Brent Council's housing companies report increased delay in re-letting their properties and below target rent collection

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.

i4B

 FWH

 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:

i4B

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.

FWH 

 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. 

ACCOUNTS

i4B

FWH 

 

No response from Brent Council to Audit's concerns over potential conflict of interest in First Wave Housing and i4B Holdings

Wembley Matters recently drew attention to the Brent Council Internal Audit that found a possible conflict of interest in the directorships of Brent's housing companies First Wave Housing and i4B Holdings. See LINK. Wembley Matters drew attention to the role of the councillor director Saqib Butt, who is the brother of the Leader of Brent Council as well as Brent Council officers.  

Brent Council responded to the Audit:  Management Response: We will review job descriptions to identify and mitigate conflicts of interest.

The Internal Audit found 5 medium risks the first of which said:

Responsibilities for Council employees working for the companies: The management and two of the five directors of the companies are employed by the Council and line managed within the Council. This may create a conflict of interest as management may feel they need to represent the interests of the Council rather than the companies. These responsibilities need to be clarified to ensure that these conflicts are effectively managed, and the companies are robustly represented in disputes with the Council.

Proposed changes to the Board membership and governance arrangements for both companies are tabled for Cabinet on September 12th. The officer's report makes no mention of resolving the potential conflict of interest and merely substitutes one Brent Council officer,  Phil Porter, Corporate Director for Adult Social Care, for another, Gail Tolley, who steps down from the boards following her retirement as Strategic Director for Children and Young People.

The Independent Chair, Martin Smith's and Independent Non-executive Director. Akimntoye's terms of office are recommended to be extended for another 3 years. 

As Peter Gadson, Corporate Director, Residents Srrvices stays on the board, it means that three of the five directors are either Brent employees or a Brent councillor. 

No mention is made of the Council's promise to review job descriptions and mitigate conflicts of interest. Instead the Cabinet's overall control of both companies is emphasised:  

As sole Shareholder for i4B and the sole Guarantor for FWH, the Council has an important role in providing strategic direction for the companies and retains control of key decisions. Cabinet is the strategic supervisory body with ultimate responsibility for ensuring governance of the companies and the power to appoint and dismiss Directors and the Company Secretary are reserved to Cabinet. Cabinet therefore has the power to agree the Recommendations contained in this report

i4B and First Wave Housing board membership and governance arangements on agenda for Brent Cabinet's September meeting

Wembley Matters recently drew attention to the Brent Council Internal Audit that found a possible conflict of interest in the directorships of Brent's companies First Wave Housing and i4B. See LINK. Wembley Matters drew attention to the role of a councillor director who is the brother of the Leader of Brent Council as well as Brent Council officers.  

Brent Council responded to the Audit:  Management Response: We will review job descriptions to identify and mitigate conflicts of interest.

Proposed changes to the Board membership and governance arrangements for both companies have now been tabled for Cabinet on September 12th. The decision is led by Cllr Mili Patel, Deputy Leader of the Council:

To agree the proposed changes to the Board membership and governance arrangements of the Council's housing companies i4B Holdings Ltd and First Wave Housing Ltd

Decision type: Non-key

Decision status: For Determination

Wards affected: (All Wards);

Notice of proposed decision first published: 22/07/2022

Decision due: 12 Sep 2022 by Cabinet

Lead member: Deputy Leader and Cabinet Member for Finance, Resources and Reform

Lead director: Strategic Director - Customer and Digital Services

Department: Customer and Digital Services

Contact: Harry Chavasse Email: Harry.Chavasse@brent.gov.uk.

Documents

• i4B/First Wave Housing Governance and Board Membership Update  

 

Granville New Homes and the Ridge Report – Brent Council explains “discrepancies”.

 A “report back” blog by Philip Grant:

Some Granville New Homes images from the Ridge Report.

 

There was great interest in October, when Martin shared details of the scandal over Granville New Homes, where repairs to these South Kilburn flats would cost more than the blocks cost to build, only twelve years ago.

 

Proposals for these homes to be taken over by the Council from its company, First Wave Housing Ltd (“FWH”), were considered at an extraordinary meeting of the Community and Wellbeing Scrutiny Committee on 7 October. Committee members were told that the repairs would cost £18.5m, but had to rely on a report which had been prepared for a Cabinet meeting the following week, and on information and answers given to them by Council Officers and Cabinet members. 

 

Title page of the Ridge Report.

 

The committee had not been allowed to see a copy of the report by the consultants, Ridge and Partners, who had carried out a detailed survey of the Granville New Homes buildings. Martin obtained a copy of that Report from Brent Council, under the Freedom of Information Act, and published it on “Wembley Matters” in November.

 

When I read the Report online, there seemed to be discrepancies between some of the details it showed, and what the Scrutiny Committee, and an earlier Audit & Standards Committee meeting, had been told. I added a comment below the 11 November blog, and sent a copy of that comment in an email to the two Committee Chairs involved, to draw those “discrepancies” to their attention.

 

I heard nothing more about it until 7 December, when I received an email from Brent’s Legal Director, saying: ‘The councillor, the Independent Chair and the Chief Executive have asked that I consider your email and respond and I will be in contact with you as soon as possible.’ I’ve now received her response, and as my original comment is “in the public domain”, I think it only fair that Brent Council’s explanation for the “discrepancies” should also be publicly available. I will set out my original comment, and the Council’s response below.

 

I will not comment further on them, other than to say that when a small number Senior Council Officers and Cabinet Members have so much power, I believe that they should provide full, accurate and clear information to the elected councillors whose scrutiny of their decisions is an important safeguard on behalf of the local community. You can judge for yourselves whether they did so over Granville New homes and the Ridge Report.

 

My comment of 12 November 2021 (under published copy of the Ridge Report):

 

‘There appear to be some discrepancies between the Ridge Report above, and how it was presented to Cabinet on 11 October 2021, in a report signed off by Brent's Chief Executive.

The opening paragraph of the report to Cabinet members says:

 

'First Wave Housing (FWH) has commissioned a report from Ridge Consultants to investigate water penetration, cladding, fire safety and window issues at FWH’s Granville Road, Princess Road, and Canterbury Road blocks (otherwise known as Granville New Homes). Ridge have recommended that works be carried out at the blocks to remediate these issues. It is estimated that the cost of works will be £18.5m. This makes the FWH business plan unviable.'

 

This clearly states that fire safety was investigated as part of the Ridge Report; but the report itself (see bottom of page 24 of the document in the blog above) says:

 

'Fire safety matters, relating to the cladding have not been commented on in this report as they are excluded from the scope. From what was seen, during the opening up of the cladding, there are a number of issues which should be further investigated by a façade specialist and fire engineer. These include possible combustible insulation and seemingly a lack of cavity barriers within the cladding system. The cladding systems should be reviewed, from a fire safety perspective, as a matter of urgency.'

 

Page 26 of the Ridge Report gives the budget cost estimates of the work identified as a result of this consultant's investigations:

'TOTAL COSTS by block:

Granville Road East £2,185,000
Granville Road West £2,475,000
Peel Square £4,550,000
Pilgrims Corner £4,435,000

TOTAL £13,645,000'

 

Clearly, there is a difference between the £13.645m figure in the Ridge Report which has now been disclosed under FoI (and which was not made available to the members of the Audit or Scrutiny Committees, when they considered the problems and proposed solutions over Granville New Homes), and the £18.5m figure in the report to Cabinet.

Was there a second specialist report on the fire safety issues, with the estimated cost of that remediation making up the almost £5m difference between the two figures?

 

If not, what is the explanation for that difference?

 

And if there was a separate fire safety defects report, why was that not mentioned in the report to Cabinet, and why has that report not been disclosed to councillors, or made public?’

 

Relevant extracts from the Ridge Report.

Brent Council response of 9 December 2021:

 

‘Dear Mr Grant

 

 

Your email below was shared with David Ewart, the Independent Chair of the Audit and Standards Advisory Committee, by Cllr Lo.  It was also drawn to the attention of the Chief Executive by Cllr Sheth.  The Chief Executive, Cllrs Lo and Sheth and the Independent Chair have asked that I consider your email and respond.

 

 

Your email references reports considered by three council bodies, Audit and Standards Advisory (22 September 2021 (ASAC)) Community and Wellbeing Scrutiny (7 October 2021) and Cabinet (11 October 2021) and raises three areas of concern which I address below.

 

1. Commissioning of the Ridge Report

 

You are concerned that the Scrutiny Committee Report referred to the Ridge Report as being commissioned by First Wave Housing (FWH) while the Ridge Report itself refers to the report being commissioned by FWH and Brent Council.  You seek clarity as to who commissioned and paid for the report.

  

 

The council provides housing management services to FWH.  Therefore, FWH asked the council to commission the report on its behalf and the cost will be borne by FWH.

 

 

2. Ambit of the Ridge Report

 

You refer to the first paragraph of the Cabinet report, part of which reads: 
“commissioned a report from Ridge Consultants to investigate water penetration, cladding, fire safety and window issues”and to the Ridge Report which refers to: “Fire safety matters relating to the cladding” being excluded from its commission. 

 

The paragraph you refer to in the Cabinet report is a summary paragraph and the detail behind that summary appears later in the report.  Paragraph 3.6 of the Cabinet report refers to the council’s own Housing Property Services presenting the result of fire risk assessments and intrusive investigations into fire safety concerns and to Ridge presenting the result of intrusive investigation into water penetration, cladding and window issues.   I consider this corrects any misunderstanding as to the scope of the investigations commissioned from Ridge that the summary paragraph may have led to. 

 

 

Further, the Ridge Report, makes reference to fire safety issues which happened to be observed during Ridge’s investigations and suggests that cladding systems be reviewed from a fire safety perspective as a matter of urgency.  The review had effectively already been undertaken following the Fire Brigade Improvement Notice and therefore included in the presentation by Housing Property Services referred to in the report.

 

 

3. Discrepancy in figures given for estimated costs of repairs

 

 

As you point out, page 26 of the Ridge Report gives the cost estimates as totalling £13,645,000 but the Cabinet, ASAC and Scrutiny reports refer to estimated costs of £18.5m.  You query why this is and whether there is a second specialist report on fire safety issues which accounts for the difference.

 

 

This figure of £13,645,000 is included in the £18.5m referred to in the reports.  As set out in paragraph 3.9 of the Cabinet report, that higher figure also includes the cost of fire safety work already undertaken and paid for by FWH, e.g. the waking watch over the premises and a new fire alarm system, and a contingency figure.  In addition, paragraph 3.9 make clear that the total figure is inclusive of VAT, which FWH and I4B, unlike the council, would be required to pay.  The final sentence of 3.9 should have read that the £18.5m is “based on” an estimated value from Ridge, but in the overall context of the paragraph I think the position was clear.

 

 

Although these elements are not explicitly referred to in paragraph 3.4 of the Scrutiny report, the Cabinet report was in the papers presented to the Scrutiny Committee and did contain this information.  This level of detail was not in the report to the ASAC, but as the report was a general update report of which this particular issue was only one element and pre-dated the matter being put to Cabinet as the decision maker, this is unsurprising.

 

 

At the time when Ridge were commissioned, they were aware of the fire safety issues identified through fire notices and the test results of the combustibility of the external wall system which had been carried out previously.  The Ridge Report and their cost estimate included the work to remediate these issues. The report of the test results does not include any costs.

 

 

In light of the above, I do not consider there is any reason to fear that members were misled by the reports as to the essential issues.  These were that the estimated costs to FWH of dealing with the issues identified in relation to Granville New Homes would render the company’s business plan unviable and an assessment of options for dealing with the situation was required as set out in the report. 

 

Best wishes

 

Debra Norman 

Director of Legal, HR, Audit & Investigations’

 

 

 

Prepared on behalf of: 

Brent to sell off surplus residential properties

Brent Cabinet on Monday LINK will be asked to approve plans to dispose of surplus Council property 'at the best value that could be currently obtained in the market. The disposals would generate capital receipts to support corporative objectives.'

Some of the properties will be disposed of to the Council's wholly owned company Invest for Brent (I4B). See LINK for background of Invest for Brent.

The property is varied:

8 Coniston Gardens. NW9 OBD - former 3 bedroomed school keeper's house for Oliver Goldsmith Primary School.Will be sold to I4B at market value for use in the privately rented sector (PRS) programme.

67 Woodheyes Road, NW10 9DE - terraced house compulsorily purchased by the Council's Empty Property Team last year.  Will be sold to I4B at market value under PRS scheme.

Property X (address not revealed to safeguard personal data of owner).  Will be sold via an arms-length transaction on the open market to realise funds for payment of the owner's residential care fees.

27 Claremont Road, W9 3DZ - ex mental health hostel handed back to Council as surplus to requirements by Adult Social Care in December 2015. Unsuccessfully marketed for conversion in 2016.  Cost of internal decoration and modernisation rendered many alternative options unviable. Recommended to take to market in its current un-refurbished condition.

3 Kent Road, Stantonbury, Milton Keynes, MK14 6BA - managed by Milton Keynes Council under historic arrangement with Brent.  To be considered for I4B programme in first instance, if not suitable to be sold on the open market for a capital receipt.

18 Alliance Close, HAO 2NG - flat managed by North West London NHS Foundation Trust. Handed back to Council as no longer fit for purpose for client group. Being considered or I4B programme and it not suitable will be sold on open market for capital receipt.

It would be useful to have some further information on how the capital receipts will be used.