Brent Council has two wholly-owned housing companies i4B and FWH both of which have a large number of voids (unlet homes waiting to be re-let) and lower than expected rent collection levels.
The poor re-letting performance comes at a time of great housing need with evictions from private rented housing at a high. The Council has recently relaunched a scheme focusing on empty homes in the borough and the need to bring them back into use LINK and it appears that quite a lot of such homes might be its own.
A task group has been set up to address these issues.
The problems facing the i4B, leading to a suspension of acquisition of new properties, are outlined in a report to Cabinet LINK:
1. The 2022/23 Business Plan outlined that i4B’s primary aim is to improve the Council’s affordable housing offer through the acquisition and letting of properties in Brent and neighbouring boroughs. A Development Strategy was agreed alongside the 2022/23 Business Plan with the aim of utilising remaining and potential future funding to develop a portfolio of affordable new build accommodation which:
· Supports the Council’s Housing Strategy and relieves housing need;
· Supports the financial viability of the Companies; and
· Is feasible and realistic.
2. The strategy was implemented during 2022/23. However, this has been impacted by the current economic environment, principally higher global inflation rates driven by COVID supply chain issues and the war in Ukraine. In the UK, skills shortages and a tight labour market are adding to these pressures.
3. The Company’s ongoing street property purchase programme has been significantly impacted by increased interest rates, which reduce the amount i4B can spend on new acquisitions. As of January 2023, i4B has purchased 21 properties in the financial year against an initial target of 48. The Board has agreed to a pause on committing any new loan funding and to therefore suspend the acquisition programme until May.
4. During 2022/23, i4B also carried out a pilot of purchasing adaptable properties to meet high demand from homeless families requiring adapted accommodation. Additional funding of up to £100,000 per property was allocated to the pilot, but i4B’s price caps have proven restrictive, especially as i4B primarily operates in the south of Brent where the majority of properties are flats and terraced houses and therefore not typically suitable for adaptation. Therefore, a large amount of additional funding would be required in order to make this a viable purchasing stream for i4B. Due to the significant amount of funding required, the Council is now exploring alternative options for housing this Cohort; options involving i4B are being considered as part of this.
i4B’s primary aim is to improve the Council’s affordable housing offer through the acquisition and letting of properties in Brent and neighbouring boroughs. i4B has available finance and aims to ensure this is spent in a way that adds maximum value to the Council, whilst also being feasible and supporting the Company’s financial viability. i4B has currently suspended new offers on street properties to focus on acquiring a new build scheme during 2023/24. During 2023/24, i4B will work with partners to appraise schemes, and will look to re- enter the market later in the year.
The financial position of the company has been hit by the cost of the Granville New Homes refurbishment:
The cash position of i4B is initially positive but reduces over two years due to the cost of the refurbishment works to the Granville blocks. The cash balance then remains broadly stable for five years to 2030/31 as rental growth offsets the cost of decarbonisation works through the stock. From 2031/32 onwards cash balances start to increase as rental growth continues and capital costs associated with the decarbonisation works end.
i4B is forecasting positive cash balances of around £0.5m for the five years up unto 2030/31. These balances are relatively small in terms of the size of the organisations. As a result all the stress test scenarios modelled in the business plan put the organisation into deficit. The business plan sets out that further work will be required on contingency plans to ensure the organisation can maintain its financial viability.
Regarding Granville New Homes the FWH report notes:
On the 4th April 2022, the transfer of 110 properties at Granville New Homes was completed – 84 social housing units, 1 leasehold unit, and the freehold for the site (including the Tabot Centre) were transferred to the Council’s HRA, and 25 intermediate units were transferred to i4B Holdings Ltd (i4B).
Decarbonisation of housing stock to reduce heating costs and meet climate targets is an issue for both companies:
The decarbonisation of i4B’s stock is set to be a major capital expense for the Company. During 2022/23, i4B commissioned a programme of stock condition and energy surveys, which outlined the requirements and estimated costs for bringing i4B properties up to an Energy Performance Certificate rating of B. The results of this work have been received, and i4B now have EPC data for all of its properties. A decarbonisation strategy for the Company will be developed during 2023/24, which will outline works that will be undertaken to improve performance. This may include stock rationalisation in some cases.
The company has also applied for the Green Homes Grant, and the managing agent of the grant is working to book in surveys with tenants with the view to completing a programme of energy efficiency works at properties by the end of 2022/23, in order to improve the Energy Performance Certificate (EPC) rating of properties to at least a C.
The decarbonisation of FWH’s stock is set to be a major capital expense for the Company. During 2022/23, FWH commissioned a programme of stock condition and energy surveys, which outlined the requirements and estimated costs for bringing FWH properties up to an Energy Performance Certificate rating of B. The results of this work have been received, and FWH now have EPC data for all of its properties. A decarbonisation strategy for the Company will be developed during 2023/24, which will outline works that will be undertaken to improve performance. This may include stock rationalisation in some cases.
The two companies and Brent Housing Management will all be affected as landlords by the Building Safety Act 2022 which includes the introduction a Building Safety Regulator and a new regulatory regime that applies to the planning, construction and occupation of higher risk buildings, government powers to regulate construction products, new regulations for the safety of construction products, and protection of leaseholders in respect of the costs of remediating building safety defects in their properties.
There is plenty of material here that merits further examination by the Scrutiny Committee.