MD2042 Hounslow Town Centre Housing Zone

Type of decision: 
Mayoral decision
Code: 
MD2042
Date signed: 
27 October 2016
Decision by: 
Sadiq Khan, Mayor of London

Executive summary

Increase the funding allocation for Hounslow Town Centre Housing Zone from £18.5 million to £21.2125 million to support an increase in the number of affordable homes to be provided by Network Homes Limited at the Hounslow Town School site to 142 homes (equivalent to 50%). This funding will only be contractually committed subject to the outcome of due diligence.

 

Decision

That the Mayor 

-    APPROVES the indicative allocation of a further £2.7125 million being made available for the purposes of unlocking or accelerating the delivery of housing within the Hounslow Town Centre Housing Zone in addition to the indicative allocation of £18.5 million of funding made available in respect of the Hounslow Town Centre Housing Zone under MD1457, noting that such funding shall only be contractually committed subject to the satisfactory outcome of legal and financial due diligence;

-    NOTES that this takes the overall indicative funding allocation for the Hounslow Town Centre Housing Zone to £21.2125 million;

-    DELEGATES authority to the Executive Director of Housing and Land and the Executive Director of Resources, in consultation with the Deputy Mayor for Housing & Residential Development, to determine that legal and financial due diligence has been satisfactorily undertaken and that it is appropriate for the Greater London Authority to contractually commit Housing Zone grant funding of up to £6.2125 million (which includes the additional £2.7125 million indicatively allocated under this Mayoral Decision) to the intervention known as the Hounslow Town School site within the Hounslow Town Centre Housing Zone; and

-    ADDITIONALLY DELEGATES authority to the Executive Director of Housing and Land to approve any amendments required to the Overarching Borough Agreement between the London Borough of Hounslow and the Greater London Authority dated 6 November 2015 he considers necessary or expedient as a consequence of this Mayoral Decision.
 

Part 1: Non-confidential facts and advice

Introduction and background

1.1.    Hounslow Town Centre was designated a Housing Zone by Mayoral Decision 1457, which approved an indicative allocation of £18.5m (subject to the outcome of legal and financial due diligence) to unlock housing and deliver regenerative benefit to the area. The Borough’s proposal was for the GLA to invest £3.5m at the Hounslow Town School site to enable the delivery of 200 homes (including 80 affordable homes) alongside a new primary school and a further £15m at Lampton Road to deliver 750 homes on the site of the civic centre which will be relocated to Bath Road. The latter was approved by DD2004 and is now in contract (with an obligation to deliver 919 homes, rather than the 750 homes originally proposed). In accordance with Borough requirements, both schemes were expected to deliver 40% affordable housing. In MD 1547, total homes proposed to be built in the Hounslow Town Centre Housing Zone were 3,478. This is expected to increase to 3,731 as a result of 169 additional homes planned for Lampton Road and 84 for the Hounslow Town School site. 

1.2.    London Borough of Hounslow retains oversight of delivery across the Housing Zone through governance arrangements set out in the Overarching Borough Agreement (OBA) with the GLA, dated 6 November 2015.

1.3.    Following designation of the Housing Zone, the Borough used the GLA London Development Panel to invite tenders for the provision of a new primary school and homes on the Hounslow Town School site. Countryside Properties Plc was selected as the preferred tenderer with Network Homes Limited (Network) identified as their Registered Provider to be the landlord of the affordable homes.

1.4.    On 6th October 2016, the Local Planning Authority resolved to grant permission for a new primary school and 284 homes at School Road, up from the initial 200 units planned. Following further negotiation with Countryside Properties Plc and Network, it has been agreed that the proportion of affordable homes to be provided on the Hounslow Town School site will be increased to 50% (142 homes) which requires an additional funding allocation of £2.7125m. The overall average unit cost has not increased and remains in line with MD1457 (£43,750 per unit/home).

1.5.    Subject to the outcome of this Mayoral Decision and the satisfactory outcome of legal and financial due diligence, a Director’s Decision will be prepared to contractually commit funding of up to £6.2125m (the initial £3.5m plus the additional £2.7125m)to support the delivery of 142 affordable homes at the Hounslow Town School site.

1.6.    The total grant funding budget made available to support Housing Zones in London is £400m (see MD1366 and MD1597). This Mayoral Decision will increase the amount of grant funding indicatively allocated to Housing Zones to £677.23m, thereby slightly increasing the level of over-programming. Over-programming of the indicative funding allocation introduces a competitive element to the contracting process, helping to accelerate the pace of delivery. The additional funding allocation for the Hounslow Town School site, makes clear the Mayor’s intentions to increase the level of affordable housing provided within Housing Zones. It is expected that the level of over-programming will be reduced through the financial and legal due diligence process, therefore the marginal increase in over-programming relating to this decision is unlikely to have a significant impact on the overall level of grant funding indicatively allocated to Housing Zones and the over-programming risk. 
 

Objectives and expected outcomes

2.1    Housing Zone funding for the Hounslow Town School site intervention will unlock housing by facilitating a scheme which makes more efficient use of the land. It will assist the financial viability of the overall development, which includes demolition of the existing school, re-providing a larger school on the western part of the site and enabling surplus land to be released for housing. If the existing school were not demolished it is estimated that site capacity would be reduced to approximately 105 units. The funding will also enable a scheme which carries a significant infrastructure cost to be delivered with a policy compliant level of affordable housing. The additional £2.7125m will increase the percentage of affordable housing to be provided on the Hounslow Town School site from 40% to 50%, making an important contribution to meeting the Mayor’s strategic target for 50% affordable homes. It will also help de-risk the scheme and mitigate delays resulting from softening market conditions.

 

Equality comments

3.1.    Hounslow Town Centre Housing Zone is aimed at implementing the Mayor’s policies set out in the Mayor’s London Housing Strategy. In January 2014 the GLA published an integrated impact assessment (“IIA”), including an equalities impact assessment, of that strategy. The policies related to increasing housing supply, to which the Hounslow Town School scheme will contribute, were covered by the Integrated Impact Assessment (IIA) for the Further Alterations to the London Plan. 
3.2.    The IIA concluded that updating housing projections and targets would support the delivery of sufficient housing and may help stabilise housing prices, supporting equal opportunities throughout communities. Furthermore, the provision of housing, including maximising the delivery of affordable housing would be in line with other policies of the Plan (e.g. Policy 3.5), ensuring that the needs of different groups are taken into account in the housing design.
3.3.    The delivery of new and additional homes will help to implement Objectives 1, 2, 3 and 4 of the Mayor’s Equalities Framework “Equal Life Chances for All” (June 2014) through the creation of new homes, housing products and well-designed housing schemes.
3.4.    The designation of a Housing Zone within an area is designed to identify a site or sites as an area for housing growth and delivery within London, often partnered with a series of funding streams and non-financial assistance to deliver these new homes, and therefore this decision will facilitate these goals and ultimately ensure that the needs of different groups are taken into account in the design and development of housing.
3.5.    In order to access this funding Network will be required to enter into an agreement with the GLA to deliver the intervention. With regard to project delivery the agreement places the following obligations on Network in respect of the Equality Act 2010:
•    Network shall comply in all material respects with all relevant Legislation relating to health and safety, equality and relevant employment matters. 

•    Network has, and is in full compliance with, a policy covering equal opportunities designed to ensure that discrimination prohibited by the Equality Act 2010 is avoided at all times and will provide a copy of that policy and evidence of the actual implementation of that policy upon request by GLA.  

 

Other considerations

4.1.    Subject to the satisfactory completion of due diligence, payment of grant in respect of the Hounslow Town School site will be subject to conditions set out in an Affordable Housing Grant Agreement between the GLA and Network Homes Limited together with requirements set out in the GLA’s Capital Funding Guide. The scheme will be subject to quarterly monitoring to ensure agreed delivery milestones are achieved. In the event of serious default the GLA shall be entitled to terminate the Agreement and recover grant paid. 
4.2.    The purpose of the Housing Zones Programme is to increase housing supply by accelerating and unlocking development to deliver 75,000 homes by 2026. The School Road project will contribute towards this and support the aim to deliver 42,000 homes per annum prescribed by the Further Alterations to the London Plan March 2015. 
4.3.    Officers have worked very closely with the London Boroughs in the development of the Housing Zone proposals to look at how the GLA, the Boroughs and their partners can work together to deliver homes which would not otherwise be built in the next 10 years. They have also consulted and worked with the other parties to the relevant interventions (in this case Network Homes Limited) and DCLG. It is not considered necessary or appropriate to consult any other persons or bodies specified in section 32(2) of the Greater London Authority Act 1999 for the purposes of this Mayoral Decision. 
 

Financial comments

5.1    £18.5m was allocated to Hounslow Housing Zone as part of MD1457, which included £3.5m towards the delivery of 200 units (of which 80 units, equivalent to 40% would be affordable units) on the Hounslow Town School site. 

5.2    With permission for a greater number of homes (284 in total) and the additional grant proposed by the MD (£2.7125m), the total number of affordable homes will rise to 142, which represents 50% of the total. 

5.3    The grant rate for the additional units beyond the original 80 equals £43,750 per units (£2.7125m for an additional 62units), which is considered reasonable. 

5.4    As of the 12th October 2016, the current spending on the Housing Zones grant will be £80,525,000, of the original £200,000,000 budget, with a remaining £119,475,000.

5.5    The drawdown of funds for this project would be 100% at start on site.
 

Planned delivery approach and next steps

Activity

Timeline

Completion of contract

November 2016

Start on Site

May 2017

Practical Completion

March 2021