Agenda item

This report provides an update on i4B Holdings Ltd (i4B) and First Wave Housing Ltd.'s (FWH) operational, financial, and strategic performance, including delivery of the policy objectives relating to the provision of good quality affordable housing and reducing the use of temporary accommodation.

The report has been prepared to assist the Committee in seeking to understand and assess the effectiveness of investment decisions for the Council in seeking to achieve key strategic priorities.

Peter Gadsdon (attending the meeting as a Council appointed Director on i4B/First Wave Housing Boards) was invited by Councillor Muhammed Butt (as Leader of the Council and attending to represent Councillor Tatler as Cabinet Member for Regeneration, Planning & Growth) to introduce the report providing an update on the financial and strategic performance of i4B Holdings Ltd (i4B) and First Wave Housing Ltd (FWH) as wholly owned local authority companies.  In noting the role and remit of both companies the Committee were advised that i4B had been set up in 2016 with the purpose of acquiring, letting and managing a portfolio of affordable, good quality private rented sector (PRS) properties in order to support efforts to alleviate homelessness and supporting a reduction in the use of temporary accommodation. The company acquired properties on the open market, including individual units and occasionally larger blocks of housing. It was noted that a Business Plan and financial model had been established and was closely monitored by the Board with the Committee keen to review impact of the investment decision made by the Council to support the company in seeking to achieve key strategic priorities.  It was also noted that i4B was restricted in the types of housing it could purchase, as it needed to fall within the affordable band. At present, i4B held 446 properties, with 61 x1 bedrooms, 191 x2 bedrooms, 141 x3 bedrooms and 53 x4 bedroom units. These included a number of properties located within the Home Counties, which whilst managed through Mears as an external agent, had become increasing difficult to let as households became more reluctant to relocate away from family or support networks leading to the Board, as opportunities became available, seeking to dispose of these units and reinvest in properties closer to Brent. For the properties located in Brent, the company operated a Service Level Agreement (SLA) with Brent’s Housing Management service to provide housing management, corporate and financial, property purchasing and refurbishment services.. This enable the company to operate with minimal staff and to benefit from economies of scale in terms of operating costs with a comprehensive monitoring framework in place to ensure operational performance met targets within the SLA.. Investment decisions were highlighted as having provided benefits to the Council with attention drawn to table 4.4 within the report, which illustrated that i4B had housed and discharged the Council’s housing duty to 473 families, the majority of whom were previously housed in stage one Temporary Accommodation (TA). The number of families housed was higher than i4B’s PRS portfolio due to a number of families moving on to other accommodation, with new families moving in. Table 4.7 within the report, highlighted that this was estimated to have provided a net cost avoidance of £88k each week achieved by moving 355 households from TA into i4B units.

In terms of First Wave Housing (FWH) members were advised this was a company limited by guarantee established as a registered provider of social housing to manage the property portfolio previously owned by Brent’s (now dissolved) Arms Length Management Organisation, Brent Housing Partnership. The company owned 216 street properties and one commercial unit with a breakdown of unit mix provided within section 3.2.2 of the report. Similar to i4B, FWH had also been set up to bring greater diversity and flexibility to the delivery of the Council’s housing objectives. As a Registered Provider (RP), FWH had the opportunity to access grant funding through the Greater London Authority (GLA) and remained available for such opportunities.  The company also operated under a Business Plan and an SLA with the Council to support their operation including corporate, financial and legal services as well as to support their landlord functions in relation to housing management, repairs and voids.

Both companies operated with the same Board of Directors with the appendices included within the report detailing the key objectives within the i4B and FWH Business Plans as well as updates on the progress of tasks over the previous financial year and the companies’ four strategic objectives identified as follows:

·               Providing a consistently good housing service

·               Delivering safe and sustainable homes

·               Running a viable business

·               Increasing the supply of affordable housing in the borough

Members were informed that in addition to the regular Shareholder and Guarantor meetings held between the Chair of Board and Council strategic overview on delivery of the objectives within the Business Plan was also provided through the Audit & Standards Advisory Committee with operational housing management performance subject to review by the Community & Wellbeing Scrutiny Committee and the Resources & Public Realm Scrutiny Committee involvement focussed around the effectiveness of any investment decisions and strategic housing element.  Whilst the Chair of the Community & Wellbeing Scrutiny Committee had therefore also been due to attend the meeting for this item, Councillor Conneely advised that he had unfortunately needed to submit his apologies.

Having thanked Peter Gadsdon for his introduction the Chair then moved on to invite questions and comments from the Committee in relation to the update provided in relation to the role of both companies in the delivery of affordable housing, with the following comments and issues discussed:

·            As an initial query further details were sought around the decision to include the Fulton Road development under FWH rather than i4B ownership. In response, Peter Gadsdon (as Director i4B/FWH) explained that this was due to FWH being classed as a Registered Provider (RP) which enable the development to attract grant funding contributions under the GLA’s Affordable Homes programme.

·            Views were then sought regarding whether it was felt the investment decisions made in relation to i4B and FWH had been effective and, if so, what specific factors had made them successful.  In addition, questions were raised about the benefits that would not have otherwise been realised if the Council had carried out these operations directly. In response, Members were advised that the investment decisions with regard to i4B and FWH were felt to have been effective in terms of delivery of the expectations set by the Council. i4B and FWH both offered secure, settled housing of a high standard with a responsible landlord and had supported the Council in the discharge of its homelessness duty. Further questions were raised about whether there were any constraints in the companies from being more ambitious, and if there was anything the Council could do to overcome those constraints. The Committee heard that were no constraints other than the pace at which properties could be purchased, as these could only be acquired if they aligned with the financial model to ensure viability.

·            As a further issue highlighted, members noted that i4B had been set up to respond to legal constraints on Brent’s housing strategy in terms of borrowing requirements with members therefore seeking clarification on whether, now the Council was operating in a different legislative and economic climate, i4B was still needed to deliver new properties or whether this could be achieved in a different way. In response, members were advised that FWH was created to manage the residual stock previously managed by Brent Housing Partnership (BHP) that was not in the Housing Revenue Account (HRA). There were a number of grant attachments within that which needed to be fulfilled otherwise the funds would need to be returned. The reason i4B was set up was to enable the purchase of properties on the open market and providing a good landlord in the private sector, where the Local Housing Allowance (LHA) rent could be charged, and housing could be provided to people in temporary accommodation rather than to avoid constraints in relation to the HRA. Additional details were requested in relation to the net cost avoidance of £88k which had been referred during the introduction, with members advised this had been based on an assessment that had the families not been housed, the Council would have incurred additional costs for temporary accommodation, constituting cost avoidance.

Further details were also sought in relation to viability assessments. Amanda Healy (Deputy Director Investment and Infrastructure) explained that where companies conducted financial assessments for purchasing new properties, they considered only the cash flow directly relevant to the company. As a result, the £88k cost avoidance would not be taken into account and would not affect acquisition calculations. There was no cashflow benefit to the company because it was not responsible for housing the families; this responsibility fell to the Council, who gained from the company's provision.  As a result, the Chair sought details as to whether it was felt the Council could set more ambitious strategic priorities. In response, Alice Lester (Corporate Director Neighbourhoods and Regeneration) advised as the shareholder representative that the Council was not overly risk averse, but needed to undertake actions that would not adversely impact its financial position. From a shareholder perspective it was felt that i4B and FWH were both achieving the outcomes originally identified by providing good quality homes for those in need while ensuring financially viability with the Boards effective at reviewing and monitoring the activity of both companies to ensure they were delivering as much as possible while remaining financially prudent.

·            Following on from the previous comments, members also sought details on the potential for i4B to be able to issue bonds, to which the response was that this would be difficult under the current structure given the company was wholly owned by the Council as a single shareholder.  It was not felt there would, therefore, be any additional benefit to be achieved by seeking opportunities to explore alternative sources of investment such as, for example, through the Council’s Pension Fund who it was pointed out would also be prevented from investing in Council related activity under existing regulations.

·            Further clarification was requested around the relationship between FWH and the HRA cap. Amanda Healy (Deputy Director Investment and Infrastructure) responded that this related to FWH establishment to manage the property portfolio previously owned by Brent’s (now dissolved) Arms Length Management Organisation, Brent Housing Partnership.  When dissolved all core housing stock had been transferred back to the Council’s HRA with the exception of those now managed through FWH as a Registered Provider.. The report provided for the Committee had outlined a selection of properties that required grant funding specifically from registered providers, which continued to be managed by the company. It was noted that i4B’s delivery involved General Fund Housing, which was not tied to the HRA cap. The type of provision and tenancies offered could not be supplied under the Council’s umbrella, so they needed to be provided by the company instead. Hal Chavasse (Strategy and Delivery Manager) added that in terms of rental rates, properties transferred back to the Council would need to be charged at social rent levels which were lower than the Local Housing Allowance that i4B could charge.

·            Members then moved on to raise a number of questions around the housing rent charged by i4B. The Committee were advised that i4B charged the Local Housing Allowance rent set by the government at the 30^th percentile of average rents in an area which also sought to incorporate Universal Credit and Housing Benefit income. Clarification was provided that the acquisitions policy whilst not exclusive to Brent was now increasingly focussed within the borough and surrounding area.

·            The Committee then turned their attention to the position around the current sources of grants available to support FWH as a Registered Provider and also i4B. In response, members were advised that the main source of grant funding was currently provided through the GLA. It was noted that, when evaluating any housing opportunity, housing companies considered both general fund and HRA delivery options to ensure the best value for the units being acquired or transferred to the companies as part of their viability assessment. Members sought details around whether there were any indications from the new government regarding how housing programmes might be managed, organised, funded, and developed in future. The Committee heard that greater flexibility was consistently sought in lobbying efforts in order to provide access to Local Authority Housing Fund by local authority housing companies.

·            Given the substantial savings identified in relation to cost avoidance on the Council’s temporary accommodation bill, members queried if it would be prudent to factor these into viability assessments when exploring further opportunities to reduce expenditure. It was noted that within the Council, there was currently an overspend on the budget between £10 - 15m pounds. The Leader highlighted, that whilst not risk averse there were a number of challenges associated with examining viability assessments and emphasised that careful considerations, including staffing capacity and borrowing limits, needed to be taken into account when seeking to expand the activity undertaken through i4B.

·            Moving on, members then drew attention to paragraph 6.3.2 of the report around tenant feedback and the need for improvement with members highlighting delays in responses being provided for tenants, and concerns about the potential for feedback to be ignored or overlooked. Questions were raised regarding the accuracy of the collected feedback and the frequency with which it was reviewed.  In response, members were advised that as of April 2024, The Regulator of Social Housing had introduced new tenant satisfaction standards, including tenant surveys. Currently, periodic surveys had been conducted, but efforts were underway to enhance the understanding of these surveys and to develop action plans accordingly. Starting in October 2024, a separate reporting hierarchy for housing complaints would be established with these reports reviewed and acted upon by the Board.

·            Referring to paragraph 6.4 of the report relating to the Building Safety Act 2022 and i4B's response regarding one of their housing blocks in Wembley Park, Lexington. Members were keen to seek details around the lessons learned from this experience, and how they had been applied to other buildings subject to similar requirements. The Committee were advised that responsibilities for building safety were shared with Quintain, the estate owner. Confirmation was provided that i4B had commissioned fire risk assessments and arranged for fire safety works to be undertaken with maintenance logs also being maintained.

·            As a further query, members drew attention to paragraph 6.4.5 within the report concerning the development of an asset management strategy and the significant focus on improving energy performance across housing stock including the potential viability for retrofitting. In response, Hal Chavasse (Strategy and Delivery Manager) highlighted that a programme of surveys had been carried out which covered around 80% of the properties for general capital maintenance, kitchen replacements, bathroom replacements and necessary energy works, all of which had been incorporated into the company Business Plans.  Whilst work continued to review the assumptions in relation to the stock that had not been surveyed, the Business Plan was felt to remain viable.

Following on, members advised they were keen to explore the approach taken by i4B and FWH to the retrofitting and eco standards of the properties they owned when compared to that of the Council. The Committee heard that more than half of i4B and FWH properties currently met the energy C rating.. It was, however, recognised that additional work still needed to be undertaken for properties in blocks that needed refurbishment.

·            Members then moved on to focus on paragraph 6.5.3 within the report regarding the internal audit carried out on the financial controls and billing arrangements for the companies, and the improvements identified with details sought on the controls in place to ensure the companies were operating in accordance with their policies and procedures and that the necessary oversight was being provided. Hal Chavasse (Strategy and Delivery Manager) responded that the issues identified had partly been due to staff turnover resulting in established processes that had previously been effective not being consistently adhered to. Payments were being made for work as required however, as the audit highlighted, effective communication between officers was relied upon, which typically was not an issue but became problematic during periods of staff turnover. Further questions were raised about the sign off of procedures and policies by the company Boards, to which the response was that there was a list of matters reserved for the Board and also delegated to officers. Matters which fell within operational policies were agreed by the relevant Heads of Service and Corporate Directors within the SLA management teams as opposed to the Board.

·            Moving on, details were also sought in relation to the staffing structure of i4B and FWH and how the distinction between staff focusing on i4B and FWH was maintained under the SLA. In response, members were advised that staff allocated to support i4B and FWH were based on an approximate split (reflecting the level of stock held) of two thirds to one third between i4B & FWH. The level of service provided was based on the requirements of the stock as opposed to funding dedicated posts with the costs charged for officer time calculated through the SLA and no officers directly employed to support an individual company.

·            As a further query, members drew attention to paragraph 4.7 within the report relating to the potential around surplus rents being used to invest in new supply.  Details were sought on how this could be delivered and more generally on how profits from not only i4B but FWH were reinvested.  In response, members were advised that whilst i4B had now achieved an initial profit the surplus generated by FWH was lower with any surpluses the companies made being used to invest in new supply or the maintenance of existing supply, including asset management.

·            Members then moved on to query the potential scope to undertake an investment programme aimed at supporting individuals living in underoccupied properties to relocate closer to their families by acquiring suitable properties for their needs, thereby freeing up much needed larger properties. The Leader responded, advising that the Council had an incentive scheme to work with individuals living in underoccupied properties although the process in seeking to encourage relocation was often challenging.

At this stage in proceedings, the Committee agreed to apply the guillotine procedure under Standing Order 62(c) in order to extend the meeting for a period of 15 minutes to enable conclusion of the item and remaining business on the agenda.

In continuing, members recognised the challenges identified but felt part of the issue remained the ability to offer properties attractive enough to encourage relocation. What was important was acquiring a specific property that met the individuals’ needs, especially if it was located near relatives who could provide support with the same issues arising in terms of out of borough placements. In terms of the acquisition and management of properties within the Home Counties confirmation was provided that as opportunities were identified the aim would be to repurpose or seek opportunities to dispose of them.

·            With reference to paragraph 6.5.2 of the report, members then moved on to question what could be done to better manage void times with the existing contractor including the use of penalties where performance standards were not met. In response, Hal Chavasse (Strategy and Delivery Manager) explained that as referenced in the report, there were currently no penalty mechanisms in the contract but that i4B were in the process of retendering to tighten up the contract specifications. Peter Gadsdon (Director i4B/First Wave) added that one of the primary challenges with the existing contractor was not their turnaround time but rather the nomination process. The property would be prepared to ensure that it was fit to rent, however delays could then be experienced in getting the right nominees. Additional questions were raised around whether there was a way to streamline this process, given the large waiting list for housing. In response, the Committee was advised of the close working relationship with the Housing Needs Service along with the challenges in seeking to identify appropriate nominations, particularly in relation to out of borough placements with Councillor Muhammed Butt highlighting the number of relevant considerations needing to be considered including family size, where the children attended school, and where the parents worked, all of which determined the suitability of a property to families and could lead to delays.

·            The Committee then moved on to reference paragraph 4.3 within the report on the breakdown of i4B purchased properties and the predominance of 2 bed properties in the portfolio. Questions were raised about whether i4B was in greater need of larger sized properties and if there was a financial borrowing issue as to why there was a predominance of 2 bed properties in i4B’s portfolio. In response, Peter Gadsdon (Director i4B/First Wave) explained that whilst the turnaround time for offers to those on the Housing Needs register for smaller sized properties was shorter the need to acquire larger sized properties was also recognised given the much longer waiting times for households requiring 3-4 bed sized properties.  Whilst i4B were therefore keen to acquire as many larger sized properties as practicable, the opportunities available to do so were more limited due to the price and viability in relation to the company Business Plan and financial model.

·            Returning to the issue of compliance with the Building Safety Act concerns were highlighted around issues surrounding the Lexington block, including lift maintenance and operation of fire alarms with details sought about the specific lessons learned that would be implemented in procedures and policies moving forward. In response, Members heard that issues raised at Lexington were part of the management arrangement which compliance and Mechanical and Electrical (M&E) teams delivered on behalf of i4B with an assurance provided that the concerns highlighted had now been resolved. Moving forward, the development teams managing the building at Fulton Road and other schemes had provided assurance that the Compliance and M&E teams would be involved at an earlier stage in the handover of those blocks so that these issues did not reoccur in future. It was also noted that Quintain bore responsibility for certain areas of the development, including communal areas and gates with i4B’s responsibility including the interior of the blocks. There was a relationship between Quintain as the freeholder, i4B and tenants to ensure that where issues reported were not resolved, appropriate escalation routes were available.

·            As a final issue, the Committee then moved on to focus on details around the application of section 106 agreements to support the acquisition of properties by the companies. In response, Alice Lester (Corporate Director, Neighbourhoods and Regeneration) advised that it would be possible as part of the affordable housing element within s106 development agreements for developers to explore whether a Registered Provider (such as FWH) may be interested in acquiring the affordable housing units within a development although this was often not identified as a viable option.

Given the time remaining and in seeking to bring consideration of the item to a close, the Chair thanked officers and Members for their contributions towards scrutiny of the Council’s delivery of affordable housing by i4B Holdings Ltd and First Wave Housing Ltd and as a result of the outcome of the discussion, the recommendations, requests for additional information and suggestions for improvement identified were AGREED as follows:

Suggestions for improvement

(1)       To explore further opportunities for i4B/First Wave Housing Ltd to reduce temporary accommodation costs and expand the supply of affordable housing in a sound yet non-risk adverse manner. 

(2)       To consider revising the viability assessment criteria to account for factors like temporary accommodation cost avoidance in order to support the delivery of more affordable housing via i4B/First Wave Housing Ltd.

(3)       To explore carrying out targeted work to source/purchase specific properties for households wishing to downsize and relocate outside of the borough.

(4)       For I4B/First Wave Housing directors to strengthen their oversight of policies and procedures to prevent a recurrence of the issues identified in the internal audit.

Information Requests 

(1)       To provide details of any Section 106 properties acquired through I4B Holdings Ltd.

(2)       To provide details of any potential Section 106 acquisitions that were not pursued due to viability issues, including the specific reasons for each case.

(3)       To provide asset management strategy upon completion.

(4)       To provide a breakdown of the expected costs associated with enhancing energy performance and retrofitting the I4B/First Wave Housing stock.