Agenda item

Iain Watters, Financial Planning Manager, introduced the report. Members heard that Hillingdon First Limited was the Council’s wholly owned subsidiary housing development company. The company had been established in April 2018 to deliver high quality housing and generate a sustainable revenue stream for the Council. The Council was the sole shareholder and Cabinet Members on the Shareholder Committee oversaw operations. Key company decisions such as the commencement of projects and approval of the annual Business Plan were presented to the Shareholder Committee, alongside updates on performance and matters arising as necessary. Hillingdon First Ltd employed no staff directly and operated by buying in relevant support services as required – mainly from the Council.

The Committee was informed that the first project undertaken by Hillingdon First Ltd was underway – the construction for open market sale of 31 flats on the site adjacent to South Ruislip Library on Victoria Road, The project was nearing completion with practical completion having been achieved in January 2021 and reservations in place for 25 of the 31 units. The units were retailing at a higher price than expected. A pre-tax profit of circa £1m was expected.

Members heard that a second smaller development consisting of five houses at St Helen’s Close, Cowley had been worked up within the business plan and a design and build contractor was currently being appointed. The scheme would launch by spring 2022. Surplus Council-owned sites previously used for Council services but no longer required were currently being used for development – 3^rd party land was not being purchased. The Committee was advised that, to date, Hillingdon First Ltd had remained focused on safe in-borough residential development schemes as there was a lower level of risk. The Council was not materially reliant on this business to deliver core services – Hillingdon First Ltd was not the largest contributor to Council finances.

Members requested clarification as to the objectives of Hillingdon First. It was confirmed that the aim was to deliver high quality housing for Hillingdon residents and to generate a return to the Council.

Given the lack of housing stock and high rents in the Borough, Members enquired whether social housing would be included in future schemes. The Committee was informed that the South Ruislip units had been sold to local residents at discounted rates. The proposed development at St Helen’s Close was very small therefore fell below the required threshold for affordable units. In future, affordable housing would be delivered on larger developments. It was anticipated that the Council would have first refusal on affordable units.

Members enquired how surplus land for development was determined. It was confirmed that the Strategic Property Governance Group identified redundant sites. Once declared surplus, the company would seek an independent valuation of the land and suggest an offer for the Council to consider. In response to further questions, the Committee heard that, in terms of safety standards, Hillingdon First Ltd drew on the expertise of the Council’s inhouse teams. Relevant professionals oversaw all projects.

Councillors requested clarification regarding the number of future developments proposed. Members were advised that no specific goals had been set – a budget totalling £15m was available to Hillingdon First Ltd which could potentially deliver some 150 units; however, there were no firm plans as yet and potential sites for development would be considered on a case by case basis. No brown sites had been used to date. In terms of building control, the Financial Planning Manager agreed to check whether the Council’s Building Control team was being utilised. Members heard that, to date, delivered schemes had been worked up through the planning process. For future developments, the Council would need to consider how to deliver the required percentage of affordable homes - Hillingdon First would identify a site and the split would decided in line with the Council’s strategy. A joined approach was essential and the HRA would have first refusal on affordable units delivered.

It was confirmed that the money used to run Hillingdon First Ltd was the Council’s general fund money; profits accrued to the general fund. Hillingdon First Ltd was a commercial enterprise but would be more profitable if it were a bona fide building company.

Members were informed that the St Helen’s Close scheme was a former garage site; this could set a precedent in terms of options for smaller garage sites in the future. The fact that Hillingdon First Ltd had been able to step in on a smaller site such as this and make it financially viable was a good sign. It was noted that, since Hillingdon First Ltd was not a public sector organisation, it could work with a wider pool of contractors as this was not such a complex process.

In response to questions from Members, it was confirmed that Hillingdon First Ltd was not averse to the idea of developing units for rental which could offer a longer-term investment. Rentals would be at market value. It would not make financial sense to build units to sell to the HRA for use as affordable housing as the company would need to deliver a financial return. At the request of the Committee, the Financial Planning Manager agreed to investigate the wording which appear to suggest that purchasers did not have to live in Hillingdon.

Members were informed that a service level agreement was in place between Hillingdon First Ltd and the Council – no prioritisation issues were anticipated since employees had a responsibility to Hillingdon First but were employed by LBH.

In terms of other local authorities, the Committee heard that 70% – 80% of local authorities had a similar company in place (The Financial Planning Manager would check the statistics). There was a general move amongst local authorities to set up commercial operations. LBH was taking things slowly and was measured in its approach whereas some authorities were trying to run before they could walk. It was confirmed that LBH kept in touch with other local authorities to understand what they were doing.

RESOLVED That:

1)    The Committee noted the performance to date of Hillingdon First Limited;

2)    The Financial Planning Manager check whether the Council’s Building Control team was being utilised by Hillingdon First Ltd;

3)    The Financial Planning Manager investigate the wording which appeared to suggest that purchasers did not have to live in Hillingdon; and

4)    The Financial Planning Manager check what percentage of local authorities had a similar company.