Decision details

9.1

The Executive Director, Place submitted a report in relation to the Sheffield Housing Company Phase 2.

9.2

RESOLVED: That Cabinet:-

(a)

notes the progress on housing delivery and neighbourhood regeneration through the Sheffield Housing Company (SHC);

(b)

approves the Council granting an Option to Purchase for £1 on up to 2 identified sites within the future Sheffield Housing Company Land Package; the ability to exercise the Option being granted only if the lender has unrecoverable debt on its development finance loan to SHC for Phase 2; and

(c)

delegates authority on the negotiation on the terms of the Option to Purchase to the Director of Capital and Major Projects in consultation with the Director of Finance.

9.3

Reasons for Decision

9.3.1

The Council providing security for the loan by way of an Option to the Homes and Communities Agency to purchase future SHC land for £1 is assessed as low risk and will enable the development of 478 quality new homes.

9.4

Alternatives Considered and Rejected

9.4.1

Option 1 – the Council does not provide any form of security for the SHC loan. Impact: This would result in the interest rate on the loan increasing to over 10%. The increased finance costs will render Phase 2 unviable as the Phase surplus would be reduced to an unacceptably low level in which to manage any development risk. This is therefore not the preferred option.

9.4.2

Option 2 – the Council and Keepmoat provide the development finance loan to SHC removing the need for HCA finance. Impact: funding will need to be identified from the corporate programme to finance this and the loan drawdown and repayment will need to be administered, drawing on officer resources. This is not the preferred option.

9.4.3

Option 3 – the Council provides a Parent Company Guarantee by way of a commitment to pay half of any outstanding debt to HCA, if SHC defaults on its loan. Impact: this would enable SHC to enter into a funding agreement with HCA and deliver Phase 2. However, it will require the Council to place a contingent liability on its accounts and potentially create a precedent for offering security to developers in this way therefore this is not the preferred option.

9.4.4

Option 4 - Council provides security in the form of an Option for HCA to purchase identified Council sites for £1 to recover any debt. This land falls  within the SHC future land package. Impact: this would enable SHC to enter into a funding agreement and deliver Phase 2. An Option to purchase land within the Land Package will allow the Council and SHC to manage the SHC site development programme to ensure that the sites in question are timetabled for delivery after the Option is removed. It would not require the Council to account for any contingent liability in its accounts. This is the preferred option.

9.5

Any Interest Declared or Dispensation Granted

None

9.6

Reason for Exemption if Public/Press Excluded During Consideration

None

9.7

Respective Director Responsible for Implementation

Simon Green, Executive Director, Place

9.8

Relevant Scrutiny and Policy Development Committee If Decision Called In

Safer and Stronger Communities Scrutiny and Policy Development Committee