The Sutton Shareholdings Board approved the establishment of a new not-for-profit registered provider, a Community Benefit Society (CBS), as a subsidiary of Sutton Living Limited. This move is intended to enable the organisation to access greater grant funding for affordable housing acquisition and development. The Board also approved the group and governance structures, shareholder agreements, and ringfencing agreements related to this new entity.

Establishment of a Community Benefit Society

The Board approved the creation of a Community Benefit Society (CBS) as a subsidiary of Sutton Living Limited (SLL). This new charitable organisation will be registered with the Regulator of Social Housing (RSH) and will seek recognition as an exempt charity from HM Revenue and Customs (HMRC). The primary aim is to enhance SLL's ability to acquire and develop affordable housing by accessing grant funding from bodies such as the Greater London Authority (GLA) and the Ministry of Housing, Communities and Local Government (MHCLG), which are currently unavailable to SLL in its current structure.

Councillor Sunita Gordon, Lead Member for Resources and Chair of the meeting, presented the report, explaining that SLL, originally established as a developer, has increasingly focused on acquiring homes for affordable housing to assist the Council with temporary accommodation and homelessness pressures. The new structure is designed to optimise this route. Councillor Jake Short, Chair of the Housing, Economy and Business Committee, noted that this proposal aims to deliver the current strategy more efficiently, rather than introducing a new one.

The establishment of the CBS was approved through a series of recommendations:

• Recommendation 2.1: To approve the establishment of a charitable Community Benefit Society as a subsidiary within the Sutton Living Limited group structure, subject to registration with the Financial Conduct Authority.
• Recommendation 2.2: To approve the establishment of the CBS for the principal purpose of becoming a Registered Provider of social housing, and to authorise the submission of an application for registration with the Regulator of Social Housing and all associated regulatory submissions, including an application for charitable recognition with HMRC.
• Recommendation 2.3: To approve the group and governance structures as set out in paragraphs 3.4 to 3.12 of the report.
• Recommendation 2.4: To note the Community Benefit Society Rules as set out in Appendix A.
• Recommendation 2.5: To approve the Shareholder Agreement between the Council, SLL and the CBS as set out in Appendix B.
• Recommendation 2.6: To approve the Community Benefit Society Ringfence Agreement with Sutton Living Limited and London Borough of Sutton as set out in Appendix C.
• Recommendation 2.7: To note the Community Benefit Society Governance Policy as set out in Appendix D.
• Recommendation 2.8: To note that minor consequential amendments may be made to the documents to ensure the registration process is completed.

All recommendations were approved by the Board.

Governance and Financial Commitments

Significant discussion revolved around the financial commitments and governance of the new CBS. Rob Beck, a legal advisor from Trowers & Hamlins LLP, clarified that the ringfencing agreement ensures that the requirements of the Regulator of Social Housing (RSH) are met, with the Council and SLL obligated to support the CBS. However, he stressed that there is no obligation on either the Council or Sutton Living to actually provide that support, and any decision to do so would depend on the specific facts and circumstances. He added, there's absolutely no regulatory or legal requirement for the Council to financially support the Registered Provider.

Councillor Isabel Araujo raised concerns about potential financial exposure for Sutton taxpayers. While the Council's support is not guaranteed, it was noted that in practice, the Council is likely to provide support if it is deemed the right course of action. The report indicated that ongoing regulatory, governance, and audit costs for the CBS will be met from its operational cash flows and will not require Council funding. Professional advisory fees for establishing the CBS total £120,000, split equally between the Council and SLL.

The structure ensures that the Council remains the sole shareholder of SLL, and SLL will be the parent company of the CBS. The Council retains direct control over the CBS's borrowing and the approval of its business plan through specific reserved matters outlined in the Shareholder Agreement. Councillor Jake Short questioned the accountability for pursuing improvements if the RSH identified issues, and it was confirmed that responsibility would lie with the CBS Board, with material correspondence with the RSH needing to be communicated to SLL and the Council.

The Board also discussed the composition of the CBS Board, noting that while the National Housing Federation recommends a minimum of five members, the initial structure would have three, with a plan to expand to at least five as quickly as practically possible to meet regulatory expectations. The majority of Board Members must be independent from the RSH registration point.

Access to Funding and Rent Affordability

A key benefit of establishing the CBS is the anticipated access to grant funding from the GLA and MHCLG. Therese, presenting the report, stated that this structure allows us to optimise that route, and the main benefit being access to grant from the Greater London Authority. Councillor Araujo inquired about the level of grants expected, and it was revealed that SLL had already bid for a modest £9 million of funding for 50 homes, with the hope of securing more ambitious bids in the future if successful.

Regarding rent affordability, it was confirmed that while the CBS's rents may not be social rents, there is a requirement and intention to keep rents affordable. The CBS will be required to adopt a Rent Setting Policy, which can only be amended with the Parent's consent, preserving the Council's ability to ensure rents remain genuinely affordable. Furthermore, as an RSH-registered provider, the CBS will be bound by the Regulator's Rent Standard and wider Regulatory Standards.

Operational Structure and Future Plans

The CBS will operate as the group's affordable and social housing delivery arm, with SLL retaining its role as the wider group parent company. Existing SLL operations will continue unaffected. Homes acquired by the CBS will continue to be allocated on the basis of housing need, consistent with current practice, and will remain subject to Council nomination rights. This is expected to generate direct revenue savings for the Council by reducing reliance on high-cost temporary accommodation.

The report detailed the proposed group structure, with SLL as the parent company, the CBS as the social and affordable housing delivery arm, and the potential for future group vehicles. It was noted that the affordable housing stock currently held within SLL is intended to transfer to the new CBS over time, subject to detailed legal, tax, and financial advice.

The meeting concluded with the Board approving all recommendations, signifying a significant step in the Council's strategy to increase the provision of affordable housing in Sutton.