52
EINA Screening Record
Title of Policy/Service/Project Purchase of Existing Houses
Date of screening 21/08/2013
Service Unit Housing Landlord Services
Lead Responsible Officer John Findley
Job Title Housing Development Manager
Members of the Assessment Team Mark Sheppard, Housing Development Officer
If the answers to the following questions are Yes or Don’t know, then a full EINA will need to be carried out.
Is there likely to be a positive or negative impact in terms of equalities? No
Does it involve a significant commitment of resources? No
It is not necessary at the screening stage to identify adverse or differential impact It is important to remember that even when it is decided that a policy/service/project does not require an EINA, it remains subject to the general duties. Not carrying out a full EINA places our council at greater risk of legal challenge because it cannot use the EINA process to meet our Public Duties around equality. It also means, more importantly, that opportunities may have been missed to promote equality. If you have answered no to the questions above and do not intend to carry out an EINA, please explain why? The additional units will be let and managed on the same basis as our existing housing stock and all EINA’s and other policies which apply to our existing stock will also apply to these new units.
G2 Programme & Project Management Office
FULL BUSINESS CASE/PROJECT INITIATION DOCUMENT 01202 458213 [email protected] (template version 0.20)
Page 1
Document Approvals - All Business Cases for projects over £25k must be approved by the following people listed in this table prior to being approved by the Transformation Board and Executive Gateway Board (EGB).
Officer/Member/Group Name FBC Approval Date
PID Approval Date
Project Owner Gary Josey 22/08/2013
Executive Director Bill Cotton 22/08/2013 N/A
Portfolio Holder Councillor Lawton 03/09/2013 N/A
Portfolio Holder comment This will reduce the council’s current waiting list for Council Housing and uphold the Councils reputation and relationship with the Homes and communities Agency.
Transformation Board (Transformation Projects Only) N/A N/A
Executive Gateway Board 18/09/2013 N/A
Cabinet N/A N/A
Project Board N/A N/A
Other Elected Members & Officers Consulted
Name Position Date
Tina Worthing Head of Accountancy Services 22/08/2013
Marta Zuk Senior Accountant 22/08/2013
Jo Greaves Senior Project Management Adviser 22/08/2013
Document Revision History
Version Author Changes Date
Full Business Case (FBC)
Purchase of Existing Houses
Service Unit: Housing
Risk: Medium
Prepared by/Project Manager: John Findley Date: 21st August 2013
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 2
1 Executive Summary
• The Council’s Corporate Plan identifies the provision of more affordable housing as a
priority.
• The opportunity to acquire 2 units as a pilot programme has been identified following
discussion with the Homes and Communities Agency. The Council House Building
Programme 2012-2015 Business Case provides the detail for the entire programme
with individual business cases being produced for each of the schemes.
• Purchase of Existing Houses is a new work stream to contribute towards the delivery
of part of this program. It is a consequence of the HCA having indicated that they may
contribute subsidy for this.
• This program of purchase will also serve as a trial for the processes and procedures to
be put in place for a subsequent much larger program using inward investment
funding.
• The Government is promoting the delivery of affordable housing through programmes
of Council New Build & Acquisition. Policy and regulation have been changed in order
to support this.
• Housing, Parks and Bereavement Services have been successful in being selected as a
Registered Provider (RP) with the Homes and Communities Agency (HCA) and Social
Housing Grant has been awarded for the delivery of additional housing up to 2015.
• The proposal helps meets our delivery obligation with the HCA and the purchased
units will have a positive impact on the Housing Revenue Account.
• This business case seeks approval of £379K funded through a mixture of HCA grant,
internal borrowing and other funding sources in order to purchase . The new housing
will help to contribute to the overall programme to provide 105 additional affordable
houses in the Borough by 2015.
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 3
2 Strategic Fit: The Strategic Case
2.1 Business Needs and Project Background
The proposal is to purchase two x two or three bedroom houses within the conurbation
The proposed purchases will be fully funded using a mixture of internal borrowing, capital and
s106 receipts from the Housing Revenue Account and Grants from the Homes and Communities
Agency.
There is a significant and growing need for affordable housing in Bournemouth. However, market
conditions, reduced grant funding and slow new build starts have markedly reduced the
opportunity to deliver against this need. Provision in the private sector in recent years has been
slow and limited to smaller flats rather than family accommodation. There is a need for both
smaller and family sized homes in order to reduce the amount of time that households with
housing need are waiting on the housing register. There are approximately 2,240 applicants on
the recently revised Housing Register.
The Council’s Corporate Plan for 2012/13 identifies the provision of more affordable housing as a
priority and significant resources have been identified within the Housing Revenue Account
Business Plan for the continuing provision of more council housing.
The Government is promoting the delivery of affordable housing through programmes of Council
New Build & Acquisition. Policy and regulation have been changed in order to support this.
Housing Landlord Services have been successful in being selected as a Registered Provider with
the HCA and Social Housing Grant can be allocated to this scheme, based on lettings at
Affordable Rents (80% of market rents).
This proposal allows headroom on the unit delivery timetable to which the Council has
committed with thh HCA as well as generating the financial return detailed elsewhere in this
business case.
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 4
2.2 Benefits, Objectives and Strategic Alignment
Council Strategic Objective / Corporate Priority (taken from Corporate Plan, Service Plans etc…)
Project Outcome Benefits expected as a result of achieving outcomes
Efficient Council
The project directly
supports the following
outcome in the corporate
plan: ‘Increased returns
from the management of
Council assets’ through
cost effective procurement
Increased returns from the
management of Council
assets.
Cost effective procurement
Increased returns from the
management of Council
assets
A surplus will be generated by the
additional units.
A significant financial surplus will
be generated to the HRA by the
additional units
Community Action
The project will directly
support the following
outcome in the corporate
plan: ‘more Council
housing, and more
affordable housing
available.
The purchase of additional
affordable housing
dwellings
The demand for affordable housing
will be partially met, although
there will still be in excess of 2,000
priority applicants on the Housing
Register.
2.3 Scope: (In/Out)
The purchase of two houses by the Housing Revenue Account
Inclusions:
Purchase, Works to meet the Bournemouth Standard / Decent Homes and ancillary costs
including:
(a) Acquisition Costs
Cost of acquisition
Administration Costs
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 5
Stamp Duty Land Tax and/or land registration costs
(b) Works
Main works costs
Statutory agreements and associated bonds including all fees and charges directly
attributable to such works) where applicable.
(c) On costs
Legal fees and disbursements.
Net gains/losses via interest charges on development period loans.
Valuation and administration fees.
Borrowing administration charges (including associated legal and valuation fees).
An appropriate proportion of the Grant Recipient’s development and administration
costs.
Exclusions:
Non-site specific feasibility work, high-level strategic control costs
2.4 Strategic Risk
Risk Mitigation Strategy Owner
Cost overruns Fully controllable through the offer
/ acceptance mechanism of
purchase.
The internal project
manager.
Funding not granted by
the HCA.
The scheme will not proceed The internal project
manager.
Time Overruns Mitigated by the use of a realistic
timescale.
The internal project
manager.
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 6
Risk Mitigation Strategy Owner
Failure to meet the
funding and delivery
requirements of the HCA
Mitigated by pursuing units which
are known to comply structurally
with the HCA’s requirements
The internal project
manager.
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 7
3 Options Appraisal: The Economic Case
3.1 Summary of Approach
A number of options for meeting the Council’s priorities have been considered. The
acquisition of a number of units will complement the existing new build program which a
detailed options appraisal submitted to Cabinet in February 2012 and subsequently to
Executive Gateway Board in April 2012, concluded was the best delivery mechanism for the
Council.
The HCA have recently indicated that they are positively minded to offer grant funding for
this option also. This means that the Council can pursue an increase in unit provision and
grant income. This will mean an additional surplus contributed to the HRA, more affordable
housing units provided and better meeting HCA targets with the improved reputation and
relationship [to the HCA] that this brings.
This option will help provide more affordable housing, has a positive impact on the Council’s
finances and enables the Council to receive 100% nomination rights in perpetuity whilst
maintaining full local control over the future management and maintenance of these
properties.
Other alternatives considered for this project and rejected included:
Do Nothing – rejected due to the over-riding need for more affordable housing within the
Borough and because of the positive financial impact the new units will have on the Housing
Revenue Account Business Plan.
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 8
3.2 Options Appraisal
Option 1 – Purchase two x two or three bedroom houses within the conurbation.
Total Expected Financial Benefit (£k) Total Expected Financial Cost (£k)
£256K surplus to the HRA over 30 years after the repayment of the prudential borrowing (including interest), plus the capital value of the retained asset as shown in section 4.4
£379K, including indirect costs such as development period interest, appropriation etc, financed by internal borrowing and capital grants
Expected non Financial Benefit High level Breakdown of Costs
An additional 2 houses for let to those in housing need.
Acquisition £320,000
Works Costs £15,000
On Costs £44,000
Strengths (Including opportunities) Weaknesses (Including threats)
Positive impact on the HRA, provides high quality, sustainable accommodation, which also provides a long-term capital asset to the Council.
Maintains the good working relationship with the Homes and Communities Agency
Changes in Government Legislation etc,
which may affect future income and
expenditure levels
Risk Mitigation Strategy
See Strategic Risk Section See Strategic Risk Section
Timeline Indicative Funding Source
September 2013 – March 2014
Internal Borrowing - £292 (incl
£33.5 contingencies)
HCA Grant Funding - £32,000
HRA Revenue - £23,000
HRA Capital Reciepts - £32,000
Option 2 – Do Nothing
Total Expected Financial Benefit (£k) Total Expected Financial Cost (£k)
Nil Nil
Expected non Financial Benefit High level Breakdown of Costs
None N/A
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 9
Strengths (Including opportunities) Weaknesses (Including threats)
None Fails to meet the Council’s Priority for more
affordable housing
Does not generate a long-term surplus to the
Council
Risk Mitigation Strategy
Loss of reputation and loss of preferred
partner status with the Homes and
Communities Agency and consequent inability
to access future grant funding
No satisfactory mitigation strategy and the
Council would have to accept this loss
Timeline Indicative Funding Source
Ongoing N/A
3.3 Preferred Option – Option 1
Secure internal borrowing from within the HRA and purchase two houses, is the preferred
option. This option provides additional properties for affordable rent at minimal risk to the
Council. No direct funding is required from the General Fund, with the majority of funding
coming from the Homes and Communities Agency and internal borrowing (from the general
fund) with a small element of funding from the Housing Revenue Account.
The financial model is based on actual experience, on market prices for these and similar
dwellings. There is a 10% contingency to allow for market price fluctuations or variance in the
cost of works.
The exact level of surplus generated to the HRA will be dependent upon a number of factors
including whether the Council choose to prioritise the reduction of the level of borrowing
rather than maximizing early surplus’s to the HRA.
If the borrowing is paid back over 25 years, the HRA starts making a surplus in the first year
and continues making a surplus thereafter throughout the life of the scheme. This surplus
made can then be used elsewhere.
The Council will also retain the capital value of the completed units, which at current value is
likely to be in the region of an additional £320,000.
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 10
4 Affordability: The Financial Case
4.1 Quantification of Risk and Associated Contingency
The financial model is the same as that used for other recently completed housing schemes
managed by Housing, Parks and Bereavement Services, all of which have been delivered on
time and to budget. The model uses assumptions based on actual historic cost data for
managing and maintaining the existing housing stock, cost data from the existing maintenance
contract and the offer of funding already received from the Homes and Communities Agency
as the basis for the 30 year business plan.
The model has been validated by the use of the PROVAL development appraisal software to
ensure consistency with the financial model used by housing associations and other registered
providers.
The model assumes a 10% contingency on the acquisition and works costs and uses the current
internal borrowing interest rate. In addition a sinking fund has been built into the model to
allow for future major repairs and improvements.
4.2 Running Costs
A detailed 30 year cash-flow is shown in 4.4 and assumes that the internal borrowing is paid
back over a period of 25 years.
4.3 Savings
The two houses will generate a long-term surplus to the HRA, which can be used in the future
effective operation of the Housing Revenue Account. Following the self-financing buy-out of
the HRA, the Council now have full responsibility for the financial operation and management
of the Account. The anticipated surplus from these properties could be used in the future, for
instance for:
(a) Providing additional funding to maintain and improve the existing stock.
(b) Financing additional council housing
G3 Programme & Project Management Office
PROJECT INITIATION DOCUMENT
Page 11
4.4 Spend Profile and Cash Flow
All figures in £k Description 2013/14 2014/15 2015/16 Total
Acquisition Costs 320 320
Works Costs 15 15
On-costs 44 44
Sub-Total Costs 379 379
Contingency @10% of acquisition & works costs
Included above
Total Costs 379 379
Cumulative Benefit See Cash Flow and NPV calcs
Funded By:
FUNDING SOURCE AND PROFILE
2013-14
£’000
2014-15
£’000
2015-16
£’000
Internal Borrowing 292
HRA New Build Reserve,
Capital Receipts etc
16
16
HRA Revenue 23
HCA Grant 32
TOTAL 379
G3 Programme & Project Management Office
PROJECT INITIATION DOCUMENT
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G3 Programme & Project Management Office
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G3 Programme & Project Management Office
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4.5 Source of Funding
Source of Funding Total (£k)
Homes and Communities Agency Grant 32
Internal Borrowing (assuming the full 10% contingency is expended) 292
S106 commuted, other housing capital receipts HRA New Build Reserve
16 16
Funding from the HRA etc for staff costs, development period interest etc 23
Total 379
G3 Programme & Project Management Office
PROJECT INITIATION DOCUMENT
Page 15
5 Achievability: The Project Management Case
5.1 Project Approach
The programme will be managed in-house, by existing staff within Housing Landlord Services
using other internal departments (legal etc.) as required.
Overall project control will be administered by the Housing Development Manager assisted by
a Housing Development Officer
5.2 Resources Required
Most of the in-house resources required, will be provided by Housing, Parks and Bereavement
Services from existing assets.
There will be a need for specialist external consultants during the construction phase and the
cost of these services has been included within the overall budget
5.3 Benefit Realisation
Benefit How will the benefit be Measured? Frequency of Measurement
Increase in the provision of high
quality, affordable housing
Statistical collection and key
performance benchmarking
Annually
The completed project will provide
additional much needed housing
provision.
Reduction of the housing register Annual
survey
The development will further cement
our good working relationship with the
Homes and Communities Agency, thus
opening up additional funding
opportunities for both housing and non-
housing schemes in the future.
Successful receipt of grant funding On
completion
of the units
The generation of long-term surplus to
the Housing Revenue Account
Production and monitoring of annual
accounts
Annually
G3 Programme & Project Management Office
PROJECT INITIATION DOCUMENT
Page 16
5.4 Critical Success Factors
Successful procurement of units
Construction and Maintenance works to units, on time and to budget
Successful letting of completed units
Successful receipt of HCA Grant funding
5.5 Assumptions & Constraints
Assumptions
A number of standard assumptions are included within the financial model. These assumptions
are based on data collected on our existing stock and have previously been agreed with
Finance as being reasonable assumptions based on the best information currently available to
the Council.
Constraints
The main external constraint on the programme is the availability of funding from the HCA,
which not only provides an element of additional funding but also allows the Council to
operate outside the constraints which would be imposed by central government on council
development, should the HCA not be involved. It is therefore imperative that the Council
comply with the Funding Agreement and meet the timetable for delivery.
5.6 Interdependencies
IN/OUT
Project, person or resources that you are dependent upon (IN) or that are dependent upon this project (OUT)
Description of dependency (e.g. the complete rollout of the project or the development of a particular part of it)
In Compliance with the HCA Funding
Agreement
Failure to comply may result in the HCA
funding being withdrawn
Out Management of the completed units Managed by existing Housing Landlord staff
G3 Programme & Project Management Office
PROJECT INITIATION DOCUMENT
Page 17
5.7 Key Stakeholders
Stakeholder or Stakeholder group Relevance to project
Housing, Parks and Bereavement Services
Responsible for the future management and
maintenance of the completed units
Homes and Communities Agency Part funders and statutory regulator
Future Residents and neighbours Will occupy and/or be affected by the proposed
units
Local Ward members Represent the views of local residents
EGB and Cabinet Will monitor and assess performance against
targets
5.8 Project Management Organisational Structure
Project Team Name Appropriate Skills and Experience
Project Manager John Findley Housing Development Manager
Project Board Name Appropriate Skills and Experience
Project Owner (SRO) Gary Josey Director of Housing, Parks and
Bereavement Services
Senior User Ian Shaw Head of Housing Management
Portfolio Holder Councillor Lawton Portfolio Holder for Housing
G3 Programme & Project Management Office
PROJECT INITIATION DOCUMENT
Page 18
5.9 Timescales and Project Plan
Project Start Date Project End Date
September 2013 March 2014
ID Phase / Activity Estimated Start
Estimated End
Purchase of Units 1st October
2013
31st
December
2013
Works to vacant units 1st January
2014
28th
February
2014
Handover and letting of completed units 1st March
2014
31st March
2014
5.10 Progress Monitoring and Reporting Process
The project will report on a regular basis following the Council’s mandatory project management process. It will use the standard progress report that captures progress against the key activities / milestones, top risks and issues, progress against benefits targets and an overall summary
G3 Programme & Project Management Office
PROJECT INITIATION DOCUMENT
Page 19
6 Appendices
Environmental Impact Checklist
Equality Needs Impact Assessment
Whole Life Costing
Initial Risk Assessment
G3 Programme & Project Management Office
PROJECT INITIATION DOCUMENT
Page 20
Issue: Purchase of Existing Houses
Meeting Date: 21/08/2013
Accountable Manager: Gary Josey
Impact Assessor: John Findley, Housing Development Manager
01202 458370 [email protected]
Impact Criteria Impact Comments
Natural resources
impact on use of natural resources – for example energy, water, raw materials
+ Cost effective energy improvement works carried out prior to first letting thus helping to reduce CO2 emissions and utility bills.
Quality of environment
contribution to safe and supportive environments for living, recreation and working
n/a
Bio-diversity
protects and improves wildlife and habitats
n/a
Waste and pollution
effects on air, land and water from waste and emissions
+ Cost effective energy improvement works carried out prior to first letting thus helping to reduce CO2 emissions and utility bills.
Council Priority and Objectives for Improving our Environment:
• Reduce traffic congestion • Improve streetscene • Improve recycling & energy
management • Respond to climate change • Improve quality of existing
space
n/a
This project has a neutral impact on the environment.
There is a community impact where residents will move to other dwellings / developments.
These other developments (if council led) will be subject to their own Environmental Impact Assessment
Please complete and save your checklist, and email a copy to Lee Green, Environment Strategy & Sustainability Manager @ [email protected]
If you would like help in completing this checklist or would like to request a change, again contact Lee Green by email or call on 01202 451144.
Environment Impact Checklist
G3 Programme & Project Management Office
PROJECT INITIATION DOCUMENT
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G3 Programme & Project Management Office
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G3 Programme & Project Management Office
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G2 Programme & Project Management Office
FULL BUSINESS CASE/PROJECT INITIATION DOCUMENT 01202 458213 [email protected] (template version 0.20)
Page 1
Document Approvals - All Business Cases for projects over £25k must be approved by the following people listed in this table prior to being approved by the Transformation Board and Executive Gateway Board (EGB).
Officer/Member/Group Name FBC Approval Date
PID Approval Date
Project Owner Gary Josey 22/08/2013 N/A
Executive Director Bill Cotton 22/08/2013 N/A
Portfolio Holder Councillor Lawton 03/09/2013 N/A
Portfolio Holder comment This will reduce the council’s current waiting list for Council Housing and uphold the Councils reputation and relationship with the Homes and communities Agency
Transformation Board (Transformation Projects Only) N/A N/A
Executive Gateway Board 18/09/2013 N/A
Cabinet N/A N/A
Project Board N/A N/A
Other Elected Members & Officers Consulted
Name Position Date
Tina Worthing Head of Accountancy Services 22/08/2013
Marta Zuk Senior Accountant 22/08/2013
Jo Greaves Senior Project Management Adviser 22/08/2013
Tanya Coulter
Document Revision History
Version Author Changes Date
Full Business Case (FBC)
Purchase of Existing Flats
Service Unit: Housing
Risk: High
Prepared by/Project Manager: John Findley Date: 21st August 2013
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 2
1 Executive Summary
• The Council’s Corporate Plan identifies the provision of more affordable housing as a
priority.
• The opportunity to acquire 4 units as a pilot programme has been identified following
discussion with the Homes and Communities Agency. The Council House Building
Programme 2012-2015 Business Case provides the detail for the entire programme
with individual business cases being produced for each of the schemes.
• Purchase of Existing Flats is a new work stream to contribute towards the delivery of
part of this program. It is a consequence of the HCA having indicated that they may
contribute subsidy for this.
• This program of purchase will also serve as a trial for the processes and procedures to
be put in place for a subsequent much larger program using inward investment
funding.
• The Government is promoting the delivery of affordable housing through programmes
of Council New Build & Acquisition. Policy and regulation have been changed in order
to support this.
• Housing, Parks and Bereavement Services have been successful in being selected as a
Registered Provider (RP) with the Homes and Communities Agency (HCA) and Social
Housing Grant has been awarded for the delivery of additional housing up to 2015.
• The proposal helps meets our delivery obligation with the HCA and the purchased
units will have a positive impact on the Housing Revenue Account.
• This business case seeks approval of £526K including contingencies. This will be
funded through a mixture of HCA grant, internal borrowing and other funding sources.
Excluding the contingency, the anticipated final cost is likely to be £480,000.
• The new housing will help to contribute to the overall programme to provide 105
additional affordable houses in the Borough by 2015.
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 3
2 Strategic Fit: The Strategic Case
2.1 Business Needs and Project Background
The proposal is to purchase four x one or two bedroom flats within the conurbation
The proposed purchases will be fully funded using a mixture of internal borrowing, capital and
s106 receipts from the Housing Revenue Account and Grants from the Homes and Communities
Agency.
There is a significant and growing need for affordable housing in Bournemouth. However, market
conditions, reduced grant funding and slow new build starts have markedly reduced the
opportunity to deliver against this need. Provision in the private sector in recent years has been
slow and limited to smaller flats rather than family accommodation. There is a need for both
smaller and family sized homes in order to reduce the amount of time that households with
housing need are waiting on the housing register. There are approximately 2,240 applicants on
the recently revised Housing Register.
The Council’s Corporate Plan for 2012/13 identifies the provision of more affordable housing as a
priority and significant resources have been identified within the Housing Revenue Account
Business Plan for the continuing provision of more council housing.
The Government is promoting the delivery of affordable housing through programmes of Council
New Build & Acquisition. Policy and regulation have been changed in order to support this.
Housing Landlord Services have been successful in being selected as a Registered Provider with
the HCA and Social Housing Grant can be allocated to this scheme, based on lettings at
Affordable Rents (80% of market rents).
This proposal allows headroom on the unit delivery timetable to which the Council has
committed with thh HCA as well as generating the financial return detailed elsewhere in this
business case.
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 4
2.2 Benefits, Objectives and Strategic Alignment
Council Strategic Objective / Corporate Priority (taken from Corporate Plan, Service Plans etc…)
Project Outcome Benefits expected as a result of achieving outcomes
Efficient Council
The project directly
supports the following
outcome in the corporate
plan: ‘Increased returns
from the management of
Council assets’ through
cost effective procurement
Increased returns from the
management of Council
assets
Cost effective procurement
Increased returns from the
management of Council
assets
A surplus will be generated by the
additional units.
A significant financial surplus will
be generated to the HRA by the
additional units
Community Action
The project will directly
support the following
outcome in the corporate
plan: ‘more Council
housing, and more
affordable housing
available.
The purchase of additional
affordable housing
dwellings
The demand for affordable housing
will be partially met, although
there will still be in excess of 2,000
priority applicants on the Housing
Register.
2.3 Scope: (In/Out)
The purchase of four flats by the Housing Revenue Account
Inclusions:
Purchase, Works to meet the Bournemouth Standard / Decent Homes and ancillary costs
including:
(a) Acquisition Costs
Cost of acquisition
Administration Costs
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 5
Stamp Duty Land Tax and/or land registration costs
(b) Works
Main works costs
Statutory agreements and associated bonds including all fees and charges directly
attributable to such works) where applicable.
(c) On costs
Legal fees and disbursements.
Net gains/losses via interest charges on development period loans.
Valuation and administration fees.
Borrowing administration charges (including associated legal and valuation fees).
An appropriate proportion of the Grant Recipient’s development and administration
costs.
Exclusions:
Non-site specific feasibility work, high-level strategic control costs
2.4 Strategic Risk
Risk Mitigation Strategy Owner
Cost overruns Fully controllable through the offer
/ acceptance mechanism of
purchase.
The internal project
manager.
Funding not granted by
the HCA.
The scheme will not proceed The internal project
manager.
Time Overruns Mitigated by the use of a realistic
timescale.
The internal project
manager.
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 6
Risk Mitigation Strategy Owner
Failure to meet the
funding and delivery
requirements of the HCA
Mitigated by pursuing units which
are known to comply structurally
with the HCA’s requirements
The internal project
manager.
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 7
3 Options Appraisal: The Economic Case
3.1 Summary of Approach
A number of options for meeting the Council’s priorities have been considered. The
acquisition of a number of units will complement the existing new build program which a
detailed options appraisal submitted to Cabinet in February 2012 and subsequently to
Executive Gateway Board in April 2012, concluded was the best delivery mechanism for the
Council.
The HCA have recently indicated that they are positively minded to offer grant funding for
this option also. This means that the Council can pursue an increase in unit provision and
grant income. This will mean an additional surplus contributed to the HRA, more affordable
housing units provided and better meeting HCA targets with the improved reputation and
relationship [to the HCA] that this brings.
This option will help provide more affordable housing, has a positive impact on the Council’s
finances and enables the Council to receive 100% nomination rights in perpetuity whilst
maintaining full local control over the future management and maintenance of these
properties.
Other alternatives considered for this project and rejected included:
Do Nothing – rejected due to the over-riding need for more affordable housing within the
Borough and because of the positive financial impact the new units will have on the Housing
Revenue Account Business Plan.
G2 Programme & Project Management Office
FULL BUSINESS CASE
Page 8
3.2 Options Appraisal
Option 1 – Purchase four x one or two bedroom flats within the conurbation.
Total Expected Financial Benefit (£k) Total Expected Financial Cost (£k)
£400K surplus to the HRA over 30 years after the repayment of the prudential borrowing (including interest), plus the capital value of the retained asset as shown in section 4.4
£526K, including indirect costs such as development period interest, appropriation etc, financed by internal borrowing and capital grants
Expected non Financial Benefit High level Breakdown of Costs
An additional 4 flats for let to those in housing need.
Acquisition £430,000
Works Costs £30,000
On Costs £66,000
Strengths (Including opportunities) Weaknesses (Including threats)
Positive impact on the HRA, provides high quality, sustainable accommodation, which also provides a long-term capital asset to the Council.
Maintains the good working relationship with the Homes and Communities Agency
Changes in Government Legislation etc,
which may affect future income and
expenditure levels
Risk Mitigation Strategy
See Strategic Risk Section See Strategic Risk Section
Timeline Indicative Funding Source
September 2013 – March 2014
Internal Borrowing - £354,000 (incl
£46,000 contingencies)
HCA Grant Funding - £64,500
HRA Revenue - £43,500
HRA Capital Reciepts - £64,000
Option 2 – Do Nothing
Total Expected Financial Benefit (£k) Total Expected Financial Cost (£k)
Nil Nil
Expected non Financial Benefit High level Breakdown of Costs
None N/A
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Strengths (Including opportunities) Weaknesses (Including threats)
None Fails to meet the Council’s Priority for more
affordable housing
Does not generate a long-term surplus to the
Council
Risk Mitigation Strategy
Loss of reputation and loss of preferred
partner status with the Homes and
Communities Agency and consequent inability
to access future grant funding
No satisfactory mitigation strategy and the
Council would have to accept this loss
Timeline Indicative Funding Source
Ongoing N/A
3.3 Preferred Option – Option 1
Secure internal borrowing from within the HRA and purchase four flats, is the preferred
option. This option provides additional properties for affordable rent at minimal risk to the
Council. No direct funding is required from the General Fund, with the majority of funding
coming from the Homes and Communities Agency and internal borrowing (from the general
fund) with a small element of funding from the Housing Revenue Account.
The financial model is based on actual experience, on market prices for these and similar
dwellings. There is a 10% contingency to allow for market price fluctuations or variance in the
cost of works.
The exact level of surplus generated to the HRA will be dependent upon a number of factors
including whether the Council choose to prioritise the reduction of the level of borrowing
rather than maximizing early surplus’s to the HRA.
If the borrowing is paid back over 25 years, the HRA starts making a surplus in the first year
and continues making a surplus thereafter throughout the life of the scheme. This surplus
made can then be used elsewhere.
The Council will also retain the capital value of the completed units, which at current value is
likely to be in the region of an additional £430,000.
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4 Affordability: The Financial Case
4.1 Quantification of Risk and Associated Contingency
The financial model is the same as that used for other recently completed housing schemes
managed by Housing, Parks and Bereavement Services, all of which have been delivered on
time and to budget. The model uses assumptions based on actual historic cost data for
managing and maintaining the existing housing stock, cost data from the existing maintenance
contract and the offer of funding already received from the Homes and Communities Agency
as the basis for the 30 year business plan.
The model has been validated by the use of the PROVAL development appraisal software to
ensure consistency with the financial model used by housing associations and other registered
providers.
The model assumes a 10% contingency on the acquisition and works costs and uses the current
internal borrowing interest rate. In addition a sinking fund has been built into the model to
allow for future major repairs and improvements.
4.2 Running Costs
A detailed 30 year cash-flow is shown in 4.4 and assumes that the internal borrowing is paid
back over a period of 25 years.
4.3 Savings
The four flats will generate a long-term surplus to the HRA, which can be used in the future
effective operation of the Housing Revenue Account. Following the self-financing buy-out of
the HRA, the Council now have full responsibility for the financial operation and management
of the Account. The anticipated surplus from these properties could be used in the future, for
instance for:
(a) Providing additional funding to maintain and improve the existing stock.
(b) Financing additional council housing
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4.4 Spend Profile and Cash Flow
All figures in £k Description 2013/14 2014/15 2015/16 Total
Acquisition Costs 430 430
Works Costs 30 30
On-costs 66 66
Sub-Total Costs 526 526
Contingency @10% of acquisition & works costs
Included above
Total Costs 526 526
Cumulative Benefit See Cash Flow and NPV calcs
Funded By:
FUNDING SOURCE AND PROFILE
2013-14
£’000
2014-15
£’000
2015-16
£’000
Internal Borrowing 354
HRA New Build Reserve,
Capital Receipts etc
32
32.5
HRA Revenue 43.5
HCA Grant 64
TOTAL 526
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4.5 Source of Funding
Source of Funding Total (£k)
Homes and Communities Agency Grant 64.5
Internal Borrowing (assuming the full 10% contingency is expended) 354
S106 commuted, other housing capital receipts HRA New Build Reserve
32.5 32
Funding from the HRA etc for staff costs, development period interest etc 43
Total 526
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5 Achievability: The Project Management Case
5.1 Project Approach
The programme will be managed in-house, by existing staff within Housing Landlord Services
using other internal departments (legal etc.) as required.
Overall project control will be administered by the Housing Development Manager assisted by
a Housing Development Officer
5.2 Resources Required
Most of the in-house resources required, will be provided by Housing, Parks and Bereavement
Services from existing assets.
There will be a need for specialist external consultants during the construction phase and the
cost of these services has been included within the overall budget
5.3 Benefit Realisation
Benefit How will the benefit be Measured? Frequency of Measurement
Increase in the provision of high
quality, affordable housing
Statistical collection and key
performance benchmarking
Annually
The completed project will provide
additional much needed housing
provision.
Reduction of the housing register Annual
survey
The development will further cement
our good working relationship with the
Homes and Communities Agency, thus
opening up additional funding
opportunities for both housing and non-
housing schemes in the future.
Successful receipt of grant funding On
completion
of the units
The generation of long-term surplus to
the Housing Revenue Account
Production and monitoring of annual
accounts
Annually
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5.4 Critical Success Factors
Successful procurement of units
Refurbishment works to units, on time and to budget
Successful letting of completed units
Successful receipt of HCA Grant funding
5.5 Assumptions & Constraints
Assumptions
A number of standard assumptions are included within the financial model. These assumptions
are based on data collected on our existing stock and have previously been agreed with
Finance as being reasonable assumptions based on the best information currently available to
the Council.
Constraints
The main external constraint on the programme is the availability of funding from the HCA,
which not only provides an element of additional funding but also allows the Council to
operate outside the constraints which would be imposed by central government on council
development, should the HCA not be involved. It is therefore imperative that the Council
comply with the Funding Agreement and meet the timetable for delivery.
5.6 Interdependencies
IN/OUT
Project, person or resources that you are dependent upon (IN) or that are dependent upon this project (OUT)
Description of dependency (e.g. the complete rollout of the project or the development of a particular part of it)
In Compliance with the HCA Funding
Agreement
Failure to comply may result in the HCA
funding being withdrawn
Out Management of the completed units Managed by existing Housing Landlord staff
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5.7 Key Stakeholders
Stakeholder or Stakeholder group Relevance to project
Housing, Parks and Bereavement Services
Responsible for the future management and
maintenance of the completed units
Homes and Communities Agency Part funders and statutory regulator
Future Residents and neighbours Will occupy and/or be affected by the proposed
units
Local Ward members Represent the views of local residents
EGB and Cabinet Will monitor and assess performance against
targets
5.8 Project Management Organisational Structure
Project Team Name Appropriate Skills and Experience
Project Manager John Findley Housing Development Manager
Project Board Name Appropriate Skills and Experience
Project Owner (SRO) Gary Josey Director of Housing, Parks and
Bereavement Services
Senior User Ian Shaw Head of Housing Management
Portfolio Holder Councillor Lawton Portfolio Holder for Housing
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5.9 Timescales and Project Plan
Project Start Date Project End Date
September 2013 March 2014
ID Phase / Activity Estimated Start
Estimated End
Purchase of Units 1st October
2013
31st
December
2013
Works to vacant units 1st January
2014
28th
February
2014
Handover and letting of completed units 1st March
2014
31st March
2014
5.10 Progress Monitoring and Reporting Process
The project will report on a regular basis following the Council’s mandatory project management process. It will use the standard progress report that captures progress against the key activities / milestones, top risks and issues, progress against benefits targets and an overall summary
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6 Appendices
Environmental Impact Checklist
Equality Needs Impact Assessment Screening
Whole Life Costing
Initial Risk Assessment
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Issue: Purchase of Existing Flats
Meeting Date: 21/08/2013
Accountable Manager: Gary Josey
Impact Assessor: John Findley, Housing Development Manager
01202 458370 [email protected]
Impact Criteria Impact Comments
Natural resources
impact on use of natural resources – for example energy, water, raw materials
+ Cost effective energy improvement works carried out prior to first letting thus helping to reduce CO2 emissions and utility bills.
Quality of environment
contribution to safe and supportive environments for living, recreation and working
n/a
Bio-diversity
protects and improves wildlife and habitats
n/a
Waste and pollution
effects on air, land and water from waste and emissions
+ Cost effective energy improvement works carried out prior to first letting thus helping to reduce CO2 emissions and utility bills.
Council Priority and Objectives for Improving our Environment:
• Reduce traffic congestion • Improve streetscene • Improve recycling & energy
management • Respond to climate change • Improve quality of existing
space
n/a
This project has a neutral impact on the environment.
There is a community impact where residents will move to other dwellings / developments.
These other developments (if council led) will be subject to their own Environmental Impact Assessment
Please complete and save your checklist, and email a copy to Lee Green, Environment Strategy & Sustainability Manager @ [email protected]
If you would like help in completing this checklist or would like to request a change, again contact Lee Green by email or call on 01202 451144.
Environment Impact Checklist
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