HCA funding

After two failed attempts, in May and July 2008, respectively, due to irregularities and discrepancies in the Officers’ reports, the London Borough of Tower Hamlets (LBTH) Strategic Development Committee (SDC), on 28 August 2008, granted consent to EeH proposed scheme for St Georges Estate, based on 25% affordable housing being financed by the 65% market homes and assurances it received about an additional 10% affordable housing being financed by a Homes and Communities Agency (HCA) grant.

The inference was clearly that, based on the requirements of EastendHomes’ (EeH) Business Plan and the terms of its partnership arrangement with Telford Homes (on which the entire proposal, including significant amounts of profit-making ‘market housing’, had been designed) EeH could provide 25%, together with the cross-subsidy necessary for Decent Homes Plus Works.

Whilst EeH contract terms with its business partner Telford Homes are unclear, it became obvious that Telford Homes who, apparently, is an investment partner with the Homes & Communities Agency (previously the Housing Corporation), will also be applying for a grant to finance what used to be a ‘grant-free’ scheme. It therefore appears that the highly manifested ‘private contribution’ has turned into government funds (tax-payers’ money) being provided by the Homes & Communities Agency (HCA) to a private work-for-profit organisation.

The HCA has now confirmed that a grant of £8,040,255 (to fund the entire 35% affordable component) has been approved and the scheme was due to start on site last month. Furthermore, the HCA has confirmed that Telford Homes bid for funding was successful following two financial appraisals, supported by LBTH, through the production of two versions of toolkit appraisals. The first financial appraisal was dated 18th August 2008 submitted to the HCA on 19th August and the second was dated 3rd October 2008 submitted to the HCA on 21st October and these were provided by Telford Homes and supported by LBTH.

It is important to highlight that Telford Homes second financial appraisal indicating that the proposed scheme was not viable without HCA funding for the entire 35% (and not just 10%) affordable housing, and was supported by LBTH, was submitted to HCA on 3rd October 2008 which is approximately a month after LBTH approved the scheme as viable without public subsidy for the 25% of the affordable housing component.

In view of Telford Homes successful grant application to HCA to finance the entire 35% of the affordable housing component of the proposed development, it follows that the proposal is no longer the same as the construction of market homes to finance 25% affordable housing is no longer required.
As the sources of funding for the affordable housing component have been changed, it is unknown why EeH has not revised the number of market homes now required for financing the Decent Homes Plus Works.

EeH is not an investment partner of the HCA signifying that EeH has not gone through the rigorous assessment that HCA applies to its investment partners. It therefore appears that EeH is using its business partnership with Telford Homes to get funding from public subsidies.

At present, EeH is progressing with phased construction at St Georges Estate, starting with the construction of the affordable housing component, for which Telford Homes secured funding from the government. It has been said that the market homes will be built once the housing market conditions improve.

Despite numerous attempts to get a response from EeH regarding the utilisation of the extra revenue that will become available (equating to 25% affordable housing) if the market homes are built, I could not get a straight answer. Based on HCA’s funding for 35% affordable housing, it is considered that the extra revenue equating to 25% affordable housing is circa £6m. It is yet unknown who is going to benefit out of this extra revenue, in case it is not returned to the government.


View Comments (1)

  • 1. Consent was granted by LBTH Strategic Development Committee in August 08 for an application for development consisting of 139 'market units' and 54 'affordable units' (with a tenure mix of 23 'intermediate' and 31 'social rented' units) together with refurbishment of existing units and provision of community facilities.

    2. Central to planning officers' appraisal of the scheme, and recommendation to Members for its approval, was the consideration that the proposed development was for an 'estate regeneration site' where particular policy provisions apply under LBTH' Interim Planning Guidance for the purposes of Development Copntrol.

    3. Central to these policy provisions is the facilitation of the refurbishment of existing estate buildings to Decent Homes Plus Standard through 'cross-subsidy' generated by market development.

    4. The fiscal justification for the scheme was accordingly based on financial appraisals demonstrating that the cost of providing 25% affordable housing, and cross subsidy for the refurbishment proposals, would be provided as a result of the market development.

    5. This was the basis on which SDC Members approved the scheme, with the added requirement that funding for a further 10% affordable housing would be provided by HCA grant subsidy.

    6. Following the SDC Members' concern over the level of affordable housing, a revaluation was carried out before the final Committee meeting in August 08 which reflected the full extent of the financial crisis and identified that without grant funding EeH' business partner, Telford Homes, would no longer be able to finance the 25% affordable component of the scheme or provide cross-subsidy for refurbishment at the levels previously agreed and on which the application had been justified in planning terms.

    7. These facts were not made known to SDC Members.

    8. Planning Officers appear to have misled the SDC Members with the introduction of Option 2 of their recommendation asserting that the scheme could finance 25% of its affordable component, at a time when it had already been confirmed by the revaluation that this was not possible.

    9. Telford Homes/LBTH Planning Officers presented figures to the HCA supporting a bid for grant subsidy amounting to £8+million. These figures were totally at variance with the ones presented to the SDC Members and on the basis of which planning consent for the development proposal was granted.

    It is our view that LBTH Planning Officers' actions constitute a very clear and serious abuse of process in:
    • Failing to pass on relevant information to the SDC Members;
    • Providing false assurances to the SDC Members regarding the viability of the scheme;
    • Acting 'ultra vires' in supporting a bid to the HCA for grant subsidy.

    The inevitable result of this maladministration on the part of LBTH is that the planning consent, with all its legal force, is at total variance with the scheme the HCA has agreed to fund.

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