For Discussion at Reports Meeting On

6 12/44 PERTH AND KINROSS COUNCIL

Housing and Health Committee – 1 February 2012 Property Sub-Committee – 7 March 2012

DISPOSAL OF LAND TO ENABLE THE DEVELOPMENT OF AFFORDABLE HOUSING AT MUIRMONT CRESCENT, BRIDGE OF EARN AND MAXTON ROAD, CRIEFF

Joint Report by Executive Director (Housing and Community Care) and Depute Director (Environment)

The purpose of this report is to seek approval for the disposal of land, at restricted market value in accordance with approved policy, to enable the development of affordable housing at Maxton Road, Crieff and Muirmont Crescent, Bridge of Earn.

1. RECOMMENDATIONS

It is recommended that the Housing and Health Committee:

1.1 Approve the disposal of a site at Maxton Road, Crieff to Hillcrest Housing Association at £0 (nil value), representing the “restricted” market value using a special assumption that the sites are to be developed for affordable housing in accordance with the policy approved on 22 August 2007.

1.2 Approve the disposal of a site at Muirmont Crescent, Bridge of Earn to Caledonia Housing Association at £0 (nil value), representing the “restricted” market value using a special assumption that the sites are to be developed for affordable housing in accordance with the policy approved on 22 August 2007.

Subject to the approval of the Housing and Health Committee of 1.1 and 1.2 above, it is recommended that the Strategic Policy and Resources Committee:

1.3 Approve the disposal of a site at Maxton Road, Crieff to Hillcrest Housing Association at £0 (nil value), representing the “restricted” market value using a special assumption that the sites are to be developed for affordable housing in accordance with policy.

1.4 Approve the disposal of a site at Muirmont Crescent, Bridge of Earn to Caledonia Housing Association at £0 (nil value), representing the “restricted” market value using a special assumption that the sites are to be developed for affordable housing in accordance with policy.

1.5 Note that the disposals are subject to other terms and conditions to the satisfaction of the Head of Planning and Regeneration and the Head of Legal Services.

2. BACKGROUND

Perth and Kinross Council Policy and Site Valuations

2.1 The policy for disposing of properties to Registered Social Landlords (RSLs) for the development of affordable housing, at a restricted value reflecting its use for that purpose, was approved by Housing and Health Committee on 22 August 2007 (report 07/527). At that time, the restricted value for affordable housing purposes was lower than unrestricted market value (effectively the value which could be achieved if the site was sold on the open market) but still generally produced a capital receipt for the Council.

2.2 The two sites, which are the subject of this report, currently fall within the scope of the policy. The sites at Maxton Road, Crieff and Muirmont Crescent, Bridge of Earn have been declared surplus to the Council’s requirements, (reports 08/251 and 09/05 respectively), and are therefore available for disposal in terms of the Council’s policy.

2.3 Recent reductions in the level of Scottish Government Grant available have had a substantial adverse effect on the valuation of land for affordable housing purposes. No recent affordable housing valuations in the Perth and Kinross area have produced a significant positive value.

2.4 It is likely that under the current Scottish Government Grant regime, the policy of disposing of sites to RSLs for affordable housing developments will result in the Council receiving small or no capital receipts from such disposals.

2.5 Independent valuations have been prepared by the District Valuer Services (DVS) for both sites and are considered as follows:

• 0.245 HA, Maxton Road, Crieff – proposed disposal to Hillcrest Housing Association to develop 8 semi detached houses. The DVS assessed the unrestricted market value of the site at £212,000. The DVS have provided an opinion of market value, subject to a special assumption reflecting the restriction to affordable housing, at £0 (Nil value).

• 0.771 HA, Muirmont Crescent, Bridge of Earn – proposed disposal to Caledonia Housing Association to develop 18 semi detached and terraced cottages. The DVS assessed the unrestricted market value of the site at £450,000. The DVS have provided an opinion of market value, subject to a special assumption reflecting the restriction to affordable housing, at £0 (Nil value).

• There could, however, be no certainty that the unrestricted market values referred to above would be achievable.

• The land value for each site for any form of affordable housing development would be nil £0 (Nil value).

42 Best Value

2.6 The Council is required to fulfil its statutory duties under Best Value as set out in the Local Government in Scotland Act 2003 and to comply with the requirements of the Disposal of Land by Local Authorities (Scotland) Regulations 2010. Relevant aspects of this duty include:

• Making best use of public resources, including land and property. • Assessing the full financial consequences of decisions at an appropriate level before major financial decisions are taken or commitments entered into. • Demonstrating responsiveness to the needs of communities, citizens, customers and other stakeholders, where relevant.

Disposal for Less than Best Reasonable Consideration

2.7 The Local Government (Scotland) Act 1973 (as amended) (“the 1973 Act”) states that “except in accordance with regulations …. a local authority shall not dispose of land.. for a consideration less than the best that can reasonably be obtained.”

2.8 The capital receipts which can be achieved through disposals to RSLs for the development of affordable housing are less than could reasonably be obtained if the sites were simply to be sold on the open market. These disposals therefore have to comply with the regulations as set out in the Disposal of Land by Local Authorities (Scotland) Regulations 2010 (“the Regulations”) made under the 1973 Act as amended by the 2003 Act.

2.9 The regulations establish that the Council may dispose of land for less than a consideration that can reasonably be obtained if the disposal contributes to the promotion of any of the following purposes:

• Economic development or regeneration. • Health and/or social wellbeing. • Environmental wellbeing.

2.10 On the basis that sales on the open market would release these sites for private housing development, with a 25% affordable housing assumption, this would secure approximately 6 affordable units. It should be noted there is no guarantee of the 25% affordable housing condition being met in the current economic climate as developers seek exemption from Affordable Housing conditions on the basis of financial viability.

2.11 The capital receipt which could be achieved from the disposal of the sites on the open market could potentially be re-invested in new Council build social housing. This would only fund approximately 5 new build units.

2.12 The disposal to RSLs secures 26 affordable units and therefore increases the stock of affordable housing when compared to the number of units secured through disposing of the sites on the open market. This complies with the Council’s policy of encouraging affordable housing.

2.13 It is considered that both disposals are reasonable and will contribute to economic development, regeneration and the promotion of health, social wellbeing and environmental wellbeing by providing a larger number of new affordable houses for the residents of Perth and Kinross than would be possible if the sites were to be sold on the open market.

2.14 It has therefore been concluded that the disposals comply with the requirements of the 1973 Act and the Regulations and can proceed.

Scottish Minister’s Consent

2.17 Section 12(7) of the Housing (Scotland) Act 1987 requires the Council to obtain Scottish Ministers’ consent to the disposal of any land held on the Housing Revenue Account (HRA). Minister’s consent has been secured unconditionally in respect of both sites.

2.18 Whilst the consent in each case is unconditional, Scottish Government officials have indicated in the consent letters that the Council should consider whether the HRA should be compensated from the General Fund as the provision of affordable housing to assist the homeless could be interpreted as a broader Council objective, rather than one which Council tenants should be asked to fund. The letter also advises that any decision not to compensate the HRA should be transparently set out for tenants and auditors, should either wish to discuss the terms of the disposal with the Council.

2.19 In addition, the letter refers to an assumption that the Council has consulted sufficiently with tenants so that they are aware that the HRA is disposing of assets with significant potential open market value for nil consideration. As stated at 4.1 below, there is an ongoing consultation process regarding HRA income and expenditure and its potential impact on rent setting with tenants and Registered Tenant Organisations.

2.20 The inclusion of this additional content in the consent letters is related to the policy guidance on HRA disposals and transfers which the Ministers are considering and which is currently only in draft form. When the guidance is finalised, it is likely that a pro forma application for consent will be produced and that, in applying for HRA consent, the Council may be required to present to the Ministers information such as that which is referred to above. Officers will therefore discuss the development of a framework for future disposals of HRA assets to ensure that all relevant considerations and consultations are made.

3. PROPOSALS

3.1 It is proposed that a site at Maxton Road, Crieff be disposed to Hillcrest Housing Association at £0 (nil value), representing the “restricted” market value using a special assumption that the sites are to be developed for affordable housing in accordance with the policy approved on 22 August 2007.

3.2 It is further proposed that a site at Muirmont Crescent, Bridge of Earn be disposed to Caledonia Housing Association at £0 (nil value), representing the “restricted” market value using a special assumption that the sites are to be developed for affordable housing in accordance with the policy approved on 22 August 2007.

3.3 The disposals are subject to other terms and conditions at the satisfaction of the Head of Planning and Regeneration and the Head of Legal Services.

4. CONSULTATION

4.1 There is an ongoing consultation process regarding HRA income and expenditure and its potential impact on rent setting with tenants and Registered Tenant Organisations.

4.2 The Head of Legal Services, the Head of Democratic Services, the Acting Head of Finance, the Head of Planning and Regeneration and the Head of Housing and Strategic Commissioning have been consulted in the preparation of this report.

5. RESOURCE IMPLICATIONS

5.1 The proposals shall have no net effect on the Council’s stock 30 year Business Plan and Scottish Housing Quality Standard Delivery Plan. The anticipated impacts are within the assumptions made in the HRA Business and Scottish Housing Quality Standard Delivery Plans respectively.

5.2 The proposed disposals are in line with existing policy and there are no direct budget expectations for this receipt.

5.3 The DVS assessment of the unrestricted market value of the sites is £662,000 for both sites combined. In the current housing market it is very unlikely that this return would be achievable. If an open market sale released these sites for private housing development, with a 25% affordable housing assumption, it would secure approximately 6 affordable units. If any capital receipts received from the disposal of the sites on the open market were re-invested in new Council build social housing they would only fund approximately 5 new build units.

5.4 Therefore there is an ‘opportunity cost’ to the equivalent of 19-20 affordable housing units if an open market sale is pursued. The proposed disposals to RSLs secures 26 affordable units and increases the stock of affordable housing when compared to the number of units potentially secured through disposing of the sites on the open market.

6. COUNCIL CORPORATE PLAN OBJECTIVES 2009-2012

The Council’s Corporate Plan 2009-2012 lays out five Objectives which provide clear strategic direction, inform decisions at a corporate and service

45 level and shape resources allocation. These are reflected in the following objectives:-

(i) A Safe, Secure and Welcoming Environment. (iii) A Prosperous, Sustainable and Inclusive Economy.

7. EQUALITIES IMPACT ASSESSMENT (EqIA)

7.1 An equality impact assessment needs to be carried out for functions, policies, procedures or strategies in relation to race, gender and disability and other relevant protected characteristics. This supports the Council’s legal requirement to comply with the duty to assess and consult on relevant new and existing policies.

7.2 The procedure presented in this report was considered under the Corporate Equalities Impact Assessment process (EqIA) with the following outcome:

• Assessed as not relevant for the purposes of EqIA

8. STRATEGIC ENVIRONMENTAL ASSESSMENT

8.1 Strategic Environmental Assessment (SEA) is a legal requirement under the Environmental Assessment (Scotland) Act 2005 that applies to all qualifying plans, programmes and strategies, including policies (PPS).

8.2 The matters presented in this report were considered under the Environmental Assessment (Scotland) Act 2005 and no further action is required as it does not qualify as a PPS as defined by the Act and is therefore exempt.

9. CONCLUSION

This report seeks approval for the disposal of land, at restricted market value in accordance with approved policy, to enable the development of affordable housing at Maxton Road, Crieff and Muirmont Crescent, Bridge of Earn.

DAVID BURKE Executive Director (Housing and Community Care)

JIM VALENTINE Depute Director (Environment)

Contact Officers: Norma Robson, Ext. No. 76090 Email: [email protected] and Jim Carney, Ext. No. 75952 Email: [email protected]

46 Address of Services: Housing and Community Care, 5 Whitefriars Crescent, Perth, PH2 0PA

and

The Environment Service, Pullar House, 35 Kinnoull Street, PH1 5GD

Date: 20 January 2012

N. Robson / J. Carney