CLASSIFICATION: Open. Exempt Appendix 1

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1 ESTATE REGENERATION PROGRAMME UPDATE KEY DECISION NO. HS H70 CABINET MEETING DATE 24 March 2014 CLASSIFICATION: Open Exempt Appendix 1 WARD(S) AFFECTED All Wards CABINET MEMBER Cllr Philip Glanville Hackney Homes and Regeneration Estates KEY DECISION Yes REASON Spending or Savings CORPORATE DIRECTOR Charlotte Graves Corporate Director of Housing

2 1. CABINET MEMBER S INTRODUCTION 1.1 Hackney s Estate Regeneration Programme is leading the way in the delivery of new council social rented and shared ownership homes. Over the past four years we have worked hard to find innovative solutions to tackle the problems associated with some of our poorest quality housing stock, making the transition from a period when there was funding available to build new affordable homes to a position where we have a Programme that is sustainable without Government grant. 1.2 The Programme has built on Hackney s successful bid for Local Authority Newbuild funding, which helped to fund the delivery of the first round new Council homes in the borough for at least a decade. Since the Programme was approved by Cabinet in July 2011, five sites have been completed, delivering over 200 new Council homes at social rents, 20 new homes for low cost home ownership and 42 private homes. 1.3 These first shared equity homes are being offered to our existing leaseholders on regeneration estates to enable them to access a new home, with the remaining shared ownership homes being targeted for sale to local people. These represent the first such homes to be delivered and managed by any local authority in the country. 1.4 Planning permission has been achieved on a significant number of new sites, with new Resident Steering Groups created and procurement processes underway. 320 more homes are due to start on site in These resident steering groups and the engagement with local residents also allow Hackney to proudly say that our Regeneration is resident led, with almost all sites allowing full rights to return for tenants and with various options offered to leaseholders to allow them to buy into new homes where they live. 1.5 The Programme remains financially viable. This report updates Cabinet on the detailed progress of the scheme to date, updates the financial position of the Programme, and makes some additional recommendations to enable the Programme to move forward more efficiently. 1.6 I commend this report to Cabinet. 2. CORPORATE DIRECTOR S INTRODUCTION 2.1 The Council approved its Estate Regeneration Programme in July This approval contained detailed provisions in respect of the first part of the Programme over the period This report provides an update on progress with the Estate Regeneration Programme and requests that Cabinet gives further delegated authority to officers in connection with progressing the Estate Regeneration Programme.

3 2.2 The Estate Regeneration Programme is based on the delivery of mixed tenure developments including social rent, shared ownership and private sale. Based on prevailing market conditions the Estate Regeneration Programme is forecast to be self financing and allows the Council to deliver high quality mixed tenure housing across the borough. 2.3 As set out in the report to Cabinet in July 2011, each scheme is subject to detailed and robust financial viability testing. The result of each scheme s viability appraisal is consolidated into an overall appraisal to provide detail on the borrowing requirement within the HRA to fund the Estate Regeneration Programme. The borrowing requirement is a key financial parameter of the Programme. 2.4 The Estate Regeneration Team, established to progress the Estate Regeneration Programme, reports quarterly on progress. The most recent quarterly report (Q ) indicates that the Estate Regeneration Programme is fundable within the HRA and will generate a surplus over the 40 year business plan period. 3. RECOMMENDATION(S) Cabinet is recommended to: 3.1 Authorise the continued delivery of the Estate Regeneration Programme as outlined in this report subject to obtaining Cabinet approval for any land disposals in connection with the Estate Regeneration Programme and obtaining Council Procurement Committee approval for the appointment of developers/contractors to deliver individual sites within the Estate Regeneration Programme. 3.2 Grant Delegated Authority to the Corporate Director of Housing and the Corporate Director of Finance and Resources to include additional properties or sites in the Estate Regeneration Programme. Their inclusion will be subject to the Corporate Directors being satisfied that the regeneration of such properties in the Programme is the most effective solution and that the Estate Regeneration Programme continues to remain within agreed financial parameters. 3.3 Authorise the Corporate Director of Housing to commence or continue with consultation with residents and other stakeholders of the estates and sites within the Estate Regeneration Programme. 3.4 Authorise the Corporate Director of Housing and the Corporate Director of Finance and Resources to award decant status to estates, development phases and properties in connection with the Estate Regeneration Programme and undertake such incidental steps as considered appropriate.

4 3.5 Authorise the Corporate Director of Housing and the Corporate Director of Finance and Resources to commence or continue with the decanting of estates, development phases and properties included in the Estate Regeneration Programme, including the acquisition of leaseholder and freeholder interests. 3.6 Authorise the Corporate Director of Housing and the Corporate Director of Finance and Resources to buy back leaseholder interests on regeneration estates in exceptional circumstances as detailed in the Leaseholder and Freeholder Options Document approved by Cabinet in April Authorise the Corporate Director of Housing to progress with the demolition of buildings in connection with the Estate Regeneration Programme and delegate to the Corporate Director of Housing after consultation with the Corporate Directors of Finance and Legal, HR and Regulatory Services authority to serve and deal with all necessary steps in relation to Demolition Notices. 3.8 Authorise the Corporate Director of Housing to submit bids for grant funding to funding bodies pursuant to any future national or regional grant or investment programme(s) for which the Estate Regeneration Programme may be eligible. 3.9 Authorise the Corporate Director of Housing to commission detailed design and consultancy work to enable the submission of planning applications for the estates, development phases and properties included in the Estate Regeneration Programme Authorise the Corporate Directors of Housing and Legal, HR and Regulatory Services after consultation with the Corporate Director of Finance and Resources to negotiate and enter into any unilateral / legal agreement in connection with the determination of any planning application associated with schemes included in the Estate Regeneration Programme or with the Estate Regeneration Programme generally on behalf of the Council in its capacity as landowner Authorise the Corporate Director of Housing and the Corporate Director of Finance and Resources to prepare and issue, in line with the Council s Contract Standing Orders, Invitations to Tender for the development of schemes included in the Estate Regeneration Programme In line with the Council s Contract Standing Orders, authorise the Corporate Director of Housing and the Corporate Director of Finance and Resources to incur any necessary pre-construction expenditure, including the appointment of consultants and expenditure on related fees and site enabling works, related to sites within the Programme to

5 facilitate the preparation of planning applications and Invitations to Tender Authorise the Corporate Director of Legal, HR and Regulatory Services to grant leases of electricity substations, and Wayleave Agreements to statutory service providers, in connection with the Estate Regeneration Programme on behalf of the Council in its capacity as landowner Authorise the Corporate Director of Housing, the Corporate Director of Finance and Resources, and the Corporate Director of Legal, HR and Regulatory Services to commence any preparatory work required prior to the making of a Compulsory Purchase Order, as necessary to continue with the Estate Regeneration Programme Delegate to the Corporate Directors of Housing; Finance and Resources; and Legal, HR and Regulatory Services the authority to undertake such steps as are necessary and incidental to the above Recommendations and enter into such legal agreements as deemed appropriate, to facilitate the progress and completion of the regeneration of each estate, development phase and property within the Regeneration Programme as well as the overall Regeneration Programme itself subject to obtaining Cabinet approval for any land disposals in connection with the Estate Regeneration Programme and obtaining Council Procurement Committee approval for the appointment of developers/contractors to deliver individual sites within the Estate Regeneration Programme. 4. REASONS FOR DECISION 4.1 The reasons for providing this report and the recommendations set out within it are: To update Cabinet on progress to date in delivering the Estate Regeneration Programme To recast the financial position of the Estate Regeneration Programme To ensure the continued delivery of the Estate Regeneration Programme To give the Council additional flexibility, by allowing additional properties or sites to be added to the Programme, to make best use of its existing stock and assets and to continue to meet Housing Need in the Borough 5. DETAILS OF ALTERNATIVE OPTIONS CONSIDERED AND REJECTED In the past, the Council s approach to regeneration on its estates was to consider site specific solutions either in the form of a joint venture or by means of a straightforward land disposal. Many of the schemes, on their

6 own, proved financially non-viable, mainly because of the upfront cost of acquiring right-to-buy properties to allow vacant possession. Consequently, the Council was unsuccessful in progressing these schemes. The Council s innovative new approach to regeneration seeks to overcome these impediments by taking a portfolio approach. This provides the opportunity to combine development of the schemes which have the potential to generate a surplus with those that require a net investment. By taking this approach, the proposed programme is self funding. 6. BACKGROUND The Estate Regeneration Programme builds on the Council s success in delivering the Local Authority Newbuild initiative. In September 2009 the Council achieved Housing Investment Partner status with the HCA (now GLA), enabling the Council to bid for an allocation of Social Housing Grant (SHG) Hackney was allocated a total of 10m SHG to build 115 homes for social rent under Round 1 of the bidding process and a further 6.26 million to build 87 homes for social rent under the Round 2. In both cases Hackney was the most successful borough in London in terms of the amount of HCA funding received and the second most successful Council nationally The new homes funded by Round 1 and Round 2 are now complete and occupied at Bridport (Colville Estate), Ottaway Court (now Dunnock Mews) and Rendlesham House (now Goldcrest Mews), Alexandra National House and Brooklime House and Chervil House on the Bridge House Garages site. Hackney Homes is providing housing management and maintenance services to the new properties Hackney secured further grant funding from the GLA from the National Affordable Homes Programme , amounting to 4.26 million. This funding enabled the delivery of a further 93 homes for social rent and 38 homes for shared ownership within the Estate Regeneration Programme The Council s innovative portfolio approach to its Estate Regeneration Programme provides the opportunity to combine development of the schemes which have the potential to generate a surplus with those that require a net investment. Surpluses from certain schemes are used to crosssubsidise the development of others, thereby ensuring the financial viability of the overall Programme over the 40 year business plan period On current assumptions about values and costs, which have recently been audited by Savills, the Estate Regeneration Programme is self funding and generates a long-term return to the Council through a combination of the following: Residual land value created through the sale of private-for-sale units;

7 Receipt of initial equity tranche sales and the subsequent rental stream from shared ownership homes; Ring-fencing rental receipts at target rents from the new social affordable units; and Mitigating right-to-buy repurchase costs through provision of equityswap arrangements The most recent quarterly report (Q ) indicates that the Estate Regeneration Programme begins to produce a positive cash flow from 2031, with a surplus of 247 million at year 40 (2051). Up to 2031 the Programme requires funding from the HRA to cover the difference between costs and revenue. As rent increases are above inflation, revenue surpluses continue to increase, generating additional surpluses to the HRA Due to the introduction of Self Financing in the HRA and the production of the HRA Business Plan the reporting of the Regeneration finance has a dual baseline position. The position in is reference to the complete Regeneration Programme since its commencement in However, the HRA Business Plan measures borrowing from April 2012 with the Self Financing introduction and debt settlement where the majority of the HRA s debt was repaid. A financial overview of the current financial position and viability of the regeneration Programme in reference to the HRA Business Plan is in exempt appendix 1.

8 6.2 Governance Arrangements

9 6.2.1 The Lead Member for Estate Regeneration will sit at the heart of the Governance Arrangements for the ongoing delivery of the programme Ongoing scrutiny of the Programme will be facilitated through Estate Regeneration 221 Meetings with the Lead Member and Chief Officers, with decisions on strategy taken formally through the Estate Regeneration Board, chaired by the Lead Member Exercise of the Delegated Authority functions set out in the Recommendations of this Report (Section 3) will be subject to Lead Member scrutiny in line with these arrangements. 6.3 Progress Update on the delivery of the Estate Regeneration Programme It was reported to Cabinet in July 2011 that the Estate Regeneration Programme was programmed over eight years to 2019, although it was noted this was subject to market conditions, and could be flexed accordingly. It was also noted the Programme is flexible in allowing for new schemes to be added or schemes to be taken out as appropriate The Estate Regeneration Programme as approved in 2011 covers the following estates/sites: Colville Estate (to be delivered in phases, with phase 1 being Bridport House, completed as part of the Local Authority New Build programme) Kings Crescent Estate (to be delivered in phases) Nightingale Estate (to be delivered in phases) St Leonard s Court Six Estates, which in addition to Alexander National House, Ottaway and Rendlesham, and the Bridge House Garages site, which are now completed, includes: o Bridge House and Marian Court (to be delivered in phases) o Tower Court Frampton Park the Lyttleton House & Frampton Arms sites Aikin Court Great Eastern Buildings site King Edward s Road site The Programme is forecast to deliver 2,485 new build homes (including Local Authority Newbuild Rounds 1 & 2) and 275 refurbished homes. The proposed breakdown of which, subject to planning, aims to provide the following: 1 bed 2 bed 3+ bed Total Social Rent

10 Social Rent (Refurb) Shared Ownership Private for Sale* ,249 Private (Refurb) Total , The programme will replace existing, poor quality homes that are no longer fit for purpose. 21% of the units being replaced are bed-sits and only 2% are family homes with more than 3 bedrooms Upon completion, the programme aims to deliver 1,236 new build affordable homes, comprising 717 homes for social rent and 519 homes for shared ownership. In addition, 195 social rented homes will be refurbished to a 30 year life standard, and 80 leasehold homes will be externally refurbished. Of the affordable homes, 32% will be family-sized with 3 bedrooms or more, while 18% of the family sized homes will have 4 or 5 bedrooms The number of new affordable homes to be delivered under the Programme has increased since the Cabinet report of July This is as a result of the work carried out by the Council s Estate Regeneration team, in partnership with relevant consultants, to maximise the development potential of each site within the financial parameters of the Programme to ensure that as many new affordable homes as possible are delivered by the Council The increased density and number of family sized homes on the regenerated estates will generate additional demand for education and leisure facilities, public realm, energy use, traffic and public transport. This will be assessed through the planning process and addressed through planning obligations alongside on-site provision of facilities such as amenity space, play facilities and measures to reduce carbon footprint across the estates Ensuring high quality design and delivering generous space standards in new homes are important principles of the Programme. The Council will lead on master planning and design of the schemes on each estate/site to establish these standards, and include provisions as part of the procurement process to ensure these standards are delivered by the successful contractor/developer Indicative programme dates for the schemes still to be delivered under the existing Estate Regeneration Programme are shown in section It should be noted, however, that these dates are indicative and liable to change, for two principal reasons. Firstly, estate regeneration is an inherently complex and difficult activity, and there is always potential for unexpected events that may cause delay. Secondly, particularly in relation to those sites that currently contain existing tenants and leaseholders, the process of obtaining vacant possession is similarly challenging, with elements of the process unfortunately outside the Council s control.

11 The Council does however have a robust plan in place to ensure that it can, as far as possible, deal with these challenges. Firstly, the Council has an expert in-house delivery team tasked with delivering the Project Management function of each scheme. In addition, it has the appropriate frameworks and resources in place to add external consultancy advice and expertise where necessary to ensure an effective approach to dealing with the risks and challenges that may arise With regard to the second, the Council now has a robust approach in place in order to secure vacant possession, where necessary, by exercising its CPO Powers. The Council's Cabinet approved the making of Compulsory Purchase Orders (CPOs) on September 30, 2013 with respect to six of the estates in the Programme. The inability to achieve vacant possession of a regeneration site puts both the individual site and overall regeneration programme timetable at risk. Compulsory purchase enables redevelopment take place in accordance with a managed programme of decanting, demolition and construction. Compulsory purchase is however always the Council's last resort, when negotiation and other means of achieving vacant possession have failed, but is considered necessary to minimise the risk to the programme In addition, flexibility is required over programme delivery and project milestones in order to ensure that the Council can effectively manage Programme expenditure within the HRA and in relation to the overall borrowing cap Indicative programme dates for the schemes still to be delivered under the existing ERP are shown below: Vacant/ Design & Practical SCHEME Occupied Planning Completion Approval Bridge House Occupied Planning 4 th quarter 2016 approved Marian Court 2 Phases Occupied Planning approved 2 nd quarter 2020 Tower Court Occupied 4 th quarter 4 th quarter Colville Phase 2 Occupied Planning approved 3 rd quarter 2018 Colville Phase 3 Occupied I st quarter 2 nd quarter Colville Phases 4 - Occupied In phases In phases to 7 from Kings Crescent Vacant 2 nd quarter 1st quarter 2017 Phase Kings Crescent Vacant I st quarter 3 rd quarter 2018

12 Phase Nightingale Estate Vacant 4th quarter 2014 St Leonard s Court Occupied I st quarter 2013 Aikin Court Occupied 4th quarter 2014 Frampton Arms Vacant 3rd quarter 2014 Frampton Park Occupied 3rd quarter Lyttleton 2014 Great Eastern Vacant 1 st quarter Building 2014 King Edward s Road Vacant 3 rd quarter rd quarter nd quarter st quarter st quarter st quarter st quarter nd quarter Please see Appendix 2 for more detailed information on the phasing and programme forecasts for each individual scheme. 6.4 Planning The Programme will deliver a planning compliant mix of homes, in terms of tenure and bedroom mix, across sites within Council ownership. The programme has to date delivered 221 affordable and 42 private homes. The programme: is primarily focussed around existing and future housing demand; genuinely aims to achieve mixed and sustainable communities; is a non-profit making initiative; involves access to substantial land resources not available to any other organisation; will deliver the 50% social rented / shared ownership, and 50% private sale that is rarely achieved in other developments; includes 18 identified and Cabinet approved sites; uses cross-subsidy between the financially profitable locations and financially unviable sites to deliver wider housing benefits; cannot be replicated by private developers or registered providers; provides a significant amount of social rented / shared ownership homes early and balances tenure mix over the programme as a whole to reflect the reduction in Government housing grant available; will be planning policy compliant as a completed programme To provide confidence that the overall programme is financially deliverable a consolidated viability assessment has been carried out. Each of the projects that make up the programme have individual financial assessments. The

13 larger projects which are being delivered in phases have an assessment for each phase. Some projects/phases deliver a healthy financial return; others contribute a substantial loss. The combination of the assessments generates a consolidated financial position As part of the regeneration programme, some sites, when assessed for planning purposes on an individual site basis, may not be individually planning compliant with respect to tenure mix / bedroom mix. However taken overall the programme will deliver a 50/50 tenure mix, meet the bedroom requirements of returning residents, and provide a planning compliant mix of different sized new homes Planning applications for each individual site will be accompanied by a detailed rationale in respect of tenure and mix proposals, in the context of this portfolio approach Any planning permission, if forthcoming, will be subject to a Programme- Wide Unilateral Undertaking between the Planning Authority and the Council as Landowner that requires the Council to deliver the programme as set out as a comprehensive delivery package. The Unilateral Undertaking will, if appropriate, include a restriction on the occupation of a certain percentage of market housing, as a trigger, until all the affordable dwellings have been delivered The table included at Appendix 3 sets out the delivery programme as approved by Cabinet and updated to reflect the current programme status in relation to planning. 6.5 Scheme Updates Six Estates (Ottoway, Rendlesham, Alexander National House, Bridge House & Marian Court, Tower Court) The Ottaway Court and Rendlesham House sites were redeveloped in 2011 as part of the Local Authority New Build (LANB) Round 1 Regeneration Programme. The new development at Ottaway Court containing 30 homes was renamed Dunnock Mews and the one at Rendlesham House containing 43 homes was renamed Goldcrest Mews. In accordance with the requirements of the LANB Programme all homes at Dunnock Mews and Goldcrest Mews are social rented. The Alexandra National House site was redeveloped in 2012/13 as part of Round 2 of the LANB Programme to include 67 social rented homes in five linked blocks Azelea Court, Foxglove Court, Lavender Court, Marigold Court and Orchid Court. It also included 42 open market homes in two additional blocks. At the same time, 40 new homes were built on the site of the former Bridge House Garages. 20 of these are social rented and 20 are shared ownership/shared equity. The shared ownership homes are the first

14 such homes to be both built and managed by any Local Authority in the country. The requirement under the LANB programme for exclusively social rented homes means that a greater proportion of private for sale and shared ownership homes will need to be delivered on the remaining sites within the Estate Regeneration Programme, in order to achieve a policy compliant mix of tenures (as discussed in Section 6.4) Bridge House & Marian Court This scheme will be redeveloped in four phases. As noted above, Phase 1 (the Bridge House Garages site) is complete. Bridge House will be the next phase to be developed, followed by two Phases of Marian Court. It is proposed to continue to decant and demolish the existing structures at Bridge House and Marian Court and replace them with 55 new homes for social rent, 79 for shared ownership and 60 for private for sale The Council approved the making of a Compulsory Purchase Order with respect to Bridge House (Phase 2) and Marian Court and (Phase 3) on 30 September The order was made on Monday, 20 January The procurement of a developer/contractor has commenced and it is proposed to commence an 18 month construction programme in late 2014 subject to vacant possession and CPC approval Tower Court All 57 tenant households have been decanted and contracts have been exchanged with the last remaining leasehold interest to buy it back. It is proposed to demolish the structures as soon as all leasehold interests have been bought back. Current proposals are for the provision of circa 131 new homes, comprising 33 social rent homes, 18 shared ownership and 80 for private sale. Cabinet approved the making of a CPO for Tower Court in September The date for the making of the Order has not yet been set Colville Estate An outline application for the comprehensive regeneration of the Colville Estate was approved in 2011, with an amendment approved in November Proposals include the demolition of existing buildings and the construction of high quality new buildings that will provide accommodation for a sustainable mix of 935 new and replacement homes, shops, small scale business/work space and community facilities. Of the 935 homes the tenure split is 348 social rent, 138 shared ownership and 449 private for sale homes Phase 1, Bridport House, providing 41 homes for social rent, is now complete as part of the Local Authority New Build programme.

15 6.5.7 Cabinet approval was given in July 2013 for the phasing programme. The master plan will now be delivered on a phased basis over a period of approximately 15 years Phase 2 received planning approval in November 2012 to provide 209 new homes replacing 112 existing homes in Lucan House, Felton House, Harvey House, Jordan House, Sillitoe House, Rosemary House and Harvey Street. The majority of the existing homes have decant status and a decant programme is under way. To date the Council has been unable to agree the acquisition of any leasehold properties and Cabinet approved the making of a CPO for part of phase 2 in September The CPO was made on the 13 th January A tender process has commenced for the selection of a developer/contractor for phase 2 and a shortlist of developer/contractors confirmed, however, due to the need to progress a CPO to gain vacant possession of the site the next stage of developer/contractor selection will not commence until there is more certainty on the likely date for vacant possession Architects were appointed to design the phase 3 scheme which will provide 198 private sale homes as well as commercial space. The planning application will be submitted in mid February These homes will replace 44 existing homes in Harwood Court and a redundant car park. The existing homes have decant status and a decant programme is underway. The tender process for a developer will commence in line with the programme for vacant possession To date the Council has been unable to agree the acquisition of any leasehold properties and Cabinet approved the making of a CPO for phase 3 in September The CPO was made on the 13 th January Kings Crescent As set out in previous Cabinet Reports, the regeneration model for Kings Crescent is a combination of refurbishment, retention, demolition and newbuild. The freehold of 275 existing homes, of which 195 are social rented, will be retained by the Council. These homes will be refurbished to a 30 year life standard as part of the regeneration new homes are proposed within a comprehensively designed masterplan.. The masterplan including detailed design for phase 1 received planning consent in November Proposals for phase 1 include the provision of 79 homes for social rent, 36 homes for shared ownership and 158 homes for private sale A tender process has commenced for the selection of a developer/contractor for phase 1 and it is proposed to commence a 27 month construction programme by end of Nightingale Estate

16 Prior to inclusion in the Estate Regeneration Programme, the following outcomes were delivered with Estate Action Funding and Council match funding, under a principal development agreement with Southern Housing Group: Demolition of four tower blocks Refurbishment and retention by the Council of 397 homes to a 30 year life standard Construction by Southern Housing Group of 203 homes for social rent, 89 homes for shared ownership and 12 homes for key workers About 2 hectares of mostly cleared land remain in the Council s ownership on the estate. An initial capacity study estimated that the site has the potential to be developed with approximately 350 new homes A Regeneration Steering Group has been established and resident representatives will be invited to participate in the procurement of lead architects, proposed for early in 2014, whose role will be to develop an agreed masterplan for the estate and prepare a detailed planning application for the redevelopment on the remaining land St Leonard s Court The Planning Sub Committee resolved to grant planning permission for St Leonard s Court on 6 March 2013, subject to conditions and the completion of a satisfactory Section 106 Unilateral Undertaking, for the construction of 72 new high quality mixed tenure homes comprising 18 social rent, 11 shared ownership and 43 private sale homes, replacing 64 existing homes. The re-housing of tenants and leaseholder acquisitions is ongoing. The procurement of a developer/contractor has commenced and it is proposed to commence an 18 month construction programme in late 2014 subject to vacant possession and CPC approval The Council approved the making of a Compulsory Purchase Order with respect to St Leonard's Court on 30 September The Order was made on Monday, 27 January Aikin Court Aikin Court is a small residential block of 6 flats, which has suffered structural damage due to subsidence and is in need of re-development. The proposal is to redevelop the site to provide 3 flats and 4 family houses. Decanting of the existing tenants is underway and an architect is currently being procured.

17 Cabinet approved the making of a CPO for Aikin Court in September The Order was made on 3rd February Frampton Park Arms The vacant site of the former Frampton Park Arms pub was acquired by the Council for redevelopment in There is an opportunity to extend the site beyond the original site boundary to include parts of the adjacent estate land. Architects have been appointed to undertake options appraisals for proposals both for the existing site in isolation and the wider site. A new Resident Steering Group has been formed to help guide the development proposals Lyttelton House Lyttelton House is a block of 6 small bedsits located on the Frampton Park Estate. The individual flats in the block are well below the Decent Homes standard. The development of Lyttelton House is being pursued in conjunction with that of the former Frampton Arms site located on the same estate. Architects have been procured to progress the design development of both schemes jointly. A new Resident Steering Group has been formed to help guide the development proposals The Council approved the making of a Compulsory Purchase Order on September 30, Great Eastern Buildings Design development is ongoing following detailed consultation with planners over initial proposals and it is proposed to submit a planning application in early The proposed design will deliver 18 homes for shared ownership and 3 commercial units Contractor procurement is underway with a forecast start on site of mid and a construction programme of 16 months. Local residents groups have been extensively consulted and are strongly supportive of the proposals King Edward s Road This site includes strips of land owned by Southern Housing Group, which the Council has recently acquired after a prolonged period of negotiation Planning approval for proposals to provide 32 homes (17 Private, 15 social rent) on the site was granted in October The procurement process to appoint a developer / contractor for this site has commenced and construction works are due to commence September 2014 and due for completion in the fourth quarter of 2015.

18 6.6 The Financial Profile of the Estate Regeneration Programme A bespoke development model was created to test the financial viability of schemes within the Estate Regeneration Programme and to model the borrowing requirement within the HRA of the Programme as a whole The baseline assumptions of the financial model together with variance analysis were reported to Cabinet in July In July 2013 the financial model was audited by Savills, acting as external consultants to the Council, and they have provided a comprehensive report. Savills find that the model is functioning correctly and includes appropriate assumptions. In addition, Savills provided current market estimates of outturn costs and values for schemes within the Programme, which have been incorporated into the financial model The Estate Regeneration Programme financial model is a live model and is continually updated. In addition to the information provided by Savills, cost estimates included in the model are updated when more accurate information is provided on a scheme by scheme basis by the Council s consultants. The consolidation of the financial model therefore provides both a current assessment of the financial viability of individual schemes within the Estate Regeneration Programme and the Estate Regeneration Programme as a whole One of the recommendations of the Savills audit was that the Council move to the utilisation of an industry-standard financial development management and appraisal tool. This is currently being progressed The consolidated financial position for the Estate Regeneration Programme is reported quarterly to the Cabinet Member for Hackney Homes and Regeneration Estates, the Corporate Director of Housing, the Assistant Director of Finance and the Hackney Homes Director of Finance and Resources A financial overview and viability of the current position of the Regeneration Programme is in exempt appendix 1. This also provides a comparison of the changes to the assumptions since July 2011 and how the model and financial assumptions have developed. 6.7 Policy Context In July 2009 Cabinet approved a new approach to the regeneration of its housing estates and in July 2011 Cabinet approved the Estate Regeneration Programme 2011/2019. This report provides an update on the delivery of the Estate Regeneration Programme.

19 6.7.2 Promoting mixed communities in well-designed neighbourhoods, where people can access high quality affordable homes, is one of the six key priorities of Hackney s Sustainable Community Strategy The Estate Regeneration Programme makes a significant contribution to meeting and delivering on this key Mayor s Priority. 6.8 Equality Impact Assessment The new homes for social rent delivered by the Estate Regeneration Programme will initially be used to re-house residents that were decanted to enable demolition of the existing homes on the estates within the Programme. Surplus rented homes will be made available to those in housing need through Hackney s Choice Based Lettings system Leaseholders and Freeholders affected by the Council s Estate Regeneration Programme are offered a range of rehousing options to assist them, as set out in the Leaseholder and Freeholder Options Document approved by Cabinet in April Leaseholders and Freeholders can make their own arrangements when a valuation has been agreed for their existing property, or alternatively can take up the option of moving to a new home on the estate either through a leasehold swap, leasehold swap with shared equity, or shared ownership. For Leaseholders and Freeholders who are in financial difficulties and in need of support and assistance, the Council has set out ways in which these options can be further tailored to meet individual circumstances. Overall the Council s intention is to ensure that Leaseholders and Freeholders are not disadvantaged by the regeneration process and have every opportunity to remain living as part of the local community A full Equalities Impact Assessment is being prepared for the Estate Regeneration Programme as a whole. This will identify any wider equalities issues that may arise as a result of the delivery of the Programme. The document is being prepared with input from the Policy Team in the Chief Executive s Directorate, using data and analysis from the 2011 Census in relation to the Council s estates. As part of the preparation of the EqIA a workshop has been held to help identify any initial potential equalities issues and discuss mitigations measures, where necessary and/or appropriate. This work will feed into the EqIA In addition to the programme wide EqIA, project specific Equalities Impact Assessments are prepared if there are particular equalities issues associated with a particular project. For example, a specific EqIA has been prepared for the Tower Court project. 6.9 Sustainability The schemes included in the Estate Regeneration Programme will provide new high quality homes for social rent, family sized homes which support the need for larger family sized accommodation in Hackney, and shared ownership homes which support the need for intermediate housing. All

20 projects within the Programme will contribute to the creation of new mixed and socially sustainable communities across the borough All homes within the Programme will be built to high environmental standards. Every scheme will achieve Level 4 of the Code for Sustainable Homes as a minimum. This means that all new homes will have significantly reduced carbon dioxide emissions and water usage compared to homes built to current Building Regulations. In addition, the new developments will be built so that the building fabric is as thermally efficient as possible to reduce energy consumption and address fuel poverty for residents. A range of technologies and systems such as water recycling systems (grey and black), SUDS, solar energy, biomass, and CHP are being explored and/or implemented to help achieve low carbon living across the new developments. Many of the Estate Regeneration schemes are car free developments. Secure, sheltered and adequately lit cycle storage with convenient access to the street is provided on every scheme in line with the requirements for cycle storage set out in the London Housing Design Guide The Estate Regeneration team are committed to building new homes that are adaptable to the changing needs of occupiers over time and that will enable people to live independently in their homes for longer. All new homes built as part of the Programme therefore comply with all 16 Lifetime Homes criteria. In addition, 10% of all new homes are designed to be wheelchair accessible or easily adaptable for residents who are wheelchair users in accordance with both the GLA s Best Practice Guidance (Wheelchair Accessible Housing) and the London Housing Design Guide Standards for wheelchair accessible housing Consultations Residents of all estates and properties included in the Regeneration Programme have been and will continue to be consulted and involved in every stage of redevelopment and regeneration of their estates or properties. The Estate Regeneration Programme is a fundamentally resident-led initiative Risk Assessment As part of the financial modelling of the Programme, the model s sensitivity to changes in interest rates, inflation, movements in the housing market, build costs and management costs has been measured. The main risk is that as a result of changes in one or more of these factors the projected residual land values, after provision of affordable housing on each individual site, are not sufficient to ensure the viability of the overall Programme. This risk can be managed throughout the Programme as each scheme is progressed through the procurement process: where outturn values and/or costs are at levels inconsistent with Programme assumptions, the Council has a number of options, including:

21 i) Value engineering to reduce costs ii) Redesign of proposals to maximise value iii) Amend the balance between private for sale and affordable housing iv) Delay delivery until market conditions improve viability v) Decide not to proceed The cost and income assumptions for each individual scheme are tested, checked and updated upon receipt of each tender and cost report. Market changes and tender returns are continually monitored to ensure that any impact on the viability of the Programme is reported and, where necessary, mitigated The financial model for each individual scheme is fed into the consolidated model to test and monitor the overall viability of the Programme. Details of the financial and Programme monitoring and governance arrangements are described in Section 6.2, with detailed information on the current financial model in exempt appendix To ensure that potential risks relating to each project within the Programme are identified, assessed, monitored, reported and a risk register is maintained during the life of each project. This is monitored and updated regularly to reflect the progress the risk owner is making to manage the risks, and identify new risks. A Programme-wide risk register, for reporting as part of the Quarterly Review Process, is also being prepared The Estate Regeneration Programme was recently subject to an internal audit, which identified no High Priority issues and gave a moderate level of assurance. 7. COMMENTS OF THE CORPORATE DIRECTOR OF FINANCE AND RESOURCES 7.1 The financial position of the Estate Regeneration Programme is live, with financial information being challenged and updated at each stage of the development process, for each of the schemes included in the Programme. The base line financial position, as reported to Cabinet in July 2011, has changed as a result of movements in the housing and construction markets and a greater understanding of the services, and their costs, required to support the development of a scheme. 7.2 Exempt Appendix 1 gives more financial detail of the changes in the Programme s finances since July 2011, and also puts the financial position of the Programme in the context of the HRA Business Plan, which has reset the baseline position with the introduction of Self Financing in April The Programme continues to show viability with repayment of debt in 2031 followed by a continuing positive cash flow.

22 7.3 Each of the schemes in the Programme is subject to detailed financial evaluation, which is consolidated into the Programme s financial reporting. The Programme s finances are assessed on a portfolio approach, where the schemes forecast to make a loss are subsidised by those making a surplus. However, it is the combination of the schemes and the timing of the developments that produces a viable regeneration programme. 7.4 The quarterly project reviews allow each scheme to be reviewed and the financial impact of scheme changes to be assessed and challenged, so that the Programme maintains its viability. As a result of delays on some schemes from the Compulsory Purchase Order (CPO) process to achieve vacant possession of the sites, there is a peak borrowing requirement of 70m in 2017, which reduces to 30m by Further changes and the programming of schemes will be managed so that this peak is reduced. If there remains to be a borrowing requirement in excess of the HRA Business Plan, reserves can be used to manage the peak borrowing in the short term. 7.5 The Programme and its schemes will continue to be monitored, challenged and assessed for financial viability, with the results of up coming construction tenders critical to support the assumptions in the financial model and give confidence to the Programme s viability. 7.6 With the Regeneration Programme s finances being a significant part of the HRA Business Plan and the HRA borrowing requirement, the Programme s finances will continue to be updated and reported on an annual basis as part of the review of the HRA Business Plan and Medium Term Financial Planning of the HRA. 7.7 When considering this report it is also important to recognise that the estates programme is not the sole aspect of the Councils Capital Programme and a number of capital investment decisions will be required in relation to the Schools estate and the leisure estate over the coming years. It is likely that these will at different stages require some degree of finance via borrowing. It is for this reason that it is important that the Council does not simply look at Capital Programmes on a portfolio basis but has regard to the overall corporate programme. As resources in relation to capital become increasingly constrained with numerous competing priorities it will be important that all capital investment decisions are consistent with priorities. This report reaffirms the requirement that all capital investment decisions ultimately have to be authorised by the Corporate Director of Finance and Resources in advance of consideration by members. 8. COMMENTS OF THE CORPORATE DIRECTOR OF LEGAL, HR AND REGULATORY SERVICES 8.1 The Regeneration Programme and the recommendations detailed in this Report are actions that the Council can undertake under the Localism Act 2011, Section 1 which gives the Council a general power of competence.

23 8.2 The buy back of leaseholder interests as detailed at recommendation 3.6 is permitted under the Local Government Act 1972, Section 120. The section enables the Council to acquire by agreement (here with leaseholders and other owners) any land for the purpose of any of the Council s functions, or the benefit, improvement or development of its area. The compulsory acquisition of any land must follow a separate process. Paragraph notes that Cabinet approval was granted for the making of CPOs for six of the Estates in the Programme. 8.3 The disposal of any land associated with the Regeneration Programme must be for the best consideration reasonably obtainable and in accordance with the Housing Act 1985, Section 32, 34 and the General Housing Consent The Regeneration Programme entails the demolition of various blocks. To ensure that the regeneration programme is implemented taking into account best value principles, tenants ability to exercise the right to buy (RTB) should be taken into account. The Council can serve an initial demolition notice to suspend the right for the statutory period. A final demolition notice, specifying the demolition date, prevents a RTB claim arising. The Housing Act 1985, Sections 138A, B, C and Schedules 5 & 5A of the Act prescribes the requirements and compensation provisions. 8.5 The Council is obliged to discharge the grant conditions in relation to the awards noted at paragraph 6 of this Report and/or seek the authority of the GLA and DCLG as appropriate in relation to any awards or grants awarded in the future. 8.6 Planning legal implications Planning applications must generally be compliant with prevailing local and national planning policies together with material considerations in order to be granted consent. Where individual development sites are not fully policy compliant, justifications will be considered by Planning Services on a robust basis. 9. COMMENTS OF THE INTERIM ASSISTANT DIRECTOR OF STRATEGIC PROPERTY SERVICES 9.1 Strategic Property Services note the contents of this report and that disposals of sites will be the subject of future Cabinet authorities. The Assistant Director requests that he be kept informed on the programme to ensure that adequate resources are made available to support it in the future.