Addressing challenges around housing delivery

How to set up a local housing company

Many local authorities are setting up housing development companies – are they destined for success?

06/04/2017

Lambert Smith Hampton (LSH) helps councils address challenges around housing delivery.

Councils are increasingly looking to setup their own housing companies in order to address challenges around housing supply. At a recent workshop, LSH’s Steve Armitage asked public sector attendees to consider the operating requirements and challenges for housing companies to be successful and operate within their powers of setup.

Multi-disciplinary resourcing

A recurring theme was the multi-disciplinary resourcing required at project management and technical level, fundamental to the delivery of housing directly by the company.

Several attendees commented that committing internal resources to the operation of the company would be difficult to justify until the company has a track record. The alternative option of internal staff wearing a housing company and a council hat can present tension and conflict. Accessing required technical services from within the council was feasible, but these resources are already under pressure and could not provide services at scale without compromising other responsibilities.

A more realistic and effective option was the ‘facilitating model’. In this structure, the housing company would engage a framework of project managers and technical specialists to be engaged on a project by project basis. Reporting into the board would then enable a more flexible structure, responsive to workload requirements.

Sites would remain in the ownership of the council with delivery options set out within the detailed business case, these options being – direct delivery, housing company delivery or sale with development agreement.

Political sensitivity

Political sensitivity is seen as a challenge. The company should operate independently, however when council officers are seconded into the company it may be difficult for them to act independently and in some cases members are on the board.

Cross party approval is seen as some mitigation, but nonetheless this may not insulate the company from political influence.

Non executive representation was seen as further protection.

Financial planning

Board members need to see rigorous financial planning at outline and detailed business case stages if they are to manage risk effectively. Financial models must be based on evidenced based opinions and justified by market testing. The detailed business case must be based on in depth legal and site due diligence to enable risk transfer to the private sector.

Governance

Governance processes within the parent authority will follow shareholder authority type approvals of the strategic plan (embodied in the company articles) and annual financial plans based on the pipeline.

Board and shareholder approvals must be informed and operate at pace. A development selection and key financial and housing outputs matrix is suggested as an effective management tool.

Conclusion

Addressing the housing delivery challenge is fundamental for all councils across the UK. Consideration of how best to address it however, particularly with all the elements that need to be considered can be difficult. A clear understanding of all required from each party and a commitment to delivering the aims of the company are fundamental when it comes to the creation of housing vehicles.

This workshop formed part of the event, Developing Councils – How to set up a local housing company, organised by 3Fox International and hosted at Lambert Smith Hampton’s central London offices.

 
For further information relating to this news article contact 

Contact us now

Stephen Armitage
Director - Real Estate Advisory

020 7198 2135

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