blake lapthorn social housing seminar with rund partnership ltd - stock rationalisation
DESCRIPTION
Blake Lapthorn solicitors' Social Housing team held a seminar with Rund Partnership Ltd on stock rationalisation on 14 February 2013.TRANSCRIPT
Introduction
What is Stock RationalisationHow we prepare for salesObtaining consentConsulting tenantsOther options to sales
What is Stock Rationalisation
Process of better managing your stockMore detailed knowledge of your stock’s performanceWhy Transfer?– Fund raising?– Too costly to run?
Other options to Transfer– Lease– Management Agreement
Identifying what to sell
What do you own?– Houses and flats– Other land– Unknown land
Who is in occupation?– Are they who you expect them to be?– Do you need to secure possession from occupiers?
Preparation, preparation, preparation
Locate all Land Registry TitlesIdentify problemsRemedy known problems where possibleSearchesPre-Contract enquiriesOther considerations– Will you be transferring any employees?– VAT implications
Consent
Who’s consent will you need?– Homes and Communities Agency– Lender– Local Authority
LSVT organisations– Third Party
The HCA’s requirements
The HCA requires you to:– Consult with the affected tenants– Consult with local authorities– Have an in date valuation for the stock– Fill out the required forms
Consulting your tenants
Assured tenants v Secure TenantsWhen to consult– When formulating your proposal– When you have the final proposal
The information you need to give– Discuss benefits– Discuss detriments– Give chance to respond
Tenant’s response not binding on your final decision
What we do
Sales– Prepare the contract packages– Draft and supply contracts and contract packs– Advise and negotiate appropriate warranties– Deal with enquiries– Advise on dealing with arrears and surpluses– Assist/obtain your lender’s consent– Assist with obtaining HCA Consent– Deal with Completion
Other options to disposal
Leases– The advantages– The disadvantages
Management Agreements– The advantages– The disadvantages– OEUJ– VAT
Conclusion
Be preparedInvestigate earlyConsult thoroughly
STOCK STOCK RATIONALISATIONRATIONALISATION
IN PRACTICEIN PRACTICE
Martha Slade Head of Sustainability
ESTABLISH CONDITION ESTABLISH CONDITION OF PROPERTIESOF PROPERTIES
• CALCULATE VALUE• BE AWARE OF STATUTORY
STANDARDS TO LET PROPERTIES• RUN OPTION APPRAISALS ON
WHETHER TO RENOVATE, CONVERT OR RE‐DEVELOP
•LOCAL AUTHORITY PLANNING CONDITIONS
• ENERGY ACT 2011
• FUNDING OPPORTUNITIES
LOCAL AUTHORITY LOCAL AUTHORITY PLANNING CONDITIONSPLANNING CONDITIONS
• MORE LAs
SETTING OUT HIGHER LEVELS OF CARBON REDUCTIONS FOR CONVERSIONS,
EXTENSIONS, RENOVATIONS OR CHANGE OF USE OF EXISTING BUILDINGS
•SOUTHAMPTON CITY COUNCIL’S PLANNING POLICY CS20 PLACES CONDITIONS ON
RESIDENTIAL CONVERSIONS
SOUTHAMPTON CITY SOUTHAMPTON CITY COUNCIL PLANNING POLICY COUNCIL PLANNING POLICY CS20CS20
Development Type
Low Rise Residential
4 Storey + Residential
Minimum CO2 Emission Reduction Required
20% 15%
BRE SURVEY OF LOCAL BRE SURVEY OF LOCAL PLANNING POLICIESPLANNING POLICIES
• BRE CARRIED OUT A SURVEY REGARDING POLICIES ON CONVERSIONS AND REFURBISHMENTS
• 8 LONDON BOROUGHS AND IN THE SOUTH ‐ BRIGHTON, BRISTOL, READING AND PORTSMOUTH
REQUIRE BREEAM DOMESTIC REFURBISHMENT “VERY GOOD”
OR HIGHER.
ENERGY ACT 2011ENERGY ACT 2011• FROM APRIL 2018 IT WILL BE ILLEGAL TO LET
PRIVATE SECTOR PROPERTIES WITH F OR G EPC RATING (LONG STOP DATE SO THIS COULD BE
SOONER)
• FROM APRIL 2016 PRIVATE SECTOR LANDLORDS CANNOT REFUSE TENANTS’
REQUESTS TO IMPROVE
THEIR PROPERTY TO AT LEAST AN E RATING (ALSO A LONG STOP DATE)
GREEN DEAL FINANCEGREEN DEAL FINANCE
• ENERGY EFFICIENCY IMPROVEMENTS CAN BE PAID THROUGH THE GREEN DEAL
• LOAN TAKEN OUT WILL BE PAID BACK THROUGH ENERGY BILLS BY THE PERSON WHO
IS LIABLE TO PAY THOSE BILLS
GREEN DEAL FINANCEGREEN DEAL FINANCE
GREEN DEAL PROVIDER COULD CONSIDER THE APPROPRIATE CREDIT WORTHINESS
OF THE BILL PAYER UNDER SECTION 82 OF THE CONSUMER CREDIT ACT
GREEN DEAL FINANCEGREEN DEAL FINANCE
• WHERE THE CONSUMER CREDIT ACT WILL AFFECT ANY INCOMING RESIDENTS THIS WILL HAVE
IMPLICATIONS FOR STOCK TRANSFERS OF PROPERTIES WITH GREEN DEAL PLANS IN PLACE
•COULD HAVE CONSEQUENCES ON LOCAL AUTHORITY NOMINATIONS TO THE SOCIAL HOUSING SECTOR
GREEN DEAL ASSESSMENT GREEN DEAL ASSESSMENT REPORTREPORT
• THE NHF HAS IDENTIFIED THAT THERE ARE SIGNIFICANT LEVELS OF UNDER‐HEATING AND
SELF‐DISCONNECTION IN SOCIAL HOUSING
• THESE FACTORS MEAN THAT A GREEN DEAL OCCUPANCY ASSESSMENT PREPARED FOR ONE
HOUSEHOLD COULD BE SEVERELY COMPROMISED BY AN INCOMING HOUSEHOLD
ECO FUNDINGECO FUNDING• ENERGY COMPANIES OBLIGATION (ECO)
FUNDING IS AN OPPORTUNITY TO FUND ENERGY IMPROVEMENTS TO STOCK
• 3 FUNDING STREAMS REPLACE NOW DEFUNCT CERT AND CESP FUNDING
• SPENDING IS ANTICIPATED AT £1.3BN TO MARCH 2015 (HISTORIC £1.5BN SPENT UNDER CERT)
ECO FUNDINGECO FUNDING• AFFORDABLE WARMTH FOR LOW INCOME
PRIVATE SECTOR HOUSEHOLDS
•CARBON SAVINGS COMMUNITY OBLIGATION (CSCo) TARGETING LOW INCOME COMMUNITIES
TARGET AREAS WHICH ARE LOWEST 15% WARDS IN ENGLAND, SCOTLAND AND WALES INDICATED IN THE INDICES OF MULTIPLE DEPRIVATION
•CARBON REDUCTIONS FOR SOLID WALL/HARD TO TREAT CAVITIES
ECO FUNDINGECO FUNDING
ECO FUNDINGECO FUNDING• CARBON REDUCTION FUNDING STREAM IS LIKELY TO
APPLY TO A SUBSTANTIAL NO. OF SOCIAL HOUSING SECTOR AS 25% OF UK HOMES HAVE SOLID WALLS
•LIKELY THAT A LOT OF SOCIAL HOUSING PROPERTIES WILL BE ELIGIBLE FOR CARBON SAVINGS COMMUNITY OBLIGATION FUNDING AS MANY HOMES IN THIS
SECTOR WILL BE LOCATED IN LOW INCOME COMMUNITIES TARGET AREAS
Which energy efficiency improvements qualify for Green Which energy efficiency improvements qualify for Green Deal or ECO finance (URN 12D/243) Deal or ECO finance (URN 12D/243)
http://www.decc.gov.uk/publications/AdvancedSearch http://www.decc.gov.uk/publications/AdvancedSearch
TECHNOLOGY STRATEGY TECHNOLOGY STRATEGY BOARD BOARD
• GOVERNMENT FUNDING TSB HAS RELEASED DETAILS OF TWO
FORTHCOMING COMPETITIONS FOR FUNDING
• WITH ONLY £4.5M GUARANTEED FOR 4‐ 5 SCHEMES, THERE IS VERY STIFF
COMPETITION FOR THIS FUNDING
LOCAL AUTHORITY LOCAL AUTHORITY CARBON OFFSET CARBON OFFSET FUNDSFUNDS
•THIS WILL PROVIDE ANOTHER SOURCE OF FUNDING FOR THE SUSTAINABLE
RETROFIT OF EXISTING PROPERTIES
Claire WestronRund Partnership
Opportunities and Challenges of
Upgrading Existing Stock
Case studies
Opportunities and Challenges of Upgrading Existing Stock
Case studies
1.ECO Funding ‐
Heronwood Estate, Aldershot
2.BREEAM Domestic Refurbishment – Lower Derby Road, Portsmouth
HERONWOOD ESTATEHERONWOOD ESTATE
• Low rise post war Housing Estate constructed using concrete panels
• Heating systems were replaced 10 years ago with gas fired back boilers & cylinders
• UPVC double glazed windows and external doors installed in the 1990s with around 200mm loft
insulation
HERONWOOD ESTATEHERONWOOD ESTATE
• 65% of tenants are over 60
• 25% are known to have a disability or health problem
• 35% of flats are reported to have a damp problem
HERONWOOD ESTATEHERONWOOD ESTATE
Air tightnessAir tightness
New build (max)
10New build (typical) 5Heronwood ground floor 4.2 Heronwood upper floors
7.7
Existing (SAP Band D)
Option 1 (SAP Band C)• Solid wall insulation
20% savings on fuel bills25% carbon reduction320 lifetime tonnes CO2
saving (ECO)
Option 2 (SAP Band B)• Solid wall insulation• Insulate walls to communal areas• PV panels• Combi boiler with flue gas heat recovery• Ventilation with heat recovery
50% saving on fuel bills60% carbon reduction
What are the potential carbon savings from your stock?
Are any properties located in target “Low Income Communities Target” areas?
Is there an opportunity to upgrade other measures at the same time e.g. boiler replacements?
How can ECO funding be supplemented?
Is planning consent required for solid wall insulation?
How to advise residents who are approached directly by Green Deal Providers?
Can an attractive Eco / Green Deal package be created for leaseholders in flats?
CONSIDERATIONSCONSIDERATIONS
BREEAM Domestic RefurbishmentBREEAM Domestic Refurbishment
BREEAM BREEAM Domestic Domestic RefurbishmentRefurbishment
BREEAM BREEAM Domestic Domestic RefurbishmentRefurbishment
Element Existing dwelling
Post refurbishment
BREEAM Credits
Roof 1.6 0.10
Walls 0.5 0.24
Floor 0.73 0.15
Windows UPVC 3 UPVC 1.20
Doors Timber 3.1 UPVC 1.40
Heating Gas combi boiler Alpha gas combi boiler
Ventilation Extract fans MVHR system
Air tightness 15 7
Renewable energy None Alpha solar smart 2
DER (Dwelling Emission Rate)
66.9 19.2 7.5
FEE (Fabric Energy Efficiency)
177.5 64.8 5
0
10
20
30
40
50
60
70
Existing dwelling Fabric only Fabric with solar thermal
Fabric with PV
Dw
ell
ing e
mis
sio
n
rate
WaterWater < 100 litres per person per day
4/2.6 dual flush WC170 litre capacity bath7 litres per minute taps5 litres per minute kitchen taps7 litres per minute shower flow rate
CostsCostsMechanical ventilation heat recovery
£1,500
Solar hot water with gas fired heating
£7,000
Triple glazed windows £3,780
Enhanced insulation £3,980
General refurbishment £23,120
Value before refurbishment £105,000
Value post refurbishment £140,000
CARBON OFFSET FUNDSCARBON OFFSET FUNDS
Local Authority case studies:
• Brighton• Milton Keynes• Southampton City Council
ALLOWABLE SOLUTIONSALLOWABLE SOLUTIONS
Financial Viability of Stock Rationalisation
Rund Partnership Breakfast Seminar14 February 2013
Andy Leahy Managing Director
Bespoke Property Consultants
Stock RationalisationReasons for:•Geography – more efficient management
concentration
•LA partnerships – matching development areas
•Financial stability•Stock conditionReasons against:•Future strategy uncertain
Stock Rationalisation
• Be prepared – due diligence is exhaustive• Be aware of the basis of valuation
– Market– EU – SHV
• Be aware of your stock condition• Boards don’t like surprises• Stock swap – how are you going to fund a
cash difference?
Financial Appraisal• What goes in is what comes out!
• Understand the basis of the information you are using
• Dust off old agreements – does current practice match them?
• May need to build spreadsheet macros to aid data transfer
• Valuation methodology– Internal models
– Proprietary products• Circle developer• Argus• BRIM
• Ensure model is tenure sensitive
Viability Methodology
Bespoke Residential Investment Model (BRIM)•Enter all unit types•Addresses all tenures•Development or refurbishment function
•Sensitivity analysis•20 year investment return cashflow
•Addresses different funding sources•Free to download from BPG website
THANK YOUAndy Leahy
Bespoke Property Consultants
Tel: 01403 823425
www.bpglimited.co.uk