CITY REGION COMBINED AUTHORITY

To: The Metro Mayor and Members of the Combined Authority

Meeting: 26 February 2021

Authority/Authorities Affected: All

EXEMPT/CONFIDENTIAL ITEM: No

KEY DECISION: Yes

REPORT OF THE PORTFOLIO HOLDER HOUSING AND SPATIAL FRAMEWORK AND INTERIM DIRECTOR OF STRATEGIC DELIVERY

BROWNFIELD LAND FUND YEAR ONE

1. PURPOSE OF REPORT

1.1. This report requests approval of the projects that constitute the year one spend of the Brownfield Land Fund.

2. RECOMMENDATIONS

2.1. It is recommended that the LCR Combined Authority:

(a) Approve the provision of grant funding of up to £280,000 for the Denford Road scheme in Liverpool to and up to £1.05m to the Buckley Hill scheme in Sefton to Sandway Homes.

(b) Approve the provision of grant funding of up to £4.378m for the Paddington Scheme, Liverpool to Liverpool City Council, up to £1.785m for the Halton Court Scheme, Runcorn to be apportioned between Magenta Living and Wirral Housing Partnerships (Developments) Limited, up to £0.4m to Halton Council for the first phase of Foundry Lane scheme and up to £2.19m for in the purchase of the House of Fraser Building.

(c) To note, as set out in paragraph 3.6 that this request for approval by Members is in advance of consideration by the External Investment Panel and does not accord with the usual sequence of steps undertaken and outlined in the Assurance Framework.

(d) Note that delegated authority to the Chief Executive already granted 31 July 2020 will be used to finalise negotiations of detailed funding terms and associated agreements for all the above schemes, in consultation with the Head of Commercial Development and Investment, Combined Authority Monitoring Officer and Combined Authority Treasurer.

3. BACKGROUND

3.1. The Brownfield Land Fund was announced in the March 2020 budget. The total fund is £400m. On 30th June 2020 the Ministry of Housing, Communities and Local Government (“MHCLG”) confirmed that £45m of the fund would be allocated directly to Liverpool City Region, starting this financial year. The fund must deliver land suitable for at least 3,000 and preferably 4,000 homes to be developed and house building needs to start on each site by 31 March 2025 at the latest. Each project requires standard due diligence in terms of proving market failure; meeting Value for Money; a benefit-cost ratio of at least one and passing a Greenbook appraisal. The detailed fund guidance was received at the end of December 2020.

3.2. The first year‟s expenditure of the fund was set by MHCLG as £9m and the funds were transferred to the Combined Authority on 4th January 2021. This is the first specific housing funds devolved to the Combined Authority and addresses a Mayoral commitment to bring forward more brownfield land for housing.

3.3. Those Combined Authorities that accelerated expenditure above a flat yearly profile were offered resource funding in addition to the capital funds. The Combined Authority was allocated £1.34m to spend this financial year to support the development of housing projects. A list of projects approved to date is listed in the report under section 3.15.

Fund allocation

3.4. A housing pipeline for the city region, developed by constituent Local Authorities, Homes , and the Combined Authority was used to identify suitable sites for the fund. Extensive consultation with all Local Authorities determined a list of projects which have been developed over the intervening months with deliverability a core requirement given the extremely short timescales.

3.5. The Housing Investment Strategy approved by the Combined Authority in November 2020 is also used to provide context for bids to be assessed against.

3.6. Officers determined that the funding decisions should follow a similar approval process to SIF funds, which means progressing a full business case. This is appropriate due to the commissioned nature of the projects rather than a project call. All projects have been considered by the Combined Authority‟s Internal Investment Panel. As per the recommendation above, there has been insufficient time for these projects to be presented to the External Investment Panel. This is a departure from the process outlined in the Assurance Framework. The reasons for this departure are the tight timescales of delivering this funding and the readiness of the projects to bid for funds. Members are asked to note the position accordingly.

Schemes

3.7. Moss Nook, St Helens – The Combined Authority previously approved a brownfield land residential development scheme at Moss Nook, St Helens on 24th January 2020. Whilst this scheme was approved prior to the inception of the Brownfield Land Fund, the timing of the remediation works in this financial year has meant that

part of this year‟s allocation of Brownfield Land Funding can be applied to these works.

3.8. Denford Road, Liverpool – Liverpool City Council is seeking £280,000 to support the delivery of 105 residential on 2.1 hectares bordered by Denford Road, Ackers Hall Avenue, Dunchurch Road and Murcote Road. There are abnormal ground costs associated with the site which is partially driving the gap funding in the project. The funding will also directly support the construction costs of the units. Once completed, Liverpool City Council will retain 20 units as socially rented accommodation and 54 units for affordable rents. The balance of the units will be transferred back to Riverside Homes.

3.9. Buckley Hill, Sefton – this project is being brought forward by Sandway Homes (a housing development company wholly owned by ) and will deliver 70 new residential units on a brownfield site in Netherton. Ten homes will be sold as affordable homes to „‟Together Housing‟‟. Sandway Homes are seeking £1,050,000 to directly support the construction of the residential units and close a viability gap on the project.

3.10. Paddington Village, Liverpool – Liverpool City Council are seeking up to £4.378m towards specific and associated site wide infrastructure to bring forward up to 285 new residential units on plot 8 of the Paddington Village development scheme. Once the extensive ground works for the plot have been completed, Liverpool City Council propose to select a developer partner to undertake the construction of these units.

3.11. Halton Road, Halton – The applicants, Magenta Living and Onward Housing, require funding to remove abnormal ground conditions on this previous commercial site. Once remediated, the site will deliver 119 new residential units for a mix of both affordable and open market homes.

3.12. House of Fraser building, Wirral – as part of the Left Bank project Wirral Council very recently purchased this key building to demolish and deliver new housing on. The grant is for acquisition costs and will be used to offset any future viability gap identified when a final scheme and developer are confirmed.

3.13. Foundry Lane, Halton – Halton Council have a regeneration initiative in this area with an ambition to delivery c600 homes. One issue with the scheme is multiple land ownerships with existing commercial occupants. The Council have just appointed a master developer to lead on the land assembly and housing delivery on the site. There is the opportunity in this financial year to grant aid the Council to purchase a key site as an early part of project delivery. The grant requirement is up to £409,500 for the purchase and associated costs. The wider scheme will require further work to develop a full application to the Brownfield Land Fund in the next financial year.

3.14. The table below summarises the projects, housing numbers and the estimated expenditure for each scheme this financial year. The profile is over-programmed to ensure that the first year expenditure target is met.

FUNDING 20/21 TOTAL Spend SITE HOMES £m £m Moss Nook, St Helens 258 2 1.67 Buckley Hill, Sefton 70 1.05 0.5 Denford Road, Liverpool 105 0.28 0.28 Halton Road, Halton 119 1.785 1.785 Paddington Village, Liverpool 224 4.378 4.378 Foundry Lane, Halton 22 0.4 0.4 House of Fraser, Wirral 84 2.19 2.19 TOTAL 882 12.083 11.203

Resource funding

3.15. The Brownfield Land Fund resource funding budget has been allocated to a combination of pre-development funding and costs incurred by the Combined Authority. Pre-development funding has been allocated from the Brownfield Land Fund to various housing projects that are at the early stage of development. This funding has been approved by the Combined Authority‟s Internal Investment Panel in accordance with its delegated authority and pre-development funding guidelines. The table below sets out the pre-development funding that has been approved, along with resource funding allocated to cover the Combined Authority‟s internal and consultancy costs:

Project Applicant Amount Stonebridge Cross, Liverpool Liverpool City Council 210,000 Hind Street, Wirral Wirral Borough Council 182,000 Halton Stock Modelling Exercise Halton Borough Council 32,140 Wirral Waters Heat Network Wirral Borough Council 60,000 Small Sites consultancy LCR Combined Authority 35,313 Internal Staff & consutlancy costs LCR Combined Authority 185,000 704,453

Further bids are in progress or anticipated from LA partners to ensure the remaining £640,000 funds are spent prior to the end of the financial year. These will be reported to the Housing & Spatial Planning Advisory Board and CA as appropriate.

4. EXTERNAL INVESTMENT PANEL CONSIDERATIONS

4.1 The Combined Authority‟s External Investment Panel is considering all the projects at its March 2021 meeting. Any recommendations will be considered as part of the Grant Funding Agreements and actioned accordingly. A presentation is due to be given on the overall Brownfield Land programme to the February 2021 External Investment Panel. As set out in the report above, it has not been possible to include their comments in this report to Members. Input from the Panel will be secured subsequently and reported back to members as part of a project update.

5. RESOURCE IMPLICATIONS

5.1. Financial

The report outlines how the first year allocation of £9m capital funding and part of the £1.34m resource funding will be spent. The current total of capital expenditure approval amounts to £12.08m with up to £11.2m to be spent this financial year. As the projects are finalised, there may be a reduction in the grant funding requirement or insufficient spend to date to enable all grant to be paid immediately this financial year. It is the intention of the CA to pay all the grants immediately where possible following the Grant Funding Agreement being signed, in a single payment this financial year. This will be based on all sunk costs that have already been defrayed or for project acceleration reasons. The tight timescales to finalise all projects is challenging and also risks underspend. Failure to approve the funds as outlined in this report may result in the money being returned to MHCLG. All discussions to date have indicated a strict deadline of 31st March 2021 for the CA to defray expenditure. There may be some leeway as long as the CA have shown they have used all reasonable endeavours to meet the deadline but this is a risk.

5.2. Human Resources

There are no direct Human Resources implications arising from this report. However, it should be noted that in identifying these and other housing projects the capacity of both the CA and the LAs to develop projects ready for funding has been under-resourced. Two new members of staff started at the CA on 1st February 2021 to support the creation of a fuller housing pipeline for future years and housing funds.

5.3. Physical Assets

This first tranche of projects is support for sites in the Halton, Liverpool, Sefton and Wirral Council areas to overcome viability gaps for future housing projects caused by low rental values and/or high remediation and build costs.

5.4. Information Technology

There are no IT implications arising from this report.

6. LEGAL IMPLICATIONS

6.1 The Combined Authority will enter into Funding Agreements with each grant recipient which will be drafted by Legal Services, in accordance with agreed Head of Terms for the scheme. Where appropriate to protect public funding the Combined Authority will include security, overage or other income sharing arrangements within these Funding Agreements.

6.2 The proposed funding arrangements will be subject to the UK‟s Subsidy Control Commitments, which replaced EU State Aid rules for all funding arrangements agreed after 1st January 2021 (the end of the Brexit transition period). This includes principles on subsidy control which are set out in the UK-EU Trade and Co- operation Agreement.

7. RISKS AND MITIGATION

The identified risks include:

7.1 COVID 19 delivery risks – Socially distanced working practices have been adopted by the industry. Build contracts will include an appropriate clause to deal with any potential impact on the delivery of the scheme.

7.2 Single drawdown - In order to achieve year 1 Brownfield Land Funding targets, funding will be provided as a single drawdown where within financial rules. Suitable provisions will be incorporated into the GFA to provide clear milestones and clawback should the project not deliver as anticipated. Progress reports will be submitted and a project schedule identifying key milestones and deliverables, as well as good relationship management with each applicant.

7.3 Tight timescales to complete legal agreements – working is ongoing with applicants to develop Grant Funding Agreements at the same time as the approvals process and delegations sought to appropriate officers to approve final grant conditions. Draft Heads of Terms have been issued to all projects to ensure legal teams are all aware of conditions and can meet the timescales.

Risk Impact Mitigation

Payment of full Potential clawback of Working closely with legal team grant upfront to LA grant funding and external lawyers to ensure compliant reason for payment is Ability of CA to claw covered in all papers. back from recipient Appropriate default clauses in legal Reputational Damage agreements for timescales to start works and deliver housing.

Payment of grant Clawback of grant Based on historic sunk costs which upfront to non-LA funding by MHCLG well documented. partners Ability of CA to claw Internal legal advice followed. back from recipient

Reputational Damage

8. EQUALITY AND DIVERSITY IMPLICATIONS

8.1. The impact of equality and diversity implications have been considered in each individual project. The use of the funds to support work experience, training and job opportunities is covered in each project. Most projects are delivering an element of affordable housing to provide more quality housing opportunities for those in housing need.

9. PRIVACY IMPLICATIONS

9.1 There are no privacy implications in this report.

10. COMMUNICATION ISSUES

10.1. Projects which receive grant funding will be publicised in appropriate local or national press to promote the Combined Authority support and progress of schemes.

11. CONCLUSION

11.1. The LA and private sector partners have responded to the tight timescales for spending the year one Brownfield Land Funds in as timely a manner as possible. The strategy here balances risk whilst supporting the construction sector to deliver much needed housing for the city region.

COUNCILLOR G MORAN Portfolio Holder: Housing and Spatial Framework

DR AILEEN JONES Interim Director of Strategic Delivery

Contact Officer(s): Tracy Gordon, Lead Officer- Housing Partnerships E-mail: [email protected] Mobile: 07825 044110

Andy Swain, Communications Manager E-mail: [email protected] Mobile: 07787 227162

Background Documents: