Agenda item

This report provides the Audit and Standards Advisory Committee with an update on the work of the Housing Companies, i4B Holdings Ltd (i4B) and First Wave Housing (FWH) to deliver against their business plans for 2024-25, which were agreed by the Council as Shareholder of i4B and Guarantor of FWH.

(Agenda republished to include the attached report on 19 March 25)

Ahead of the formal introduction of the item, the Chair reminded members of the newly introduced reporting arrangements for i4B Holdings Ltd (i4B) and First Wave Housing Ltd (FWH) with the role of the Audit & Standards Advisory Committee now focussed around assurance relating to the arrangements the Council, as Shareholder (in the case of i4B) and Guarantor (in the case of WFH), had in place to oversee the governance and performance of both companies rather than on their detailed operational management & performance, which would be monitored through the Council’s scrutiny function.

The Chair then welcomed Andrew Hudson to the meeting (as Chair of the Boards for both i4B Holdings Ltd and FWH Ltd) who introduced the update report outlining the work being undertaken by both Housing companies to deliver against their respective business plans for 2024-25, which had been agreed by the Council as Shareholder of i4B and Guarantor of FWH along with an update on their 2025-26 Business Plans.  In presenting the report, the following issues were highlighted:

·             The Committee’s attention was drawn to section 3.3 in the Committee report which detailed the governance arrangements in place relating to both companies along with the updates provided in section 3.4 on the key issues covered at the most recent Shareholder meeting between the Council and i4B and Guarantor meeting between the Council and FWH (held in February 2025) relating to operational performance and financial performance as well as progress against each respective Business Plan (on which the full reports had been included as Appendix 1 (i4B) and Appendix 2 (FWH) of the Committee report).

·             As a summary of key operational performance issues highlighted, members were advised:

o      of the ongoing challenges identified in relation to the management of voids including delays from third-party freeholders affecting turnaround times. Both i4B and FWH Board had conducted a deep-dive session to identify ways to reduce void times and rent loss, resulting in an action plan which the Boards had reviewed at their February meeting.

o      Whilst the most recent tenant satisfaction metrics for both companies had shown an increase in overall satisfaction, levels were still below the London average, and below where the companies want to be with work focussed around the Housing Companies Tenant Services Managers reflected in the improved results with further work underway to consolidate and enhance performance over the coming year.

o      In terms of acquisitions, i4B was reported as having exceeded their acquisition target of 25 properties for 2024-25 with the company having successfully purchased 27 street properties and a small block of 9 units within the borough.  Whilst noting performance in this respect had been strong members were advised of the challenges in being able to maintain current levels of acquisitions moving into 2025-26 given movements in interest rates and other factors impacting on viability making it harder to acquire properties within the necessary financial criteria.  In recognising the importance in continuing to prioritise acquisitions, given the ongoing demand for housing and need to alleviate costs arising from the increased use of temporary accommodation members were advised the Corporate Director of Finance and Resources had asked for a clear acquisition target to be set for the year and confirmed that i4B had the Shareholder’s continued support to move forward with further acquisitions. i4B would therefore be continuing to explore a range of possible opportunities, e.g. conversions of non-residential property to residential use, as well as acquisitions.  In addition, FWH also continued to remain available to take advantage of any opportunity available to it as a Registered Provider, for example government grants issued via the Greater London Authority.

o      While i4B’s finances were recognised as tighter than in recent years (due to lower rent collection and related provision for bad debts) members were advised the company was actively addressing these concerns, with i4B set to remain in profit, but at a lower level than planned.  Whilst FWH had experienced similar challenges due to bad debts members were advised their income and profit forecast remain broadly in line with the plan.

Having thanked Andrew Hudson for his initial update the Chair then invited the Committee to comment on the updates in relation to both i4B and FWH, with the following issues discussed:

·             Further details were sought over the potential impact regarding any reduction in level of acquisitions would have following the challenges identified moving forward into 2025-26.  In response, Andrew Hudson advised the Committee that whilst acquisitions were expected to continue, with First Wave set to receive its first new property since being established, this would be at a lower rate (in terms of stock sourced through the property market) than achieved during the current year given movements in interest rates affecting price caps the continued freeze in Local Housing Allowance and general slow-down in the property market.  Andrew Hudson (as chair of both the i4B & FWH Boards) advised whilst the i4B Board would, therefore, be setting an acquisitions target for 2025-26 this was expected to reflect the challenges identified with the Committee assured performance in delivery would continue to be subject to robust monitoring.

·             Recognising the contribution being made through i4B in terms of saving being delivered through the reduction in Council expenditure relating to Temporary Accommodation, as a result of the alternative housing provision provided through the company members queried how this was reflected in the Council’s Statement of Accounts to avoid the role of i4B in this respect being undervalued. In response, Andrew Hudson advised that consideration of the value being delivered would be a matter that needed to be considered as part of the Council’s ongoing approach and support towards investment in the company also recognising the wider benefits available including, as an example provided, the potential support being provided to care leavers in terms of their accommodation and other costs mitigated through the acquisition of properties via i4B and First Wave Housing.  As an additional contribution, Minesh Patel (Corporate Director Finance and Resources) highlighted the Council’s ambition to pursue policy in this direction, noting the importance of different approaches in tackling budgetary issues faced by the Council and the level of cost avoidance which it had been possible to achieve to date with the shareholder keen to ensure the available structures were used to maximise the opportunities available.

·  Referring to the lack of balance sheet included as part of the report, further assurance was sought on the cashflow position relating to both companies as a means of assessing the return being achieved through the Council’s investment.  Whilst i4B’s finances were recognised as tighter than in recent years (due to lower rent collection and related provision for bad debts) members were advised the company was actively addressing these concerns, with i4B set to remain in profit, but at a lower level than planned.  Whilst FWH had experienced similar challenges due to bad debts members were advised their income and profit forecast remain broadly in line with the plan.  As further assurance Amanda Healy (Deputy Director Investment and Infrastructure) advised members that both companies cashflow had been assessed as remaining in a healthy position with cashflow risk not currently having been identified as a significant issue and Andrew Hudson confirming that the company balance sheets were subject to regular review by both Boards.

In response to further concerns identified in relation to progress on health and safety compliance Andrew Hudson advised that apart from a number of outstanding electrical safety certificates (EICRs), both companies had achieved full compliance in all relevant areas. On EICRs, the problem in most cases remained gaining access to the property with the legal process to gain access continuing to be followed for each outstanding certificate. Unlike for gas certificates, it was not possible to force entry to properties that refuses access with the Board continuing to review available options including the potential to combine access for both gas and electricity checks moving forward.

·             Clarification was sought on the Council's role and challenges involved in setting the annual budgets for both companies given the variance identified in the forecast position.  In response officers advised of the budget monitoring arrangements established across both company Boards with members attention drawn to the financial monitoring forecast provided within the shareholder and guarantor reports provided by both company Boards.  These included reference to issues such as insurance, audit fees, professional services and provision for doubtful debts providing what was felt to be an accurate forecast for operational expenditure moving forward into 2025-26.  In addition, members were advised of the work being undertaken to address and correct the position in relation to corporate SLA charges working with service providers to ensure a more accurate forecast for 2024-25 moving into 2025-26

·             Further details were sought on the measures being taken to address the performance in relation to voids with Andrew Hudson outlining the plans being introduced to streamline the process.  These included work with the Council's performance team to enhance the reporting of void statistics categorised across three stages - Void works; Housing Needs nomination & Tenancy sign-up.  It was felt this more detailed breakdown would support the Board in being able to understand delays and target service improvements more effectively with work also underway to strengthen the tracking and monitoring processes involving external partners to ensure that voids were being closely managed.  Following a deep dive review in September 2024 a series of additional actions had also been agreed  which Andrew Hudson advised were now in the process of being implemented, which included – a review of the Voids Information Form to ensure this was completed at an earlier stage and captured all information required by surveyors and Housing Needs; improved communication through earlier notification to all colleagues of planned purchase dates, works completion dates, nominations required; trial of a reduction in the number of post-works inspections by Brent surveyors designed to reduce times and developed relationship with works contractors and streamlining of the nominations review and approval process, including a review of the requirement for tenancies with voids remaining a priority area of performance.

·             Following on from this, in response to a query over the Council's role in setting acquisition targets and the numbers for the current year, Minesh Patel (as Corporate Director Finance & Resources) advised that the targets set were based on a range of factors taking account of issues such as the current property market conditions and available funding and borrowing options given the reduction in range of cheaper borrowing options as interest rates had risen.  Taken together it was recognised these factors would make it difficult for i4B to maintain the previous level of acquisitions achieved given the associated impact on viability with i4B therefore exploring different options and funding mechanisms and the Board due to consider the future acquisition programme at their next meeting with the Company remaining committed to seeking out opportunities to add to its stock in support of the Councils bid to reduce homelessness and reliance on temporary accommodation (TA) within the borough.

·             In response to a query regarding the way in which service charges were assessed for properties being acquired within blocks (recognising the impact on affordability for tenants) Andrew Hudson advised that this process included an assessment as part of the overall costs involved in acquiring the properties regarding long term affordability and viability with further clarification provided regarding the way in which rental levels were set for different types of tenure including the impact of Local Housing Allowance applications as well as other benchmarks.

·             As a final question, details were sought on the level of oversight provided in relation to the operation and performance of both Boards, including from an audit perspective.  In response, the Chair reminded members of the newly established arrangements involving the Audit & Standards Advisory Committee  focussing around assurance relating to the arrangements the Council, as Shareholder (in the case of i4B) and Guarantor (in the case of WFH), had in place to oversee the governance and performance of both companies rather than on their detailed operational management & performance with the external audit function provided separately through Grant Thornton and the current arrangements felt to provide sufficient opportunities for oversight supported through Internal Audit through an existing Service Level Agreement with both companies and strong channels of communication between the Company Boards & Council.

In response to additional clarification sought on the current position regarding Council representation on the Board of both companies, members were advised that a replacement was currently in the process of being appointed to fill the vacancy created following Peter Gadsdon’s retirement (as Corporate Director and one of the Council’s appointed Directors on the Boards) with the Council also keen to continue reviewing the way in which i4B & FWH were supported in their roles (including through the SLA) to provide the most flexible approach.

With no further questions, the Chair thanked Andrew Hudson for presenting the report in responding to the Committee queries.  The Committee RESOLVED to note the update on the work and governance of both i4B Holdings Ltd and First Wave Housing Ltd in terms of delivery against their 2024-25 Business Plan along with the update on development of their 2025-26 Business Plan.