David Cowley Danny Mather

Warrington Borough Council

Over View

• Implementation of Ideas• Barriers / Risks• How we have over come barriers & risks• Case Studies

– Bonds– Loans to RPs– LAMS– Solar Panels

• Future Ideas

Implementation of Ideas

• Culture• Mechanism for Working up an idea• Intelligence Gathering• Resourcing• Project Planning

Implementation of Ideas

• Corporate Governance• Partnership Working• Sign up Senior Management & Members early in

the process• Speed• Resilience

Risks / Barriers

• Risk / Culture• Legal Risk• Resources• Political Risk• Accounting• Financial• Government / Current Climate• Corporate Governance

Bonds

• Identified the Opportunity• Gathered Intelligence• Evaluated Evidence to date• Talking to Banks / Brokers• Independent Report

Fuel Poverty• Household has to spend more than 10% income on fuel

to heat their home to an adequate standard of warmth• Estimate that 7,100 (9.3%) private sector dwellings

contain households in fuel poverty• Substantial increase in energy costs over the last few

years and indication that prices may continue to rise• Electricity: in 1990 average cost was £246 per year by

2009 this has increased to £456 • 1999-2009 +75.4% increase and 2008/09 +13.2%• Gas: in 1990 average cost was £285 per year by 2009

this has increased to £727• 1999-2009 +130.1% and 2008/09 +23.9%.

Getting Paid to Generate Energy and Reducing Fuel Bills

• April 2010 government introduced feed in tariffs for solar photovoltaic panels and wind

What can you earn• Each 1kWh generated £0.413• Each 1kWh saved £0.13• Each 1kWh exported £0.03

Working with Golden Gates Housing• Saving to tenant of around £150 per

year• Targeting Closing the Gaps areas• Around 1,300 out of 3,004

properties in these areas could benefit from solar pv.

Solar Photovoltaic Panels Project• Executive Board 18th July 2011

approves business case• Partnership with Golden Gates

Housing Trust• Phase 1 308 3/12/11• Phase 2 315 3/3/12• Tenants saving £112 to £160 on

energy costs each year• 474 tonnes of carbon saved

each year• Prudential borrowing• Forecast £3 million surplus over

25 years for the Council.

Solar PV Challenges

• How much surplus!!!! - figures seemed too good because of the feed in tariff rates (£0.41 at the time compared to £0.1544 June 2013)

• Government consultation to reduce the feed in tariff rate

• Reduced rates originally due in December 2011 but government had to delay this to 3rd March 2012

• We continued installing whilst others stopped• District Network Operator approval under G83• Required GGHT’s banks to approve the project.

Local Authority Mortgage Scheme (LAMS) in Warrington

Background• 12 Local Authorities worked with Sector to

establish LAMS• Lloyds TSB the first lender• Aim was to assist First Time Buyers purchase a

home with a small deposit• Raising a deposit is one of the biggest challenges

for FTBs since the 2007 banking crisis• Average FTB deposit in 2010 was £32,375.

Credit Crunch

Mortgage deposits needed Nov 2007 v Dec 2008• 0% down from 257 to 10• 5% down from 1,126 to 15• 10% down from 1,152 to 151• 15% up from 198 to 209• 20% down from 216 to 171• 25% down from 449 to 408• 40% up from 21 to 249.

Why Consider the LAMS?

• Warrington: April 2002 1,835 on the housing register October 2012 there were 13,406

• Proportion of First Time Buyers aged under 30 requiring financial assistance rose from 36% in 2005 to 77% in 2010 (figures indicate that for FTBs the average deposit is £32,375 or 17% of the value of the property).

How Does The Scheme Work?• Mortgage lending undertaken by the lender(s)• Local Authority provides an indemnity, but not

involved in lending• Scheme operates across the whole of Warrington • Loans up to a maximum of £350,000• First time buyer (FTB) needs 5% deposit and has to

meet the lenders usual lending criteria• FTB views properties and chooses the one they

want to buy• FTB provides 5% deposit and mortgage for the rest • LA provides an indemnity of up to 20% for 5 years• FTB will own the property in its entirety.

Who Do We Work With?Lloyds TSB• Started in August 2011• Initial £2 million investment has been spent • Assisted 85 FTB to purchase, average property price

£117,329 with an average age of 29 years old• So successful invested another £1m which has helped 31

FTB and a further 14 due to complete• Average property price £118,202 and average age of 30

years old• Total 130 FTB and investing a further £1m• Leeds Building Society

– Initial £500,000• Teachers Building Society

– Initial £150,000.

Some Success Stories• James said: “We had been living at

Nina’s parents’ house trying to save enough for a deposit to buy our first home.

• “We have just had our first baby so we were keen to get on the ladder as soon as possible. Once we were told that we could qualify for scheme we jumped at the chance.”

• “We now have a great house that is perfect for us with the baby and as the mortgage rates are lower than we would normally be able to get with the deposit we had, it means our mortgage is more affordable than the rent we had previously been paying.

• “None of this would have been possible without this scheme.”

Some Success Stories

• Debbie said: ‘We had been living at my dad’s house, trying to save enough of a deposit to purchase our first home. We heard about the scheme through my cousin who was also looking to get on the ladder, and rang our local branch to make an appointment. We really didn’t think we would be able to get a mortgage, and once we were told that we could qualify for the scheme we jumped at the chance.”

• “We now have a great house that is perfect for us, and as the mortgage rates are lower than we would normally be able to get with the deposit we had, it means our mortgage is more affordable. None of this would have been possible without this scheme.”

LAMS Challenges and Risks• Loans up to maximum £350,000 seemed too high, but you

would need 5% deposit so £17,500• In practice the average property price has been around

£118,000 • When first launched a large number were unsuccessful (some

had been turned down for a mortgage because they couldn’t afford one but thought the Council would provide a loan)

• Risk of repossessions so income allocated to a ring fenced account and after 5 years if not required provides additional income for the general fund

• No repossessions or anyone in arrears.

Loans To Registered Providers

• Banking crisis in 2007 meant that lenders were seeking to re-price existing loans to Registered Providers if covenants were broken

• Slow down in the delivery of affordable housing to keep within covenants

• Researched alternative options to address this.

Loans to Registered Providers

• April 2009 Executive Board approval to provide 2 Registered Providers with a loan of up to £10 million each for affordable housing

• At the time Secretary of State approval was required

• An application for Section 25 consent was applied for and approved by the Secretary of State

• In February 2012 the Council’s Executive Board extended the provision of loans to other RPs delivering affordable housing in Warrington.

Loans to Registered Providers

• Your Housing Group £10 million • Warrington Housing Association £10 million• Golden Gates Housing Trust £1.89 million• Muir Group Housing Association £30 million• 3 year capital programme for £380m loans being

considered subject to our processes, due diligence and Member approval.

Loans To Registered Providers - GGHT

• Local Authority New Build• 32 two bed bungalows over

7 sites• HCA grant of £1.95m and

prudential borrowing• Council had transferred its

housing stock in November 2010

• Loan to GGHT to purchase the properties from the Council.

Loans Challenges and Risks• Legal Counsel opinion• Due diligence of financial standing• Assessment of risks• RPs facing many areas of change

– Welfare reform– Bedroom tax– Direct payments to tenants– Affordable rent and lower grant

rates for new build• Changes in business plans for rent

arrears/bad debts e.g. RP has increased this from 4.5% to 10%.

Local Authority New Build

• Use of Section 106 funding of £2.3m to build 110 units combined with prudential borrowing

• Acquisition of long term empty properties• Conversion of commercial properties• Increase the provision of temporary accommodation

to reduce the impact of B&B costs• Increase New Homes Bonus funding.

Outcomes

• Warrington has the 6th highest allocation of New Homes Bonus in the North West with £2.58m for 2013/14

• Over 2 years Warrington has received an additional £2.734 million due to New Homes Bonus

• Direct impact on economic output, averaging 3 per cent of GDP in the last decade. For every new home built, up to two new jobs are created for a year

• Commercial financial return from loans.

Outcomes

Affordable Housing Completions

Year Target Achieved

2007/08 150 318

2008/09 150 143

2009/10 172 133

2010/11 172 291

2011/12 172 187

2012/13 172 209

The Future

• Bond issue• Community Bank• Energy efficiency• Economic regeneration.

David Cowley Danny Mather

Warrington Borough Council