North Yorkshire County Council
Business and Environmental Services
Executive Members Briefing Note
24 May 2019
Homes England – Accelerated Funding Programme
Report of the Assistant Director – Growth, Planning and Trading Standards
1.0 Purpose of Report
1.1 The purpose of the report is to:
1.2 Brief executive members on the progress of the Homes England Accelerated Funding Programme.
1.3 To seek authorisation from the Corporate Director Business and Environmental Services (BES) and in consultation with BES Executive Members to authorise Corporate Director, Strategic Resources the following: a) To contract with Homes England for the grant funding in accordance with their objectives and contract requirements. b) To procure the services of a principle planning consultant to lead the planning process and undertake necessary enabling works. c) Acknowledge that the constitutional requirements of consultation and delegation have been met through this report.
2.0 Background
2.1 Homes England established a £450m Accelerated Funding Programme in 2017. The principle aims of the programme are to: Support local authorities to develop their land so that it can be disposed of for housing; See homes built faster on these sites than the market would alone (pace) and the use of Modern Methods of Construction (MMC); Encourage diversification through support for low and medium volume house builders, and new entrants.
2.2 Homes England ran an expressions of interest exercise and NYCC submitted the following 5 sites for consideration on 28th February 2017. 1. Land at Cliffe 2. High Street Whixley 3. Sands Lane, Osgodby 4. Minskip Grange, Minskip 5. Woodbine Grange Farm, Ryther
2.3 All sites are owned by NYCC and tenanted at low value to farms. Details of the tenancies and break clause requirements are at table 8.4
NYCC – 24 May 2019 – Executive Members Homes England – Accelerated Funding Programme/1
2.4 Expressions of Interest were submitted on the basis of size, and units and unallocated planning status. Also on the basis of the site’s need for the funding, the absence of other government funding and the local development context including that houses wouldn’t displace other developments in the area. NYCC determined the requirements for the land that were put forward.
2.5 Homes England carried out further due diligence to establish viability and technical constraints. NYCC has the reports produced by a variety of multi-disciplinary consultants. The Technical studies formed the basis for the grant offer from Homes England totaling up to approximately £2.4million.
2.6 The following sites have been approved for progression by Homes England. Detail of the sites is set out at para 6: 1. Land at Cliffe 2. Minskip Grange, Minskip 3. Woodbine Grange Farm, Ryther
2.7 The required outcome from the funding is a ‘clean site’ by March 2021. This is to be done by obtaining a successful planning outcome by March 2020 and that all infrastructure and enabling works funded must be completed and funding drawn down by March 2021.
3.0 Next Steps – Contract with Homes England
3.1 NYCC will need to enter into a Funding Agreement with Homes England to draw down grant funding for the sites. The full list of requirements of the Funding Agreement are attached at Appendix 1. Its main elements include: 1. A commitment to hit the key project milestones set out in section 2.6 above 2. An estimated funding profile for each site including NYCC staffing costs. 3. A commitment to bring forward schemes: a) At the agreed pace (units constructed per month, between start of first unit and completion of final unit) b) Using the agreed MMC (recorded as a % of units to be delivered using each MMC category) c) In ways which help promote diversification in the industry (eg attracting new entrants and promoting growth in smaller to medium sized house builders) 4. If the disposal receipt achieved in the market is higher than the ‘clean site’ value in (table 6.1) then Homes England is entitled to claw back its grant from that surplus. Where Homes England has funded 100% of the identified costs they may claw back 100% of that surplus, up to the total grant paid.
3.2 A Funding Profile will be added to each of the sites. This will include estimates and costs from the principal consultant and NYCC time costs.
3.3 Grant is to be claimed in arrears, with evidence of works having been carried out and/or costs incurred on eligible items, and with Section 151 officer sign-off. Grant should be paid within 12 working days of a successful claim.
3.4 The costs NYCC will look to claim back through establishing the funding profile will include: Project costs – Assistant Director Growth, Planning and Trading Standards and Senior Policy Officer (Infrastructure) Procurement Costs- project support officers Finance – Assistant Director Strategic , capital accountants and s151 officer time Legal costs- First North Law or Internal Legal officers
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4.0 Next Steps – Procurement of Principle Planning Consultant
4.1 Homes England have established a Multi-Disciplinary Framework from which to procure a principal planning consultant. There are 20 organisations on the Framework.
4.2 Due to the potential size of the contract it is necessary to run a full competition against the framework.
4.3 The forward plan notice was published on 2 April 2019 and we have run an expressions of interest exercise with the intention of reducing the list of 20. Following that, at the end of April we will run the full procurement exercise with the intention of getting on to contract with the principle planning consultant and Homes England by June.
5.0 Next Steps – legal requirements
5.1 Regard must be had to: 1. Paragraph 6 (a) of the Executive Members delegations scheme authorising the submission of bids for grants in excess of £100,000 in consultation with the Corporate Director and Corporate Director – Strategic Resources; and 2. to accept any offer of grant over £100,000 in consultation with the Corporate Directors, Corporate Director Strategic Resources and Assistant Chief Executive (Legal and Democratic Services)
5.2 Regard must be had to Financial Procedure Rule 8 requiring Authorisation prior to the submission or acceptance documents being signed.
5.3 Regard must be had to the officers’ delegation scheme.
5.4 The approvals sought in this report will comply with these requirements.
6.0 The Sites
6.1 The sites are all owned by NYCC.
6.2 A Grant offer of £2.4m has been offered by Homes England to advance delivery of the sites, this is allocated to each site on the following basis:
Table 6.1 Site Planning No Total Est Grant Offer Estimated Balance % Claw Authority of Costs (Due (profile to clean site Surplus / Back Units Diligence) be agreed) value (Shortfall) Land at Selby DC 113 £526,000 £536,520 £760,000 £770,520 100% Cliffe Minskip Harrogate 93 £948,000 £976,440£3,950,000 £3,978,440 100% Grange, BC Minskip Woodbine Selby DC 106 £1,559.750 £929,996 £595,000 (£34,754) 60% Grange Farm, Ryther
6.3 All developments will require 40% affordable housing units as a requirement of the Homes England funding. This is in line with local housing policy.
NYCC – 24 May 2019 – Executive Members Homes England – Accelerated Funding Programme/3
6.4 The estimated clean site value comes to the Council on completion of the sale of the land to any potential developer. The claw back is what Homes England will claim from any funds achieved above the clean site value (up to the value of the grant).
6.5 The estimated clean site values have been determined by Cushman and Wakefield on behalf of Homes England. The valuations are based on the special assumption that planning is secured and all "abnormal" development costs (eg infrastructure installation) has been paid for by the HE grant. In all cases the valuation assumptions taken are sensible and therefore the potential for significant land value increase to NYCC is considered low. In this context the likelihood of the clawback to HE operating is also considered low.
6.6 The likely costs have been identified through the due diligence reports carried out by Homes England consultants. Where the costs incurred are greater that the value of the grant, NYCC will bear the cost of the shortfall.
6.7 The process, liability for costs and beneficiary of land receipts is set out in Appendix 2 and Appendix 3
7.0 The Timetable
Table 7.1 Date Stage Principal Consultant tender process undertaken. NYCC and March 2019 - May 2019 Homes England Contract documents completed June 2019 Principal Consultant Appointed together with sub-consultants July 2019 Planning application materials prepared August 2019 Planning Submissions Planning Outcomes achieved. Infrastructure and Enabling August 2019 - March 2020 Works packages concept design, programme and budget developed. Subject to planning outcomes, Infrastructure and Enabling March 2020 - March 2021 Works packages undertaken. Infrastructure and Enabling Works packages completed and March 2021 and beyond site available to develop. March 2021 and beyond Subject to construction schedule.
8.0 Risk Analysis
8.1 There is a risk of shortfall. As in paragraph 6.5 NYCC will bear the cost of any shortfall between cost of bringing the site forward to a clean site and the grant received from Homes England. After sale of the land, the risk of financial loss to the Council is minimal in the cases of Minskip Grange and Land at Cliffe. On the basis of the figures in table 6.1 there is likely to be a cost to the Council to bring the Woodbine Grange Farm site forward of £34,754.
8.2 Taken in the round the benefit to the Council outweighs this risk substantially. The potential benefit is £4,748,960. This does not include the recovery of time costs set out at 3.4 which will be substantial.
8.3 Risk of numbers. The due diligence has been carried out by consultants on behalf of Homes England. NYCC is relying on the accuracy of the figures for both the clean site value of the site and the estimated costs to bring the site forward. The consultants reports are based on a range of outcomes including the ‘most likely’ cost outcome. The grant offer is based on the most likely cost outcome.
NYCC – 24 May 2019 – Executive Members Homes England – Accelerated Funding Programme/4
8.4 At this stage we have not seen the draft contract. The basic terms at Appendix 1 include the possibility to challenge the numbers and the ‘clean site value’ with evidence. Any assumptions in the reports would be challenged through the planning process by the principal consultant.
8.5 There is a political / planning risk. Part of the virtue of the programme is in bringing sites forward for housing that would not otherwise be developed. We understand that selection criteria for the sites included their planning status - not being allocations in the local plans. This could lead to potential conflict where for example, NYCC would be supporting Harrogate Borough Council to bring forward development within the parameters of their Local Plan, and at the same time promoting a site outside of the plan. It will be important to stress the wider economic benefits of the programme and the exceptional circumstances in bringing the sites forward.
8.6 Officers will work closely with counterparts in Selby District Council and Harrogate Borough Council to minimise the risk of planning difficulties. The government backed scheme unlocks sites that would otherwise not be viable. There would be no expectation for such sites to be in the local plan under other circumstances.
8.7 Risk of the current use. The sites are currently tenanted as follows:
Land at Cliffe Residue of a two year agreement. Any future lettings could be of a duration(s) to fit the programme.
Minskip Grange, A 10 year agreement with a break clause to enable us to bring Minskip land back. This would be at 12 months’ notice. Ideally, we would want to provide longer notice in order to maintain a good relationship with the tenant, who would remain the tenant for the rest of the farm.
Woodbine Grange A 12 months Farm Business Tenancy was let at Woodbine Farm, Ryther Grange Farm. It ends this Autumn. We will review the situation on this farm again nearer to the expiry date.
8.8 To take advantage of the funding programme we would need to risk breaking the tenancies early and prior to planning permission being granted. To not break the Minskip Grange tenancy until after planning permission was obtained would mean the 12 month notice period would take up the time needed to carry out preliminary works on the site.
8.9 There is an opportunity within the contract to discuss these timing if necessary. Details of time required will be known following the appointment of the principal planning consultant.
8.10 There is a cash flow risk. Main contract terms (Appendix 1) refers to: Grant is to be claimed in arrears, with evidence of works having been carried out and/or costs incurred on eligible items, and with Section 151 officer sign-off. Grant should be paid within 12 working days of a successful claim.
9.0 Equalities
9.1 Consideration has been given to the potential for any equality impacts arising from the recommendation. It is the view of officers that the Accelerated Funding Programme does not have any adverse impacts on any of the protected characteristics identified in the equalities act 2010 and an Equalities Impact Assessment screening form is attached as Appendix 4
NYCC – 24 May 2019 – Executive Members Homes England – Accelerated Funding Programme/5
10.0 Finance
10.1 The programme is brought forward using Homes England grant funding.
10.2 There is no anticipated impact on core NYCC funding other than the risk of shortfall outlined in the risk analysis above at para 8.1
10.3 The cash flow risk is outlined in 8.10
10.4 There is value in the significant uplift in the value of NYCC land, particularly at Minskip Grange Farm. The rental value of these sites is minimal. NYCC staff will also claim for their time in the funding profile. This will include project costs, procurement and legal costs.
11.0 Legal
11.1 Consideration has been given to the potential for any legal implications arising from the recommendations. It is the view of officers that the recommendations have no further legal implications than those highlighted and discussed above.
11.2 The briefing note and recommendations are in line with the constitutional requirements set out in section 5
12.0 Recommendations
12.1 It is recommended the Corporate Director Business and Environmental Services (BES) and in consultation with BES Executive Members to authorise Corporate Director, Strategic Resources the following:
a) To contract with Homes England for the grant funding in accordance with their objectives and contract requirements. b) To procure the services of a principle planning consultant to lead the planning process and undertake necessary enabling works. c) Acknowledge that the constitutional requirements of consultation and delegation have been met through this report.
Matt O’Neill Assistant Director Growth, Planning & Trading Standards
Author of Report: Michael Reynolds, Senior Policy Officer (Infrastructure)
Background documents: None
NYCC – 24 May 2019 – Executive Members Homes England – Accelerated Funding Programme/6 Appendix 1 Key Funding Agreement conditions [as set out in the Homes England ACP Funding offer letter]
The total grant amount is set out in Annex A. Local authorities should propose an estimated profile for their draw-down to include within the Agreement. We recognise that the profile may need to be revised later once further detail is known about the detailed works programme. All investment must be drawn down by March 2021
Homes England will work with local authorities to agree a set of core delivery milestones (e.g. procurement and delivery of the infrastructure). If the core milestones are not achieved, and no resolution can be found to the issues causing the delays, Homes England can terminate the funding agreement and prevent further draw-down. These may need to be revised following more detailed due diligence and procurement of works.
Homes England may require submission of the detailed works schedule (with costs and milestones) prior to the first grant drawdown
All conditions precedent must be achieved before draw down of the grant. Evidence for achievement of these can be submitted to the online monitoring system.
Grant is to be claimed in arrears, with evidence of works having been carried out and/or costs incurred on eligible items, and with Section 151 officer sign-off. Grant should be paid within 12 working days of a successful claim.
In return for the grant funding, we are requiring that local authorities seek to bring forward the scheme: o At the agreed pace (units constructed per month, between start of first unit and completion of final unit) o Using the agreed MMC (recorded as a % of units to be delivered using each MMC category) o In ways which help promote diversification in the industry (eg attracting new entrants and promoting growth in smaller and medium-sized housebuilders)
It is expected that local authorities deliver the agreed number of housing units, and will work with housebuilders to secure the agreed levels of pace and MMC. In most cases we would expect this to be achieved through use of a Building Lease (Homes England’s own Lease is available on request). Freehold disposal of sites will be restricted as these do not allow sufficient control of the requirements around delivery pace and MMC.
Homes England can offer additional tools and support such as: use of our Developer Partner Panel (https://www.gov.uk/guidance/delivery-partner-panel-3); access to our draft Building Lease; access to our MMC procurement and evaluation methodology.
If local authorities cannot show evidence of having tried to achieve these goals through suitable marketing materials and market engagement, Homes England can terminate the funding agreement and may be able to clawback grant paid to date. Homes England may request evidence of the marketing materials prior to any procurement exercise
The local authority must produce a ‘franking valuation’ at the point of disposal to ensure that the preferred bid achieves market value.
If the disposal receipt achieved in the market is higher than the ‘clean site’ value in Annex A then Homes England is entitled to claw back its grant from that surplus.
NYCC – 24 May 2019 – Executive Members Homes England – Accelerated Funding Programme/7 Appendix 1 Where Homes England has funded 100% of the identified costs they may claw back 100% of that surplus, up to the total grant paid.
NYCC – 24 May 2019 – Executive Members Homes England – Accelerated Funding Programme/8 Appendix 2 Land at Cliffe – Worked through example
Site Planning No Total Grant Offer Estimated Balance % Claw Authority of Estimated clean site Surplus / Back Units Costs value (Shortfall) Land at Selby DC 113 £526,000 £536,520 £760,000 £770,520 100% Cliff
Agree the funding profile (including NYCC costs) and entre contact with Homes England Pre-contract Review tenancies over land to June 2019
Procurement of the principal planning consultant
Work with Principal Planning Consultant to oversee Positive - Move Forward infrastructure and site preparation works Planning Outcome March 2020 Make final claim against the Negative - Site is not brought grant offer. Any funds not forward claimed from the grant offer will stay with Homes England
Costs are in line with estimates and less than the balance of the Estimated costs: £526,000 of the grant offer then all costs Actual cost: £500,000 are borne by the Homes Cost to NYCC: NIL England Grant
Infratructure and site preparation work costs Estimated costs: £526,000 Up to March 2021 Actial cost:£600,000 cost to NYCC: £74,000 Where infrastructure costs exceed the estimates and there is a balance to pay, NYCC will bear the cost of that balance. NYCC costs can be recovered through land receipts at the 'Sale of Land stage.
Where the proceeds of sale are less than the estimated clean Sale of land £600,000 site value - those proceeds go to NYCC Receipt £600,000 NYCC Sale of Land - The proceeds of sale belong to NYCC up to the estimaed clean site value Post March 2021 Where the sale proceeds exceed Sale of land £1,000,000 the clean site vlaue - the uplift NYCC receipt £760,000 in value is due back to Homes England, up to the value of the Homes England Claw back grant offer £240,000
NYCC – 24 May 2019 – Executive Members Homes England – Accelerated Funding Programme/9 Appendix 3
Uplift Grant Clean site Total value to the Sale value Due to the Uplift to Received £ Total costs £ value £ council - up to £ +25% Council £ Due to HE £ HE Land at Cliffe 536,520.00 526,000.00 760,000.00 760,000.00 950,000.00 760,000.00 £190,000.00 100%
Minskip Grange 976,440.00 948,000.00 £3,950,000.00 £3,950,000.00 4,937,500.00 3,950,000.00 £987,500.00 100%
Woodbine Grange Farm 929,996.00 1,559,750.00 595,000.00 595,000.00 743,750.00 654,500.00 89,250.00 60%
NYCC – 24 May 2019 – Executive Members Homes England – Accelerated Funding Programme/10 Appendix 4
Initial equality impact assessment screening form (As of October 2015 this form replaces ‘Record of decision not to carry out an EIA’)
This form records an equality screening process to determine the relevance of equality to a proposal, and a decision whether or not a full EIA would be appropriate or proportionate. Directorate Business & Environmental Services Service area Growth Planning & Trading Standards Proposal being screened Authorisation to accept funding from Homes England Accelerated Funding Programme Officer(s) carrying out screening Michael Reynolds What are you proposing to do? Accept grant funding from the Homes England Accelerated Funding Programme to take through to planning approval and initial infrastructure requirements three NYCC owned sites for residential development. Why are you proposing this? What To facilitate growth and housing development on are the desired outcomes? sites which without this grant funding, would not be viable. Does the proposal involve a Staffing costs will be reclaimed through the significant commitment or removal grant. of resources? Please give details. Impact on people with any of the following protected characteristics as defined by the Equality Act 2010, or NYCC’s additional agreed characteristic As part of this assessment, please consider the following questions: To what extent is this service used by particular groups of people with protected characteristics? Does the proposal relate to functions that previous consultation has identified as important? Do different groups have different needs or experiences in the area the proposal relates to?
If for any characteristic it is considered that there is likely to be a significant adverse impact or you have ticked ‘Don’t know/no info available’, then a full EIA should be carried out where this is proportionate. You are advised to speak to your Equality rep for advice if you are in any doubt. Protected characteristic Yes No Don’t know/No info available Age x Disability x Sex (Gender) x Race x Sexual orientation x Gender reassignment x Religion or belief x Pregnancy or maternity x Marriage or civil partnership NYCC additional characteristic People in rural areas x People on a low income x Carer (unpaid family or friend) x
NYCC – 24 May 2019 – Executive Members Homes England – Accelerated Funding Programme/11 Appendix 4
Does the proposal relate to an area No where there are known inequalities/probable impacts (e.g. disabled people’s access to public transport)? Please give details. Will the proposal have a significant None effect on how other organisations operate? (e.g. partners, funding criteria, etc.). Do any of these organisations support people with protected characteristics? Please explain why you have reached this conclusion. Decision (Please tick one option) EIA not X Continue to relevant or full EIA: proportionate: Reason for decision The report is asking for approval to accept grant funding.
The funding will be used to develop NYCC owned land for housing development.
The sites’ development will bring economic and social benefits of development to the area including 40% affordable housing.
It is a requirement of the funding that modern methods of construction are used and low and medium volume house builders are used.
Therefore there is no reason to consider that this decision will lead to any negative impact on any groups of people with protected characteristics.
Signed (Assistant Director or equivalent)
Date
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