Innovation in council housebuilding – Oxford

Oxford City Council has had an ambitious ongoing council housebuilding programme. This aimed to contribute to addressing the affordable housing crisis caused primarily by the buoyant local economy


Oxford City Council has had an ambitious ongoing council housebuilding programme. This aimed to contribute to addressing the affordable housing crisis caused primarily by the buoyant local economy (which makes a major contribution to UK productivity). However, Government policy changes, such as rent setting, together with the headroom borrowing cap, have resulted in a switch in the delivery of part of a major scheme to the local housing company (LHC). Nevertheless, a small council housebuilding scheme remains.

The prospects for future council housebuilding have been potentially enhanced by the development of the Oxfordshire Growth Deal that was launched by the Government and local partners (including the city council) in the Chancellor of the Exchequer’s autumn statement in November 2017. Even so, the Government has indicated that any affordable rented housing developed through this initiative must be subject to right to buy (RTB).

Context
Oxford and its sub-region has a world-leading economic position. A recent report by PriceWaterhouseCoopers (PwC) highlighted that Oxford is one of the two highest performing cities in the UK. OxLEP (the Oxfordshire Local Enterprise Partnership) has pointed out that the sub-region is in the top five technology innovation ecosystems in the world and has an internationally renowned knowledge intensive cluster, with over 1,500 high-tech companies employing over 43,000 people.

However, the buoyant local economy has a major impact on housing in Oxford. The estimated household growth rate between 2011 and 2031 is nearly 25 per cent. The National Housing Federation’s ‘Home truths’ report (2018) for the South East showed that the ratio of mean house prices to household incomes was the second highest in the region at over 16:1. An annual income of nearly £112,000 would be needed for an 80 per cent mortgage for a house at an average price, while the mean monthly rent in the private rented sector in 2016/17 was nearly £1,400. There are over 3,000 households on the local housing register. 

RTB is a major issue. About 200 homes have been sold under RTB since 2012 and one to one replacement has not been possible. Only 88 replacement homes have been completed. The council is pessimistic over the likelihood of recent Government guidance on raising individual HRA borrowing caps changing this situation.   

The ‘Oxfordshire strategic housing market assessment’ (2014) indicated that the annual mid-range rate of new provision for Oxford should be 1,400 units – half of which should be affordable housing. In 2015/16, however, new delivery was only 150 units. In relation to overall affordable housing provision, the council intends to boost supply from 68 units in 2017/2018 to over 500 homes per year by 2021/22 through its enabling and delivery roles.

Changing role of council housebuilding
Oxford City Council’s housing and homelessness strategy (2018-2021) has as one of its priorities to “increase housing supply and improve access to affordable housing”. One of the actions is to “deliver more affordable homes either by direct delivery or through the council-owned housing company”. A further priority is to maintain and improve the existing council housing stock (7,000 units) which includes a number of tower blocks. A major part of HRA capital expenditure over the next three years focuses on estate regeneration and modernisation of properties.  

The previous strategy and HRA business plan included an ambitious programme of council housebuilding, making use of the £55 million housing revenue account surplus to deliver over 350 new council properties at Barton Park by 2022 and an annual additional programme of 35 new units through the HRA business plan. However, a number of Government policies have impacted negatively on this approach. They include the annual reduction in social rents for four years from 2016 and the uncertainty over the potential levy on the sale of high-value council homes to pay for voluntary RTB and welfare changes. As well as their impact, it is the uncertainty and frequent changes in policy that have resulted in changes to the programme for the delivery of affordable homes. 

The current HRA programme is the delivery of 10 homes per year, primarily on small infill sites that are unattractive to other providers. However, the LHC (Oxford City Housing Ltd) will develop 162 units of mixed tenure housing by 2019/20. It will also start taking ownership of properties developed at Barton Park, starting in 2018/19 with nearly 100 units. The expertise and skills for the LHC have, in part, been derived from the council housebuilding programme in the early and middle part of this decade. 

Funding
The housing and homelessness strategy is linked to the council’s medium-term financial plan, which is regularly updated. A wide range of sources have been used and are being used for the HRA programme. They include:

• HRA borrowing subject to headroom limits
• Homes England grant
• RTB receipts, although these cannot be used with Homes England grant – they have been used primarily for purchasing existing property to provide temporary accommodation for homeless households
• Section 106 funding through the commuted sums route.

New homes bonus money has not been used. 

Barton Park
Barton Park was intended to make a major contribution to council housebuilding. It is a 36-hectare site that was allocated as a strategic housing site. However, it required significant infrastructure investment of £30 million covering, for instance, decontamination of land, access to a major road and provision of a new primary school. A traditional development approach of selling the site to a housebuilder was unlikely to result in new housing being available in a reasonable timeframe, especially if there were protracted negotiations over a Section 106 agreement. Other alternatives were explored including local authority funding of the project, but this would have exposed the council to the full development risk as well as requiring significant public sector borrowing.

Oxford City Council therefore decided, following an option appraisal process, to proceed with a joint venture vehicle with a private sector partner. Following a procurement exercise, it entered into a 50:50 joint venture partnership with Grosvenor Developments Ltd. This has enabled the local authority to contribute to the development of a large but complex site and, at the same time, retain some control over the management of the project.  

Barton Park will eventually provide approximately 900 new homes. It is also part of the NHS ‘healthy town’ programme. At least 40 per cent of these homes will be affordable housing. These will now be provided through the LHC rather than the HRA programme.

This example demonstrates the importance of being able to switch delivery methods in a fast-changing external environment.       

Oxfordshire Growth Deal
The principles of the Oxfordshire Growth Deal were announced by the Chancellor of the Exchequer in his autumn statement in November 2017. The Oxfordshire Growth Board (comprising the county council and six districts, including Oxford City Council, along with OxLEP) will receive £215 million of funding to promote economic growth and deliver a significant boost to new housebuilding; £60 million of this funding is for affordable housing provision, £150 million is for infrastructure improvements and £5 million is to provide increased capacity to develop a joint strategic spatial plan for the sub-region.

A draft delivery plan was published by the Oxfordshire Growth Board in February 2018. This included more detail on each of the funding elements, including affordable housing provision. The £60 million is in addition to the existing Homes England affordable housing programme. It will be used by each of the districts and their partners to deliver schemes that reflect local priorities. In the case of Oxford City Council, this could include council housebuilding through its housing revenue account.