Agenda and minutes

www.swansea.gov.uk/disclosuresofinterests

In accordance with the Code of Conduct adopted by the City and County of Swansea, no interests were declared.

To approve & sign the Minutes of the previous meeting(s) as a correct record.

NOTED that the previous meeting was inquorate.

Mike Hawes, Director of Resources, to provide a verbal report.

Mike Hawes, Director of Resources, stated that there were many complexities surrounding the financing of new house building. 

Legislation in England differs from Wales so any legal advice provided to English local authorities could not be re-badged and utilised by the 11 Welsh Local Authorities.  The remainder of the Welsh local authorities had previously transferred their housing stock.

He stated that he had been liaising with colleagues in Carmarthen Council to gain an understanding on their progress.  Contact had been made with the remaining 10 Welsh authorities to ascertain their progress.

By way of background he stated that local authorities are driven by statute and must therefore have the statutory backing in order to make any decisions.  ‘Promotion Wellbeing’ as detailed in the Local Authority Act 2000 gives local authorities powers to act in the best interests of local tax payers .  Promotional Wellbeing also includes the promotion of affordable and social housing.  There are two other acts which are applicable in this context, the Localism Act 2011, which provides a general power of competence for the wellbeing of taxpayers (whilst this is not applicable in Wales different legislation for Wales will provide similar provision) and the Local Authority Act 2003 which provides local authorities with the ability to undertake trading activities (albeit via an ‘arms length company).  It was noted that advice was currently being sought as to whether the term ‘trading’ includes the ability to build houses. 

In response to Member questions the Director of Resources stated that:

a)    The Authority could not borrow more than £6m at this particular point in time;

b)    Following the implementation of the Welsh Quality Housing Standard in 2020, the and surplus that would previously have been spent on repairs and maintenance from the Housing Revenue Account (HRA) could be used to pay off debts;

c)     Promotional Wellbeing (Local Authority Act 2000) also includes the promotion not provision of affordable and social housing.  There is little advice to suggest that this Act would allow for house building at this particular time;

d)    The Housing Act 1985 gives local authorities special powers to erect, acquire, convert, enlarge, repair, alter or dispose of land for social housing purposes.  All these activities are to take place within the ring-fenced HRA.  The legislation does not allow the Authority to cross subsidise from other accounts and it is unlawful for the HRA to transfer money to different accounts;

e)    It may be feasible for the Authority to build under HRA with a partial ownership scheme.  However, there are difficulties associated with this as the HRA allows the Authority to build but when it is sold it is a capital receipt and must go back to the Welsh Government.  Challenges are currently ongoing regarding that legal opinion.

f)      It is legal to sell below the market value in order to provide affordable housing to for example, first time buyers.  However, authority must

have the permission of the Wales Audit Office;

g)    The Authority would need to be clear on the rationale for utilising the General Fund to finance mixed ownership and Welsh Local Authorities do not believe they have the power to build.  The option is to examine the use of housing companies which would be at ‘arms length’.  However, this approach created different types of control issues in so far as the company could not be controlled by the Council and any rents/responsibilities could not fall to the Council.  This in turn resulted in the houses not being classed as ‘council houses’;

h)    Whilst the Authority had the power to pay someone’s rent under homelessness powers, they do not have the power under the General Fund to build houses;

i)       It would not be lawful for the Authority to stipulate rent or other criteria to an ‘arms length’ company;

j)      Legal advice would need to be obtained regarding the building of houses to generate power;

k)     The discounting of General Fund Land would be possible with the approval of Wales Audit Office, as long as it is for general housing, however, there would be issues associated with this in terms of the potential for state aid; stamp duty, land tax, corporation tax and disposal.  A report on the future strategy would be submitted to the Future Housing Strategy Group, however, there will not be a specific paper on how to do this.  Issues would need to be resolved around prioritising and Councils ability to manage debt. 

l)       The issues are not simply associated with the cost of construction, there are also matters in relation to what the land would be worth.  If the land was leasehold then that would be classed as a capital asset, albeit a  deferred asset;

m)  General Fund land could be swapped with HRA land;

n)    Unsure why building within the HRA conflicts with current tenants right to buy;

o)    The capitalisation directive powers are quite strong within Welsh Government.  There are different powers that could be evoked but this would take significant work; and

p)    Section 106 agreements and social housing provision needs to be strengthened.

The Chair thanked the Director of Resources for his informative presentation.

RESOLVED  that:

1.     The Director of Resources provide a future update in respect of the use of the General Fund for the provision of affordable housing;

2.     The Director of Resources provide a future update in respect of Section 106 agreements and Developers contributions to Council houses in Swansea. 

3.     The presentation be NOTED.

The Chair presented an updated Work Plan 2016/2017. 

RESOLVED that:

a)    The February meeting receive a presentation from Local Partnerships (a Welsh Government sponsored organisation)

b)    A special meeting be convened to consider Passiv Haus Tenants.