At next week’s Rushcliffe Borough Council full Cabinet Meeting, the suggestion of forming a property development company will be put to members with a recommendation for further discussion.
The council says,
‘In the current economic climate, with low interest rates,property investments are increasingly important to support the Council’s budgets and enhance its revenue income, therefore funding the provision of services. The Council’s Corporate Strategy includes the task of “Continuing to develop the Council’s property portfolio to enhance the Council’s financial position and deliver community outcomes”’
Setting up a property development company is an increasingly popular option for local authorities.
One of the key questions is what does the Council want to deliver, and does it need a property company to do it?
The table below sets out some potential objectives in relation to property.
Examples below using the council owned Abbey Road and Cortgrave sites earmarked for consultation in Local Plan 2
A Public Sector Partnership (PSP) is an organisation that is assisting councils set up and deliver property companies. It is an “insourcing model” – ie it brings commercial skills into a council rather than the council outsourcing its property or regeneration projects.
The model would involve the Council setting up a limited liability partnership (LLP) with PSP and then deciding which projects it wishes to pursue together. Each project would have its own development company eg Abbey Road Ltd, COT1 Ltd, etc.
There is no requirement to deliver a project through the LLP but it may be a useful resource. PSP can also bring in external funding through its funders (Cabot Square and Winston Group) which can assist with the cashflow of schemes. As an example, the Rushcliffe/PSP LLP could set up ‘Abbey Road Ltd’ to develop out the depot site. PSP could fund the development of the properties on the land and the Council would commit to buy the properties when they are built (in reality it would simultaneously market them for sale.)
PSP takes a split of the profits, the split being negotiated in advance and approved by a CIPFA (Chartered Institute of Public Finance Accountants) validation process..
PSP currently has 21 LLPs with councils across the country. PSP professionals have public and private sector property experience and the company is based on a “relational partnering” model.
It is recommended that officers explore the PSP model in more detail as part of a detailed options review for Abbey Road and COT1 and that this options review is reported back to a future Cabinet meeting.
*What is a Public Sector PLC?
A Public Sector PLC (PSP) is a hybrid private public partnership option facilitating a new kind of culture within a new type of legal framework, that enables local authorities to generate a significant source of potential income that has previously been inaccessible. To date, 21 local authorities across the UK have partnered with us and been able to unlock revenue from their council assets.
The recommendations for the full cabinet meeting on this agenda point are below:
> Cabinet supports that further provision of affordable housing in the Borough is currently best delivered in partnership with registered providers rather than by the Council through a property company
> Cabinet supports the further investigation of the Public Sector PLC (PPSP)) relational partnering model to develop a Limited Liabil ity Partnership (LLLP)) to deliver discrete property development projects in the Borough.
> Officers continue to also identify the best opportunities and delivery models for delivering the best value return for the Council’s land assets.
More on property in Rushcliffe:
As set out in the table, the Council cannot grant an assured shorthold tenancy. In order to become an ethical landlord the Council would need to acquire some stock through a property company, and then manage it.
Alternatively, it could do this via a Registered Provider partner ( e.g. Metropolitan ) that has private investments or another private sector operator.
According to Land Registry published data, the average house price in Rushcliffe was just over £257,000 in February 2017 – which is higher than the average prices for both Nottinghamshire (ccirca £161,000) and Nottingham City (ccirca £128,000). The average house price in Rushcliffe has risen from circa £197,000 in 2011, a rise of 30%. National average house prices have increased 29.5% (from £166,415 in Feb 2011 to £215,503 in Feb 2017) which mirrors Rushcliffe’s average house price increase of 30%.
According to Valuation Agency Office data recorded in 2015/16 the average monthly rent (median) for a privately rented property in Rushcliffe is as follows: £325 (shared accommodation); £375 (studio); £425 (1 bedroom); £550 (2 bedrooms); £695 for (3 bedrooms); £1100 (4 bedrooms+), which is higher than the Nottinghamshire averages.
Current evidence suggests that the high capital costs for housing accommodation in Rushcliffe are not compensated sufficiently by the rental returns to make this option financially attractive to the Council, compared to investing in commercial property. In addition,the Council could inadvertently contribute to increasing values in the borough by entering the residential market.
Read the entire document:Agenda item 5 - Rushcliffe Property Company Options
Cabinet meeting to be held on Tuesday 14 November at 7.00 pm in the Council Chamber, Rushcliffe Arena, Rugby Road, West Bridgford.