Councillors and committees

Agenda item

Decision on the Route to Market for Two Extra Care Housing Schemes

Decision:

RESOLVED:

 

1.    It be noted that the financial modelling set out in this paper and associated annexes demonstrates that the development of Extra Care Housing on the sites in question is expected to generate financial benefits for the Council in addition to representing an important contribution to the Council’s strategic aim to develop an additional 725 affordable units of Extra Care Housing in Surrey by 2028.

2.    That capital investment in the development of Extra Care Housing on the sites out of the [Exempt Minutes E-17-20] pipeline funding already approved in the Council’s Medium Term Financial Strategy (MTFS) be approved for this programme as follows:

 

a)    Up to [Exempt Minutes E-17-20] for Lakeside and [Exempt Minutes E-17-20] for Salisbury Road if contributions towards developments costs are required by the Council as part of a tender for development and strategic housing management partner(s), which is the recommended delivery approach.

 

b)    Up to [Exempt Minutes E-17-20] for Lakeside and [Exempt Minutes E-17-20] for Salisbury Road if the tender for development and strategic housing management partner(s) is not successful, meaning that the development of Extra Care Housing is instead managed in house and fully funded by the Council.

 

Reason for decision:

 

This paper sets out the financial case underpinning the development of Extra Care Housing on the sites in question.

 

Cabinet is asked to approve the potential capital investment required for both of the two delivery approaches set out in the Part 1 paper – external delivery through a tender for development and strategic housing management partner(s) and in-house delivery whereby the Council would manage and fully fund the costs of development.

 

As set out further in this paper, external delivery through a tender is recommended as the desired delivery approach as it is modelled to achieve a greater financial return over the initial 40 year estimated life of the assets. The aim will be to avoid or limit as far as possible any capital investment by the Council. Capital investment will only be considered if the winning bidder in the tender for each site requires it as part of their tendered proposal for the development of Extra Care Housing at a site.  The level of capital investment Cabinet which is being asked to be approved here has been capped at the estimate existing use value of each site.  This means that the modelled financial benefits of developing Extra Care Housing on each site would be no less than the opportunity cost of selling the land.  If a higher level of capital investment is required for either site following the outcome of the tender, then the Extra Care project team will consider whether this is financially viable and acceptable to the Council.  A further report would then be brought back to Cabinet if appropriate to request approval for additional capital investment above the levels set out in recommendation 2a above.

 

If the tender for development and strategic housing management partner(s) is not successful, then Cabinet is asked to approve capital investment to cover the estimated full costs of development.  As set out in this paper, although in-house delivery is not modelled to fully repay the capital outlay over a 40 year period, it is expected to generate care package savings and to achieve a financial return beyond the initial 40 year life of the assets.  The development of Extra Care Housing would increase the land value of the sites, create an asset for the provision of Extra Care Housing, as well as making an important contribution to reaching the Council’s strategic ambition.  Furthermore, if in-house delivery did become the only viable option, then the Council would re-explore the possibility of securing some form of funding or investment by other public bodies such as Homes England in the sites.  This could reduce the scale of capital investment required by the Council and in doing so increase the Council’s net financial return.

 

If Cabinet approves the capital investment requested for the two sites in this paper, then capital funding within the limits approved will be moved from the Council’s capital pipeline to the Council’s capital budget as required based on the outcome of the tender for strategic housing management partner(s) or if necessary to fund the full cost of developments if in-house delivery becomes the only viable option.

 

[The decisions on this item can be called in by the Adults and Health Select Committee]

 

Minutes:

The Cabinet Member for Adults and Health introduced a Part 2 report that contained information which was exempt from Access to Information requirements by virtue of paragraph 3 – Information relating to the financial or business affairs of any particular person (including commercially sensitive information to the bidding companies).

 

RESOLVED:

 

1.    It be noted that the financial modelling set out in this paper and associated annexes demonstrates that the development of Extra Care Housing on the sites in question is expected to generate financial benefits for the Council in addition to representing an important contribution to the Council’s strategic aim to develop an additional 725 affordable units of Extra Care Housing in Surrey by 2028.

2.    That capital investment in the development of Extra Care Housing on the sites out of the [Exempt Minutes E-17-20] pipeline funding already approved in the Council’s Medium Term Financial Strategy (MTFS) be approved for this programme as follows:

a)    Up to [Exempt Minutes E-17-20] for Lakeside and [Exempt Minutes E-17-20] for Salisbury Road if contributions towards developments costs are required by the Council as part of a tender for development and strategic housing management partner(s), which is the recommended delivery approach.

b)    Up to [Exempt Minutes E-17-20] for Lakeside and [Exempt Minutes E-17-20] for Salisbury Road if the tender for development and strategic housing management partner(s) is not successful, meaning that the development of Extra Care Housing is instead managed in house and fully funded by the Council.

Reason for decision:

 

This paper sets out the financial case underpinning the development of Extra Care Housing on the sites in question.

 

Cabinet is asked to approve the potential capital investment required for both of the two delivery approaches set out in the Part 1 paper – external delivery through a tender for development and strategic housing management partner(s) and in-house delivery whereby the Council would manage and fully fund the costs of development.

 

As set out further in this paper, external delivery through a tender is recommended as the desired delivery approach as it is modelled to achieve a greater financial return over the initial 40 year estimated life of the assets. The aim will be to avoid or limit as far as possible any capital investment by the Council. Capital investment will only be considered if the winning bidder in the tender for each site requires it as part of their tendered proposal for the development of Extra Care Housing at a site.  The level of capital investment Cabinet which is being asked to be approved here has been capped at the estimate existing use value of each site.  This means that the modelled financial benefits of developing Extra Care Housing on each site would be no less than the opportunity cost of selling the land.  If a higher level of capital investment is required for either site following the outcome of the tender, then the Extra Care project team will consider whether this is financially viable and acceptable to the Council.  A further report would then be brought back to Cabinet if appropriate to request approval for additional capital investment above the levels set out in recommendation 2a above.

 

If the tender for development and strategic housing management partner(s) is not successful, then Cabinet is asked to approve capital investment to cover the estimated full costs of development.  As set out in this paper, although in-house delivery is not modelled to fully repay the capital outlay over a 40 year period, it is expected to generate care package savings and to achieve a financial return beyond the initial 40 year life of the assets.  The development of Extra Care Housing would increase the land value of the sites, create an asset for the provision of Extra Care Housing, as well as making an important contribution to reaching the Council’s strategic ambition.  Furthermore, if in-house delivery did become the only viable option, then the Council would re-explore the possibility of securing some form of funding or investment by other public bodies such as Homes England in the sites.  This could reduce the scale of capital investment required by the Council and in doing so increase the Council’s net financial return.

 

If Cabinet approves the capital investment requested for the two sites in this paper, then capital funding within the limits approved will be moved from the Council’s capital pipeline to the Council’s capital budget as required based on the outcome of the tender for strategic housing management partner(s) or if necessary to fund the full cost of developments if in-house delivery becomes the only viable option.

 

[The decisions on this item can be called in by the Adults and Health Select Committee]

 

 

 

Supporting documents: