not being able to select the Council’s preferred design and installer would likely impact on the final design and quality of fit out.   ·  The proposed works are limited in scope, complexity and crucially do not include any structural works nor material upgrades to the existing building systems or services, nor changes to the existing fire compartmentation.   ·  The works are limited to a discrete area within the building, reducing the opportunity for damage to the wider building.   ·  The most prevalent risk likely to occur is damage to the building beyond the scope of works and any financial costs arising. The Public Liability policies held by both the proposed contractor and the Council, are principally designed to respond to these heads of loss and it is anticipated that these policies would respond.   ·  The proposed contractor has agreed to purchase additional Public Liability insurance up to the £50m reinstatement value of the building. It is anticipated that this policy would pay out in the event the worst case scenario occurred due to the works or as a consequence of the works. The proposed policy has been reviewed by Insurance Services and is deemed to be acceptable. Note that LBH the Council carries a Public Liability policy with a limit of £50m which could be called on.   ·  Taking into consideration the scope of the works, the discrete area the works are taking place in and the insurance policies in place, the risk of the uncapped liability manifesting itself to its full extent is low as is the likelihood that the full financial liability will rest with the Council and not be recoverable, to an extent, from insurances.