Agenda item

Report by Head of Place, Property and Regeneration (attached)

The Committee considered a report by the Head of Place, Property and Regeneration (circulated previously) in relation to the Ilfracombe Housing Infrastructure Fund.

The Head of Place, Property and Regeneration highlighted the following:

·         The Housing Infrastructure Fund (HIF) was a Government fund awarded through Homes England, which was intended to allow Local Authorities to front load infrastructure on housing sites where the provision of infrastructure by the developer would mean that the housing scheme was unviable.

·         The intention was that once the dwellings started being constructed, the developer would repay the funds under an agreed repayment mechanism, which were then re-circulated by the Council to bring forward further housing developments within North Devon.

·         The amount awarded in respect of the Ilfracombe Southern Extension development was £6,500,000, which was to be used to provide roads, drainage and community facilities including a serviced school site.

·         In July 2020 the Council requested to draw down the first tranche of funding from Homes England.  Inox Homes were awarded the sum of £619,242 -, which was used for the planning, and design fees related to the HIF infrastructure works.

·         On the 23rd May 2019 the Council received the offer letter from Homes England confirming that this scheme had received the internal approvals to proceed with the formal award of grant subject to a number of conditions and the grant determination agreement. The award was to forward fund roads, drainage, a community building, a multi-games use area (MUGA) and a serviced school site to accelerate the delivery of new homes on a greenfield site at the Southern Extension in IIfracombe, Devon.

·         In December 2019 NDC entered into a contract with Homes England having met the first set of conditions and subsequently entered into a contract with Inox. The First tranche payment was drawn-down in July 2020. In order for the remaining monies to be drawn-down, the remaining conditions identified above had to be met.

·         Inox Homes have used the First tranche HIF monies of £619,242 to pay for design work and fees and as a result all planning permissions had now been secured. They had subsequently repaid the First tranche monies to North Devon Council and these were being held in a Capital Receipts Reserve.

·         Whilst Inox Homes found that interest rate to be acceptable due to the timeline of loan period, the level of loan amount and de-minimis threshold that could be applied under State Aid regulations, it has become clear that Devonshire Homes are not in the same position. They report to us that they are able to borrow at a more competitive rate due to the size of the remaining infrastructure circa £4.3million, the minimal impact any de-minimis threshold has and the timeline period involved.

·         All parties have worked with Homes England to see if a solution can be found that would enable the use of the HIF funds. Homes England agree with the method used to calculate the interest rate.

·         At present, the Council do not consider that there was a solution to retain the funds; it has to be spent on this project. Devonshire Homes could borrow more competitively elsewhere and so do not wish to drawdown the fund. The original objective of the HIF was to unlock barriers and to accelerate the delivery of housing. To that end, the withdrawal from the scheme will not impact this. The draw-down of the first tranche of funding enabled Inox Homes to secure the consents, which had provided Devonshire Homes with a scheme they could deliver and this would be delivered regardless of HIF. Furthermore, Inox Homes had repaid the first tranche monies to the Council and this £619,000 of funding could be used by the Council to accelerate the delivery of housing elsewhere. The Council could, therefore, conclude that the HIF funding had had a positive intervention on the housing infrastructure delivery in this scheme.

·         The current contract required infrastructure to be delivered by March 2023 but to date, only demolition had occurred on site. Homes England could extend this milestone to March 2024 (subject to approval) but would need Treasury approval to extend further past that date.

·         Homes England advised that there were two ways forward, should a solution not be found. The Local Authority could mutually withdraw from the HIF scheme and the Council would make a Statement to that effect or Homes England could terminate the fund.

·         The withdrawal from the fund would mean that the remaining funds would be returned to Treasury and could not be recycled by the Council. This would happen regardless of whether the Council mutually withdrew from the fund or if Homes England terminated it.

·         It was officers’ views that if the Council mutually withdrew from the fund the Council could set out the positive role that HIF had played in implementing development at Ilfracombe Southern Extension, and the reasons for the Council’s withdrawal. This wouldn’t be the case if Homes England terminated the Agreement. It was for this reason that officers make the recommendation to members to mutually withdraw from the scheme if a final solution with Devonshire Homes could not be found.

·         It was officer’s intentions to write to the Treasury to see whether these funds could be ring fenced within Ilfracombe but there was no guarantee that this would be the case; they would be returned to central Government by Homes England.

In response to questions, the Head of Place, Property and Regeneration advised the following:

·         The monies repaid by Inox Homes could still be recycled by North Devon Council to be used in housing projects elsewhere.

·         In a meeting with Homes England the officers had asked whether the remaining funding could be re-directed to another area but Homes England were clear that this could not happen.

RESOLVED that:

(a)  The report be noted;

(b)  In the event that agreement with the new delivery partner cannot be found to utilise the current HIF government funding, that Members authorise the Chief Executive to mutually withdraw from the HIF contract with Homes England recognising that they are no longer required to facilitate the delivery of the 350 homes at Ilfracombe Southern Extension; and

(c)  It be noted that it was disappointing to be losing this opportunity to utilise this funding to unlock other development opportunities in Ilfracombe where it was desperately needed and a letter should be sent in the Leader’s name to the Treasury at Central Government outlining this and to express disappointment that Ilfracombe was not identified in the recent Levelling Up announcement.