Agenda item

This report sets out the vision and objectives of the Property Strategy that officers developed in conjunction with Avison Young - independent consultants, and a range of stakeholders through interviews and interactive workshops.

Councillor Muhammed Butt (Leader of the Council) introduced the report, which set out the vision and objectives of the Draft Property Strategy that officers had developed in conjunction with Avison Young, independent consultants, and a range of stakeholders. The Committee was advised that the Strategy had been informed by the previous comments of members, as the topic had been considered by the Committee last year, and further suggestions and recommendations were welcomed prior to expected Cabinet adoption later in the year. Following the initial introduction of the report, Councillor Muhammed Butt outlined the Strategy’s Strategic Objectives:

•         Manage by robust processes, good data, and insights.

•         Create a leaner, compliant, and financially sustainable portfolio.

•         Dispose, repurpose, or redevelop properties no longer required.

In concluding, the Leader emphasised the importance of ensuring that community, economic and social value was being delivered from commercial properties to maximise the benefits provided to both residents and the Council. Furthermore, it was reiterated that due to the relatively small size of the Council’s non-residential property portfolio, the income generated from increased rents or repurposing properties would not be sufficient enough to ease the Council’s overall financial pressures. In adding to the Leader’s comments, Tanveer Ghani (Director of Property and Assets, Brent Council) explained that if no action was taken regarding the Council’s commercial properties, the portfolio would become unsustainable. Moreover, both Tanveer Ghani and Minesh Patel (Corporate Director of Finance and Resources, Brent Council) stated that key stakeholders had been engaged prior to formal adoption to ensure that the Strategy was fit for purpose and well challenged. Members also noted that the final version of the Strategy would be more succinct, ideally 5-6 pages, however officers wanted to provide a holistic view of the Strategy to the Committee to ensure appropriate scrutiny.

During the consideration of the agenda item, the following key points were discussed:

•         Given that many Brent Housing Management (BHM) non-housing assets, such as community centres, were said to be underused, members queried whether the Strategy included these assets and if not, why was this the case. In response, the Committee noted that the Strategy did not include these assets as it focussed on the general fund, not the Housing Revenue Account (HRA). Nevertheless, it was explained that the Strategy would feed into the HRA to ensure that non-residential assets were being treated in a uniform manner.

•         Regarding the omission of the Council’s approach relating to the acquisition of properties, the Committee was advised that the Council was not currently exploring the acquisition of commercial property that would strive for a traditional ‘return on investment’. Therefore, it was not included in the Strategy’s vision. Moreover, it was explained that a sustainable business case was needed prior to any acquisition to ensure that expected revenue generated would sustainably fund the purchase and maintenance of the property, which was always considered on a case by case basis.

•         Concerning the management of i4B and First Wave Housing (FWH) assets, members heard that they both had their own annual business plans which required Cabinet approval. These business plans focussed on affordable housing and therefore the remit of i4B and FWH was limited. The Committee also noted that further information outlining i4B and FWH voids could be provided as a written response.

•         Officers reiterated that the Strategy was concerned with commercial and non-residential assets, therefore housing related assets were not applicable.

•         In response to a question regarding the expansion of the proposed Corporate Asset Board to include highways assets such as kerbside space, members were informed that this could be explored, but a review of highways assets would be required and therefore an implementation timeline could not be provided. Furthermore, members and officers were keen to manage expectations given the constrained resources that the Property and Assets Team were working with and therefore emphasised that further resources and revenue streams would be required to enable this work.

•         In highlighting the importance of ensuring that new buildings were built according to the necessary high standards to prevent depreciation, the Committee questioned how the Strategy joined up planning and building control processes. In response, members were reassured that the Property Team actively collaborated with the Regeneration department to actively manage properties to prevent depreciation and ensure that the Council did not acquire new properties that may be detrimental to Council operations. As a follow up comment, the Committee referenced recent changes in building safety legislation that could be utilised to ensure that Council assets were safe and suitable. Therefore, it was requested that the Strategy included a commitment to explore all legal avenues to sufficiently maintain assets.

•         Regarding the capacity to deliver the Strategy and ensure proactive asset management, the Committee was reassured that the Council did have the necessary capacity to deliver the Strategy as a result of a review of resourcing and objectives. Additionally, further staff could be hired if the posts were justified by a sustainable business plan funded by additional income.

•         In response to a query seeking further assurances that members enquiries would be allocated to the relevant team, the Committee noted that officers would ensure that members enquiries were suitably addressed and that the Property Team was more visible, although it was outlined that officers had engaged with key stakeholders, members and tenants on the Strategy.

•         Members highlighted that BHM and i4B assets were not listed in the Strategy and queried who was responsible for these properties. In response, it was detailed that the Council’s landlord function was shared across directorates as HRA and commercial assets were separated. However, it was stated that the Strategy would inform the Council’s approach to all assets where relevant.

•         Concerning the reference to the requirement of an additional commercial property consultant team in the Seed Funding section of the Strategy, the Committee was advised that to successfully implement and receive market rate rents would require significant resources to conduct investigations, liaise with tenants and review potential impacts of the proposals. However, no commitments had been currently made and it was explained that alternative resource models could be explored. Nevertheless, officers emphasised that many tenants would struggle to pay market rate rents and therefore it would take a long period of time to actually receive market level incomes.

•         The Committee recommended that the proposed implementation timeline for the Corporate Social Benefits Assessment Methodology should be revised as it was deemed imperative to understand and define social value prior to introducing rent discounts related to social value criteria.

•         In discussing written off rent arrears and the outstanding arrears at Quarter 3 2023/24, members were informed that the pandemic had a substantial impact on tenants’ ability to pay rent and therefore much of the arrears were defined as uncollectable leading to debt being written off by the Council. It was explained that moving forward the emphasis would be on prevention and early support, such as repayment plans, informed by ongoing dialogues to understand the difficulties faced by tenants accruing arrears. The Committee also noted that the £700k outstanding arrears had been accrued over the lifetime of the assets and was not just for the current financial year. Nevertheless, despite recognising the need to treat voluntary and community sector (VCS) organisations differently to commercial tenants given the social value often provided by VCS tenants, it was explained that the new Strategy provided the mandate to better achieve the right balance between ensuring sufficient value and generating required income through rents, in turn ensuring the sustainability of the Council’s commercial portfolio.

•         Members sought a commitment to publish the criteria that tenants must meet in order to qualify for discounted rent and how the Council judged applications, framed as a ‘decision-making framework’, as currently this process was not publicly available. In response, the Committee was advised that options for ‘social leases’ and ‘agreements’ were outlined in section 6.7 of the Strategy, with the preference being to pursue either Option 1 or Option 2. Moreover, it was explained that defining and ranking social value was a corporate decision rather than something in which Property and Assets could unilaterally decide. Nevertheless, once the required policies had been agreed corporately, officers stated that they would explore the creation of a publicly available decision-making framework for discounted rents.

•         Regarding the Corporate Social Benefits Assessment Methodology that would attempt to quantify the social impact delivered by tenants, members noted that implementation would take time and therefore it was expected that, in the best case scenario, the Methodology would start to be used in early 2025. However, it was explained that some measures quantifying social impact could be utilised earlier, such as how many grants tenants were applying for and securing, how many residents were being supported by the tenant and collecting references from ward councillors regarding their overall impact on the local community. In light of this information, members expressed concerns regarding the capacity of VCS organisations to adapt to new demands and emphasised that the Council would need to provide support to organisations if required.

•         In highlighting the importance of conducting rent reviews given the financial pressures faced by all local authorities across the country, the Committee queried what had caused the delays in rent reviews and how much the delays had cost the Council in unrealised income. In response, members were advised that many organisations had accrued debt due to disruption caused by the pandemic and therefore it did not make sense to review rents to increase income whilst the Council was attempting to reduce debt. However, the Committee was reassured that reviews were actively being undertaken and, in most cases, the reviewed rents could be backdated to ensure that the Council was not at a loss. Furthermore, it was detailed that most new rents would be linked to the CPI uplift and therefore the increase in rent would differ on a case by case basis. Nevertheless, officers stated that a total figure comparing income generated pre and post rent reviews could be provided once all reviews had been completed.

•         In response to a question regarding the urgency of improving the EPC ratings for properties with certificates below E and whether the Council was currently in breach of regulations, members heard that this workstream was a priority as the regulations changed in April 2023 which required all properties to have a rating of E or above. However, it was detailed that currently officers could not comment on whether the Council was in breach of regulations as more information was required but given that 50% of properties had an EPC rating of E and above and that void properties were exempt, the risks associated with the new regulations were not deemed significant. Despite the reassurance provided, there was speculation that new regulations could be introduced in 2028 to raise the requirement for properties to have an EPC rating of B or above and thus the Council was actively monitoring the situation.

•         In discussing the possibility of charging tenants for the necessary works required to improve EPC ratings to ensure regulations were met, and whether the Council had calculated cost savings as a result of improving the energy efficiency of assets, it was detailed that there would need to be a provision in the lease agreement that enabled the Council to charge tenants for works. Additionally, members noted that it was difficult to monitor long-term energy efficiency and therefore cost savings were hard to estimate. Nevertheless, it was emphasised that decisions relating to improving the energy efficiency of properties would be made on a case by case basis using cost-benefit analysis as it would be unsustainable to carry out the required works for certain properties.

•         The Committee was advised that conducting accessibility audits was a priority and were already underway as an operational matter. Whilst it was explained that the audits should not take a significant amount of time, implementing any required improvements may do. In addition, the Council would have to engage tenants to understand the requirements of visitors, staff and service users to get a holistic understanding of accessibility requirements.

•         In response to a query regarding the lessons learned from previous asset management strategies and the difficulties faced ahead, members were informed that the Council’s commercial portfolio was historical which inherently created contemporary issues such as depreciation. Concerning future challenges, officers detailed the requirement to complete accessibility audits, meet new EPC regulations and further understand the potential income generated from rent reviews. Additionally, cost-benefit analysis and viability assessments would need to be undertaken for each property to determine the required next steps.

•         Regarding the disposal of assets and safeguarding the interests of the community, members heard that the Council’s work on social value would feed into any decisions regarding the disposal of assets to protect the interests of communities. Furthermore, the Committee was reassured that disposal was a last resort, requiring a strong business case, and the default approach would be to retain assets if it was clear that social value was being generated. Lastly, officers stated that members, stakeholders and residents would be engaged regarding any negative impacts if the Council was exploring the possibility of disposing of an asset.

•         In highlighting the possible negative impacts arising as a result of certain decisions, such as the disposal of assets, which had been omitted from the Equality Impact Assessment (EIA), members reiterated the importance of linking decision-making to social value and equality frameworks to ensure that specific demographics were not disproportionately impacted by decisions relating to the Council’s commercial property portfolio. In response, the Committee was advised that each case would be judged on its own merits, however social value and equality would be a consideration in all decision-making processes and officers stated that the Strategy could make this clearer in relation to potential actions that were likely to have negative impacts on local communities.

•         Concerning voids in properties that were scheduled for demolition, it was explained that the Strategy addressed meanwhile use to enable wider regeneration and redevelopment, but once again each case would need to be supported by a cost-benefit analysis.

In closing the discussion, the Chair thanked officers and members for their contributions towards the scrutiny of the item, before summarising the outcomes of the discussion and additional actions, which were AGREED as follows:

Suggestions for Improvement

Please note that both the suggestions for improvement and information requests were finalised following the Committee meeting and therefore may slightly vary from the general discussion above.

(1)      For the final version of the Strategy to be shared with housing colleagues for best practice in respect of HRA, I4B and first wave non-housing assets for potential alignment purposes.

(2)      To condense the final strategy into a short, easily digestible format for the benefit of residents.

(3)      To conduct rent reviews in line with lease agreements.

(4)      To actively explore additional opportunities for energy efficiency upgrades (e.g., solar panels, insulation etc.) in existing properties to generate additional income and cost savings.

(5)      To liaise with the Legal department to ensure the utilisation of all legal powers in the pursuit of developers building substandard properties in the borough.

(6)      Upon completion, sight the Committee on the draft Corporate Social Benefits Assessment Methodology for feedback.

(7)      Upon completion, publish the final Corporate Social Benefits Assessment Methodology for the benefit of residents, businesses, and community organisations.

Information Requests

(1)      To provide the forecasted figure of additional income that could be generated (subject to lease provisions) as a result of the rent reviews scheduled.

(2)      To provide information regarding the number of i4B and first wave (commercial/non-housing) voids.