GREATERLONDONAUTHORITY REQUEST FOR DIRECTOR DECISION - DD2009 Title: Abbey Wood and South Thamesmead Housing Zone (LB Bexley) and Abbey Wood, South Thamesmead and Plumstead Housing Zone (RB Greenwich) - Thamesmead Executive Summary: This Director’s Decision signs off due diligence undertaken in respect of the proposed interventions that the GLA proposes to fund in the Thamesmead Housing Zones in LB Bexley and RB Greenwich and agrees that it is appropriate for the GLA to enter into an Affordable Housing Grant Agreement with Peabody Trust for the purpose of drawing grant funding amounting to £47,556,893 in relation to the Thamesmead Housing Zones in LB Bexley and RB Greenwich Decision: That the Executive Director of Housing and Land and the Executive Director Resources, in consultation with the Deputy Mayor for Housing • Confirms that the outcomes of the financial and legal due diligence are satisfactory • Approves contractual commitment of an affordable housing grant of £47,556,893 to fund the interventions specified below within the Abbey Wood and South Thamesmead Housing Zone in the London Borough of Bexley and the Abbey Wood, South Thamesmead and Plumstead Housing Zone in the Royal Borough of Greenwich that have been subject to finance and legal due diligence; • Approves transfer an existing Peabody Trust grant allocation of £9,226,893 from the Building the Pipeline programme to the Housing Zones programme for the purposes of including this allocation in the above funding commitment, • Approves a change in the boundary of the Housing Zone in the Royal Borough of Greenwich to include Pettman Crescent as per the appendix, • agrees the revised site details and re-profiled completion dates for the delivery of housing completions, • notes the deduction of £12,775,000 (RB Greenwich) and £25,555,000 (LB Bexley) from the grant budget for Housing Zones for the interventions specified below AUTHORISING DIRECTOR I have reviewed the request and am satisfied it is correct and consistent with the Mayor’s plans and priorities It has my approval Name David Lunts — Position: Executive Director Housing and Land Signature:Q Date: — Name Martin Clarke Position: Executive Director Resources Signature: ,gL-( ) Date: 2C. 2 DO Template May 2014 1 PART I - NON-CONFIDENTIAL FACTS AND ADVICE Decision required — supporting report 1. Introduction and background 1.1 The Abbey Wood and South Thamesmead Housing Zone (LB Bexley) and Abbey Wood, South Thamesmead and Plumstead Housing Zone (RB Greenwich) proposals were designated Housing Zones by MD1 457, where affordable housing grant funding of £47,556,893 (L34,781 .893 in LB Bexley and £12,775,000 in RB Greenwich) was indicatively allocated to these Housing Zones (subject to the outcome of due diligence) to unlock housing and deliver wider regeneration to the area. 1.2 Peabody Trust (Peabody) will deliver the outputs as set out in this Decision. LB Bexley and RB Greenwich will retain oversight of delivery across the Housing Zone by implementing governance arrangements outlined in the Memorandum of Understanding (M0U) with the Greater London Authority (GLA) and Peabody dated 19 May 2016. The MOU sets out the roles, responsibilities and functions of LB Bexley, RB Greenwich and Peabody Trust. 1.3 Legal and Financial due diligence has now been undertaken in respect of the proposed affordable housing interventions within the two Housing Zones, the conclusion of which is set out below. 1.4 The MD 1457 also included an “in principle” allocation of funding for Peabody Trust to enter into a 03.9m Financial Transaction (FF) agreement for both zones to deliver open market housing for rent and sale, subject to detailed due diligence by financial and legal advisers and by external property consultants. However Peabody have opted not to take up the El. In the Housing Investment Group paper that approved the two HZs, subject to the MD, the following information was required which is now no longer applicable as the El is not being taken up. - Detailed financial, legal and delivery due diligence in respect of the FT - Agreement on the structure of loan funding to Peabody - Thamesmead Investor Prospectus approved by GLA and Boroughs The other conditions were: - agreement on payment structure for enabling grant - agreement of a clear road map for programme delivery - formal agreement between Greenwich, Bexley and Peabody on roles, responsibilities and functions - formal agreement between Greenwich and Peabody; and Bexley and Peabody, on the arrangements needed to secure the additional infrastructure contributions. Sections 1.11, 1.19 and terms agreed in the Memorandum of Understanding show that these conditions have now been met. 5uaary 1.5 Peabody requires GLA investment in the form of affordable housing grant in accordance with the Housing and Regeneration Act 2008 to deliver a total of 1,272 affordable homes across both Housing Zones by 31 December 2024. The terms of the investment for these interventions will be set out in a single Affordable Housing Grant Agreement (AHGA) between the GI..A and Peabody. In addition to these homes, it is also expected that Peabody will deliver 1,403 homes for market sale or market rent (not funded under the AHGA) across both Boroughs. 1.6 Peabody Trust has significant land holdings at Thamesmead and is undertaking a long term regeneration of the area. GLA intervention will accelerate the delivery of new homes. 00 Temptate May2014 2 1.7 The proposed grant funding improves the viability of the project based on evidence provided by Peabody Trust in financial appraisals provided to and assessed by the GLA. Er2position 1.8 The project will deliver a mixed use area regeneration of Thamesmead accelerating the delivery of a minimum of 1,216 new homes in LB Bexley and a minimum of 1,459 new homes in RB Greenwich. This includes affordable homes and homes for market sale or rent (with GLA providing funding for the affordable element). The contracted position, as set out within the AHGA in relation to the delivery profile of homes and expected tenure apportionment is as follows: Bexley Greenwich Total Social/Affordable Rent 328 379 707 Rent to Save/Shared Ownership/Equity Loan 263 302 565 591 681 1,272 1.9 It should be noted however that the above tenure apportionment may change and tenure will only become fixed for each scheme once the GLA has accepted that scheme on its on-line investment management system prior to start on site. Peabody must however deliver a minimum of 207 social/affordable rent dwellings (35% of the 591 new affordable dwellings) in LB Bexley and 170 social/affordable rent dwellings (25% of the 681 new affordable units) in RB Greenwich. Funding 1.10 Consistent with MD 1457, due diligence for these Housing Zone interventions confirmed the need for Housing Zone grant amounting to £25,550,000 for the LB Bexley Housing Zone and £12,775,000 for the RB Greenwich Housing Zone. In addition, £9,226,893 of Building the Pipeline programme funding is to be transferred to the Housing Zones programme to fund these interventions as part of this DD. This is an existing Peabody allocation within LB Bexley and MD1 457 notes the intention to combine this allocation with the proposed Housing Zones grant allocation for Thamesmead. The grant rates payable per affordable dwelling are £58,853 for LB Bexley and £1 8,759 for RB Greenwich. Grant is provided on the basis of a flat rate per affordable home by Borough consistent with these figures. A value for money assessment was carried out on these grant levels. As an average grant rate across the two boroughs they are consistent with grant awarded for the Mayor’s Housing Covenant 2015-18 programme and continuous bidding assessed by the Housing & Land Programme Change Group for the tenure mix proposed. They offer particularly good value for the anticipated proportion of rented units which will be let at target rents for decant purposes. 1.11 GLA has worked with the Peabody Trust to agree a payment structure for the affordable housing grant. Up to 75% of GLA grant funding for any potential scheme may be drawn down by Peabody at “pre start on site” on meeting certain criteria, These include: a contract for land acquisition, commencement of a decanting programme/buy back of existing residents’ accommodation or the signing of a material pre-start contact. The effect of providing up to 75% of grant at pre—start is to improve scheme viability. The remaining 25% of GLA grant funding can be drawn down at practical completion of a scheme. 1.12 The AHGA also acknowledges that Peabody may be able to use recycled capital grant funding (RCGF) on top of the proposed grant allocation if the scheme were to become unviable, including using RCGF which is older than 3 years if required to ensure deliverability. Use of RCGF is therefore not expected in the short term but may be able to address future risks linked to market factors, and will require GLA approval and be subject to the requirements of the GLA’s Capital Funding Guide. For the avoidance of doubt, this DD does not authorise or seek approval for the use of RCGF in either of the Housing Zones that are the subject of this DD. In other words, the use of RCGF in OD Temp’ate May 2014 3 either of the Thamesmead Housing Zones in the future would be subject to the change control process as set out in DD1485. Appraisal applying 1.13 Project due diligence was undertaken by officers within the Housing and Land Directorate the methodology used to assess affordable housing bids submitted to the GLA for funding via the Mayor’s Housing Covenant 2015-18 Programme.