Private Sector Leasing –Innovative Housing & Finance Solutions that meet Homeless Needs

Andrew MorrisonDirector - Policy and Business DevelopmentOrchard & Shipman plc

• Company background

• Private Sector Leasing

• Temporary to Permanent Housing

• Questions / Discussion

Presentation

• Established 1988

• 125 staff in 5 offices – Windsor, Slough, StainesWest Drayton, Edinburgh

• Property services company specialising in:- Community housing- Surveying- Residential sales and lettings- Commercial sales and lettings

Background toOrchard & Shipman

Private Sector Leasing (PSL)

• Solution to shortage of temporary housing

• Providing homes for families in need

• Contracts with - London Borough of Hillingdon- Spelthorne Borough Council- City of Edinburgh Council

• Contracts for 2,500 properties

Typical PSL Structure

TENANT

PRIVATESECTOR

LANDLORD

ORCHARD & SHIPMANACQUISITION TEAM

LOCAL AUTHORITY

ORCHARD & SHIPMANMANAGEMENT TEAM

ORCHARD & SHIPMANCUST. SERVICE TEAM

ORCHARD & SHIPMANCLIENT ACCOUNT TEAM

“ Orchard & Shipman was able to demonstrate a solid knowledge of the local property market, with property management experience, an excellent database of contacts and a sound financial business.”

‘Reducing B&B Use and Tackling Homelessness –What’s Working: A Good Practice Handbook’ Office of the Deputy Prime Minister

Good Practice Example

• Experienced community housing provider

• Increasing housing options for homeless

• Major increase in temporary accommodation provision

• Significant budget savings when compared with hostels and B&B

• Partnership working with private landlords

• O&S can provide indemnities covering tenant arrears and any tenant damage to properties

Benefits to Councils

• More secure temporary accommodation

• More choice in location, type of accommodation

• Furnished / unfurnished options

• Professional property management service - Accompanied viewings- Settling in visits - Interim visits - Check out visits

Benefits to Homeseekers

• Guaranteed rent, paid quarterly in advance

• Long leases – 3 to 5 years

• No agent’s fees

• Free property management

• No void periods – rent paid whether the property • is occupied or not

• No dilapidations – subject to fair wear and tear

• Option for repairs to be carried out by contractor

Benefits to Landlords

• 23,000 properties, decreasing through RTB and demolitions

• 2,600 voids per year

• 208,000 bids for vacancies

• 5,000 homeless presentations per year

• 214 in B&B accommodation per night

• £3m cost of B&B

• 27,000 properties in private rented sector (14%)

City of Edinburgh Council

• 5 year contract to procure 1,500 properties

• 520 properties passed to CEC in first 11 months

• 300 properties in pipeline

• 4,100 landlords registered interest

• 3 Landlord Evenings with 150-300 at each

• High landlord and tenant satisfaction figures

• Monthly Contract Meetings with CEC

Edinburgh Council Contract

• Properties dispersed across Council area (so far in 55 out of 58 electoral wards)

• Properties dispersed within streets and areas

• Neighbour notification that Orchard & Shipman are the property managers

• Neighbour nuisance cases dealt with quickly andeffectively, in partnership with Council where necessary

Impact on Communities

LANDLORD SATISFACTION SURVEY

Our landlords have said:

“All excellent – I am delighted with the service.”

“For me your presentation and the information you gave me was everything I needed to hear.”

TENANT SATISFACTION SURVEY

Our tenants have said:

“In my experience Orchard & Shipman were extremely helpful and helped me to achieve my goal.”

“Very helpful, very welcoming, excellent service.”

Innovative Funding ** PSL+ **

• Lloyds TSB and Orchard & Shipman have developed a new funding model that can:

• Provide additional affordable homes with or without grant(Temp to Perm)

• Funding for a flexible tenure model to include temporary,market rented, permanent and shared ownership

• Alternative funding for stock refurbishment

What is T2P?

LOCAL AUTHORITY

TENANT

LLOYDS TSB

• Lloyds TSB will buy properties in accordance with the Council’s requirements and in the areas specified

• Council:

-Enter into an agreement with Lloyds TSB to lease the properties for 10 years – the higher the rent and the longer the period then the lower the debt level at the end of the agreement

- Sublet the properties tohomeseekers

At 10 years

• Lloyds TSB will offer the Council the option to:

- Purchase the properties at the debt level

- Nominate another organisation to receive the benefit of the option

- Extend the agreement for another 5 years

- Surrender the properties to Lloyds TSB

Sensitivity of Results to Property Values

• The number of properties that can beconverted from temporary to permanentaccommodation is a function of propertyvalues at the end of the initial 10 year period

• The graph shows the results for a 200property proposal prepared for a London Authority with a high HB Cap and modest property values. The relatively high revenue to property value meant that the scheme was robust even in periods of consistent deflation.

Rate of inflation

Additional value

• If O&S are selected to manage the tenancies they can underwrite the dilapidation and rent arrear costs.

• Option at year 10 will have significant value. The Council can expect a partner RSL to contribute towards the scheme if they are to receive the benefit of this value.

• Lloyds TSB will enter into a commercial arrangement with the Council’s nominated partner to undertake Landlord responsibilities e.g. repairs to structure, etc.

Key benefits of temporary to permanent:

• Creates new high quality “permanent” accommodation

• 100% privately funded – no grant or land required

• 100% equity retention for the benefit of residents

• Can share risk with private sector – Bank & managing agent

• Nomination rights to affordable rented accommodation

• Housing maintained to a good standard

• Flexibility of a ‘break’ clause – in case HB rules change

• Properties can revert to RSL or ALMO as permanent• accommodation

Key benefits

Inside Housing Editorial

HEADLINE:

Housing benefit solution that ticks all the boxes

“Under this model the government, landlords, tenants and the homeless would win all round. Housing supply is increased, benefit funding goes into leasing properties that could be owned by the social sector and more private cash is levered into housing.”

10th MARCH 2006 - Page 18

Portfolio of 200 T2P Properties

• After 10 years, 200 properties could have net equity value of • £17.6 million.

• Portfolio available to Council or its nominated RSL partner

• Properties acquired at debt levels, then re-let as part of• permanent housing stock at affordable rent levels

Questions & Discussion

• Next Stages

• Provide information to Lloyds

• Outline Proposal

• Agreement on Terms

• Submission to Elected Members