Brighton and Hove councillors agree £30m housing deal

Nearly 500 council houses and flats in Brighton and Hove are to be transferred to a not-for-profit company in a £30 million deal.

Brighton and Hove City Council cabinet members agreed the deal at a special cabinet meeting yesterday afternoon (Friday 16 September).

Most of the meeting was held in secret because of the commercially confidential nature of the discussions.

Even paper copies of the legal advice that was shown to councillors were collected up before they left the meeting.

The deal is designed to raise money to refurbish thousands of council homes over the next few years at a time when public spending is being reined in.

Although it has won broad support from all three parties represented on the council, some members have reservations and the deal is not without its critics.

It relies on a charitable company, also known as a local development vehicle (LDV).

The LDV is called Brighton and Hove Seaside Community Homes – sometimes referred to as Seaside Homes or even just Seaside.

It was set up in March 2009 by the council’s previous Conservative administration and last year it was registered as a charity.

It has 12 directors or trustees – four councillors, four tenant representatives and four independent members.

Seaside Homes was set up after tenants voted overwhelmingly in 2007 to keep the council as their landlords.

The Greens included a promise in their local election manifesto this year to continue work with Seaside Homes.

The council wants to lease 499 of its 12,500 houses and flats to Seaside Homes with Seaside borrowing about £30 million from Santander, the Spanish bank, to fund the deal.

This would respect tenants’ wishes in as much as the council would remain the owner of the freeholds while receiving an average of about £60,000 for each property.

The council had originally hoped to raise £45 million.

The repayments are to be funded through rents paid by tenants who would almost all be in receipt of housing benefit or local housing allowance, which is paid by the government.

Those rents will be higher than council rent levels but no higher than the level of the local housing allowance which is linked to private sector rent levels.

At least one critic believes that council rents in Brighton and Hove have for some years been slightly lower than they should have been.

And that a modest rise in rents would help raise the necessary money to pay for refurbishments without the need for this deal.

The downside of low rents has been that the condition of many properties fell below a standard known as decency – or the decent homes standard.

Housing maintenance and repairs contractor Mears – no relation to former council leader Mary Mears – has been working with the council to bring homes up to a decent standard.

But thousands of properties still need major work.

And this why Green council leader Bill Randall, who sits on the board of Seaside Homes, believes that the deal is so important.

He is passionate about building more homes at affordable prices – to buy and rent – in Brighton and Hove and improving the state of those that the council currently owns.

He has long experience as a journalist and adviser in housing matters and sees Seaside as Brighton and Hove’s best chance to achieve these important goals.

One criticism has been that Seaside’s tenants will not enjoy the same security of tenure as council tenants.

Another is that the model is too similar to the way PFI deals work – with major works carried out today at a heavy price for tomorrow’s taxpayers.

And another is that attempts to avoid VAT and other duties which have been factored into the financial model could fall foul of a government crackdown on tax avoidance schemes.

A report to councillors addressed some of the worries.

Councillor Gill Mitchell, leader of the Labour group on the council, said that she broadly supported the deal although she had “serious concerns about significant risks to the council”.

Those concerns included the reliance on housing benefit or local housing allowance payments and about a host of uncertainties some of which were spelt out in private yesterday.

A “risk matrix” showed that the council was underwriting most of the risks and Seaside some of them with none allocated to Santander.

Council lawyer Bob Bruce said in a report that the guarantee and indemnity agreement between the council and the funders was still not agreed.

He said: “This is the most contentious area of negotiation and discussions between the parties are ongoing.”

Councillor Mitchell said that there were other uncertainties around interest rates, the possibility of rent defaults and even changes to housing benefit rules.

She said: “They’re going to use the housing revenue account to refurbish properties before they go into the LDV to cut down the length of time they’re going to be empty.

“Lifts on the Bristol Estate are breaking down left, right and centre and I’m concerned that money that should be spent there will be used to prop up the LDV.”

Council officials now have less than a week to conclude the deal with Santander.

If it works, other councils are expected to try to copy the way that it has been achieved.

And Brighton and Hove will have homes fit for 21st century living.