Gloucester City Counciland

Gloucester City Homes

Gloucester Co-Co ModelOctober 2012

Martin Shields

Corporate Director of Services and Neighbourhoods

Gloucester City Council

martin.shields@gloucester.gov.uk

About Gloucester City Homes

• 0* in 2005; 2* in 2007; 3* excellent organisation with excellent prospects - Dec 2010

• Delivered 100% Decent Homes / 99% Tenant Satisfaction with improvements – March 2012

• Wide range of external accreditations including IIP Gold; BSI ISO 9001; Customer Service Excellence

• Excellent performance in virtually all service areas

• High levels of efficiency savings c£13M

Purpose of the Options Review

• Determine a clear strategy for future investment in the Council’s housing stock

• Regenerate our housing communities

• Develop new affordable housing

• Identify a preferred option model to deliver these.

Investment Requirements

• In summary: Overall investment 30 years: c£260,000,000 to maintain the stock to a decent homes standard. No regeneration or development

• Equates to c£57k per property over 30 years, or £2k per property per year.

Investment Requirements

• Self financing is good for Gloucester £2.143M additional debt

• Around c£3M better off per annum through retaining rents

• However Investment Shortfall of £13.1M over first 11 years of plan because of required investment in non-traditional stock

Options Considered by Council

A Continue with the existing arrangements

A1 Extend the ALMO management agreement (30 plus years)

B The Council brings the service ‘in-house

C Traditional stock transfer.

D Transferring the stock to a CoCo

Option A and B: Investment Shortfalls

Option C: traditional stock transfer

• Council would transfer ownership of the housing stock to a Housing Association

• Price paid for the stock would be the amount which the association could afford to service and repay within 30 years

• Total debt £59m, stock value £14m, debt write off requirement of £45m

• This option was discounted by the Council.

Formal Resolution – Council Meeting22nd September 2012

1. That a Council and Community Owned (CoCo) model be adopted as the best option and that further work be undertaken with Government to establish, in detail, whether the necessary support for a CoCo would be given.

  and:

2. That a continuation of existing arrangements be regarded as the next best option if a CoCo cannot be made to work. Including;

• Extending GCH’s management agreement to 35 years

• Changing GCH’s ownership so as to allow it to borrow outside the public sector borrowing requirement.

Community- and Council-owned Organisation (CoCo)

Another form of transfer: • CoCo ‘pays’ for the stock by paying the council’s

debt charges (at public sector rates) and repays debt as it becomes due

• CoCo takes on its own debt as necessary

• Modelling assumed that government will adjust the debt settlement for the VAT which the new landlord would pay and not be able to recover

• This could be regarded as a form of support –

– but the government would be receiving extra VAT

Community- and Council-owned Organisation (CoCo)

• The Council is retaining £36.3m of the HRA debt – at least some of which is being written off on other LSVTs

• The CoCo model is consistent with CLG policy – except requires a debt write off of £23.6m

• The model delivers £22.7m of private finance – otherwise unavailable because of HRA debt cap.

• It reduces public sector debt by £22.7m public borrowing and repays all the HRA debt within 30 years

• It creates the potential for regeneration and a substantial new build programme

Communications with Government Agencies

Started discussions

• 01-11-2011 - First Meeting held with DCLG and HCA

• 05-12-2011 - Response to specific questions posed by HCA

• 21-12-2011 - Letter to DCLG / HCA

• 08-02-2012 - Meeting DCLG / HCA

• 10-02-2012 - Letter to DCLG / HCA

• 17-02-2012 - Letter to DCLG / HCA

Communications with Government Agencies

• 21-02-2012 - Meeting with Grant Shapps and Richard Graham MP

• 24-02-2012 - Letter to DCLG following meeting with Housing Minister

• 22-03-2012 – Letter from Grant Shapps

• 11-05-2012 - GCC write to DCLG with formal letter responding to concerns.

• 25-06-2012 - Tel call from HCA

• 19-09-2012 - Meeting with HCA to review options and respond to requests for more

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