Expensive new HQ and luxury apartments for rich elderly people or good-quality social housing? Tough choice for EDDC

Sidmouth resident Mike Temple has the lead letter in today’s Guardian on social housing. Our council is MUCH more interested in moving into its very expensive new offices (£10 million and counting) than building, or encouraging the building of, social and truly affordable housing. As shown when it agreed to sell its Knowle site to PegasusLife for super-luxury housing for only rich, elderly people, with PegasusLife attempting to exploit a loophole via a planning appeal to avoid any on-site or off-site affordable properties.

“The fire at Grenfell Tower has highlighted a number of issues relating to government housing policy in recent years, not only the failure to apply proper safety measures but also its whole approach to social housing.

The 2012 national planning policy framework, often described as a “developers’ charter”, has given precedence to expensive private development while discouraging social housing. The result is that through land-banking, slow build-out rates and using the housing market as an investment, house prices have risen way beyond the reach of most average-wage earners. At the same time, an increasing proportion of the incomes of the lower paid is spent on rented accommodation, which is often of poor quality.

Among the 72 Conservative MP landlords who voted against the 2016 housing bill to make “rented properties fit for human habitation” were the communities secretary, Sajid Javid, housing minister Brandon Lewis (who has also said installing fire-sprinklers could discourage house-building), fire minister Nick Hurd, and David Cameron.

Official Statistics on social housing show that since 2010 the number of government-funded houses for social rent has plummeted by 97%.

Gavin Barwell, until recently housing minister and author of a white paper that offered proposals to ease development while doing little to promote social housing, has – like the government he serves – failed to act on the recommendations in the report on the fire at Lakanal House in 2009. Like previous Conservative minsters he preferred light-touch regulation so that warnings have been ignored at national and local government level.

The result is a system that has failed to protect our citizens – cost-cutting and reckless decisions were made with little fear of anyone being held responsible.
Mike Temple
Sidmouth, Devon”

https://www.theguardian.com/uk-news/2017/jun/25/grenfell-tower-tragedy-shows-social-housing-system-has-failed-uk-citizens

This is no time for council vanity projects

“Public service leaders have expressed dismay over the Queen’s Speech failure to address public sector issues including pay, social care and local government funding.

Today’s address laid out prime minster Theresa May’s legislative agenda for the next parliament but is far removed from the Conservative manifesto pledges she hoped to introduce.

She has been unable to push through all of her policy plans after she failed to win a majority in the bruising general election vote. The government’s weakness has been hampered further by the inability to finalise a confidence and supply arrangement with the Democratic Unionist Party.

There was no mention of May’s proposal to change the way social care was funded, pledges on grammar schools, retention of businesses rates for local councils or removal of the triple lock on state pensions.

CIPFA chief executive Rob Whiteman said “pressing issues” were missing from the speech, highlighting social care, devolution and the NHS.

He added: “Without urgent action, both health and social care budgets will be stretched to breaking point. More realistic medium and long term financial planning, and investment in prevention, is needed to stabilise the financial position of the NHS.”

This view was shared by Jo Miller, chief executive of the Society of Local Authority Chief Executives, who said: “I am disappointed that key legislation – absolutely fundamental to ensuring the future sustainability of local government – has now been dropped.

“Local government urgently needs clarity around our future funding – at present we simply face a cliff edge from 2020. This must urgently be resolved.”

Claire Kober, chair of London Councils, also expressed disappointment at the lack of detail on council funding, adding she was “deeply concerned” by the absence of discussion regarding 100% business rates retention.

Garry Graham, deputy general secretary of the civil service Prospect union, said this “was a missed opportunity” for the government to listen to the public over the election result.

“This was an ideal time for ministers to acknowledge that the 1% pay cap is no longer working and that public servants deserve a pay rise,” he said, adding that hard-pressed public servants would struggle to deliver a good Brexit because of bad pay and increasing world loads.

Alison Michalska, president of the Association of Directors of Children’s Services, welcomed the measures on mental health and domestic abuse but criticised the government for not tackling funding concerns for schools and local authorities.

She said: “The government must recognise that there is not enough money in the education system rather than focusing on the way in which existing funding is distributed to schools.”

She said it was “a matter of urgency” that great clarity was provided on local government funding as children’s services face funding shortages.

Dave Prentis, Unison general secretary, claimed the government was ignoring the nation’s concerns while “ministers are living in a parallel universe”.

He said: “People have had enough of austerity, and want proper investment in schools, hospitals, police forces and local services. Yet there was none of this in the Queen’s Speech.

“Nor was there anything about pay. Nurses, teaching assistants, council workers, police support staff and other public sector employees should be rewarded for their hard work with a long overdue wage rise.”

http://www.publicfinance.co.uk/news/2017/06/public-service-chiefs-slam-lack-policy-action-queens-speech

“Developer submits appeal to £7.5m Knowle plan refusals”

PegasusLife submitted its challenge to East Devon District Council’s (EDDC) ruling to the Planning Inspectorate on Wednesday before today’s deadline.

Councillors defied officer advice to refuse the scheme in December – arguing it would overdevelop Knowle and represent a departure from the site’s 50-home allocation in the Local Plan. They also had concerns about the lack of ‘affordable’ housing provision.

An EDDC spokeswoman confirmed that PegasusLife has lodged an appeal with the Planning Inspectorate, but said it can take weeks for the process to begin.

The developer has agreed to pay EDDC £7.505million for the site of its current HQ if the application is approved. The proceeds would go towards the authority’s £10million relocation to Exmouth and Honiton, but councillors have since voted to press ahead with the project before a buyer is guaranteed.

This means construction work, funded by a loan, will begin at Heathpark in Honiton before Knowle is sold. Work on Exmouth Town Hall is already under way.”

http://www.sidmouthherald.co.uk/news/developer-submits-appeal-to-7-5m-knowle-plan-refusals-1-5055742

Baby boomers spurning luxury retirement by the coast in favour of cities

“… Baby boomers are not moving to the country or coast, but staying close to their network of family and friends, shops and the theatre. The urban model is very important and fast-growing …”

Sunday Telegraph Business News (firewall)

Vanity projects, speculation and unwise development could lead councils to bankruptcy

“Desperate councils risk being plunged into an Icelandic-style financial crisis after investing £1.5bn in the commercial property market, according to Sir Vince Cable, former business secretary.

Heavy cuts in central government funding have left the authorities having to consider increasingly exotic solutions to ease their financial constraints.

Between 2010 and 2015, there was a 37% cut in real terms in central government funding to local authorities. One option – popular in the last couple of years – has been to borrow from the Treasury-run Public Works Loan Board (PWLB) at very low rates of interest and then use the money to invest in commercial property ventures that offer returns of as much as 8%.

But there are fears that the strategy is creating a bubble that could bankrupt some local authorities. “This is not a wise and sensible thing to do,” said Cable, who was business secretary in the Tory-Lib Dem coalition and is standing as Lib Dem candidate in his former seat in Twickenham, south-west London.

“Local authorities have a long and inglorious history of gambling in financial and property markets,” he said. In the 1980s, Hammersmith and Fulham council was one of several local authorities that got into financial difficulties after becoming involved in complex bets on interest rates.

Cable said he could understand why councils were considering such strategies. “When they are massively constrained in what they can do around council tax – and indeed commercial rates – they are trying to prevent even deeper and more damaging cuts by taking these unorthodox measures. In some cases they may succeed, but there is a very high risk of bankrupting their local authorities. It does suggest a certain degree of desperation.”

Local government sources have defended the councils, saying that much of the money is invested in helping regenerate their local areas. But not in all cases. “What is so bizarre, so shocking, is that they are investing in property in other parts of the country,” Cable said. “It makes no sense whatsoever.”

Matthew Oakeshott, an investment manager at Olim Property, said councils were “playing a gigantic game of Monopoly with taxpayers’ cash”.

But authorities badly need returns at a time when interest rates remain low and demands on councils are rising. It is estimated that, by 2020, England’s councils will face a near £6bn funding gap between what they need to spend and what they receive. Most of this shortfall is due to rising costs linked to social care.

Two years ago, the Local Government Association warned that a dozen councils were on the brink of financial failure. Since then, the councils have had to be inventive in seeking to balance their books. Several – such as Eastleigh, Kettering and Maidstone – have successfully exploited loans from the PWLB to invest in commercial property. This, in turn, has attracted interest from other councils.

But such copycat behaviour is a concern, according to Cable, who drew comparisons with 2008, when many councils were left exposed after depositing millions of pounds in high-interest rate accounts offered by Icelandic banks, which then went bust.

“It did very serious damage to some councils,” Cable said. “It should have been a warning to all corporate treasurers in local government to not go anywhere near this.”

The extent to which councils are exposed to a downturn in the commercial property sector is unclear.

Last month, Lord Myners tabled a parliamentary question asking the government to confirm how much money the PWLB had lent to local authorities to invest in commercial real estate between 2011 and 2016, and what it was doing to monitor the risk from such investments.

Responding for the government, Baroness Neville-Rolfe said it was up to the councils to assess risk. She said: “The Public Works Loan Board is not required to collect information on the specific reasons that local authorities borrow from it, and so it does not hold information about the amount of lending that has been used for acquisition of commercial real estate.”

However, estate agent Savills told the Financial Times that councils had invested £1.2bn in commercial property last year and a further £221m so far this year.

An economic downturn could see commercial property yields drop, leaving councils exposed, say analysts. This fear has led some councils to resist investing, but others have developed considerable appetites. The Financial Times reported that Spelthorne borough council – which has assets of just £88m – bought a business park in Sunbury-on-Thames for £360m, having taken out 50 separate loans from the PWLB.

Local government sources played down fears of a bubble, pointing out that every council investment was made on a case-by-case basis and had to meet strict borrowing criteria.

Under the Prudential Code, councils must show that their investment plans are affordable, prudent and sustainable.

A Treasury spokesman said: “Responsibility for local authority spending and borrowing decisions lies with locally elected councillors, who are democratically accountable to their electorates.”

https://www.theguardian.com/society/2017/apr/29/vince-cable-cash-strapped-councils-at-risk-credit-bubble

Some councils on verge of bankruptcy ?

And still our council wants £10 million from us for a new HQ …

” … Nothing can disguise the real crisis in local government. With councils facing a £5.8bn funding gap by 2020 – when, ominously, they are all supposed to move towards self-financing, without direct government grants – the Local Government Association has warned that even if councils abandoned road repairs, stopped maintaining parks and open spaces, closed all libraries, museums and children’s centres, and stopped funding bus services, they might still not plug the hole.

Recently, the National Audit Office warned that the government was not on track to make councils self-sufficient, with the “financial sustainability” of English local government at risk through poor (central) planning. With councils due to retain income generated from all business rates – currently raised locally and redistributed nationally – there’s little forthcoming from ministers on how the councils with low tax bases can be expected to survive. …”

https://www.theguardian.com/society/2017/apr/25/metro-mayors-local-government-cuts

Knowle: magic bean or white elephant?

The big question is ‘what is the chance of Pegasus winning an appeal?’

Probably not that great:

The application is for more than a hundred units when the Local Plan allocation is for fifty.

The application does not include any affordable.

The application is opposed by Sidmouth Town Council and a large and vociferous group of local residents.

Most importantly, the Planning Consultants at the time of the provisional sale to Pegasus foresaw that the application would be refused. So did the Planning Team, who miraculously changed their minds when the application came forward. Both EDDC and Pegasus were warned in advance that the Development Management Committee could not approve the application. Remember: this information came into the public domain as a result of the successful Freedom of Information request.

If the application goes to inquiry, as seems likely, then we, and EDDC, will have to wait for 24 months with little confidence that the appeal will be successful.

Then comes the situation of ‘what happens next?’ Well, we know the answer because Grant Thornton have helpfully predicted four scenarios, all of which will lead to receipts well below the price currently agreed with Pegasus.

The whole process would have to begin again, against a backdrop of a planning appeal refusal. New tender, new negotiation, new design, new application, and perhaps even another refusal.

Eventually an application will succeed, and a sale result, but we could easily be four years down the road, and at a substantially reduced price in possibly a very different property market.