Agenda Item No
The Vale of Glamorgan Council
Cabinet Meeting: 23 March, 2015
Report of the Cabinet Member for Housing, Building Maintenance and Community Safety
Home Improvement Loan Funding
Purpose of the Report
1. To consider a repayable funding opportunity from Welsh Government that will enable the Vale of Glamorgan Council to offer loans to repair private sector housing.
1. That Sections 7.4. and 8.2 of the Private Sector Housing Renewal Policy 2014 be amended to include the provision of Home Improvement Loans as detailed in Appendix 1.
2. That the Director of Development Services adopts a suitable delivery option to administer the loan products specified.
Reasons for the Recommendations
1. To enable the Council to offer Home Improvement Loans to private sector housing owners.
2. To enable officers to consider and appraise the delivery options available to administer a loan scheme within the revenue funding available.
2. On 1st October 2014, Welsh Government announced their draft budget. Within this budget, provision has been made for repayable funding to Local Authorities for a Loan Fund that will enable them to deliver Home Improvement Loan schemes to owners in the private sector.
3. On 29th January 2015, Welsh Government announced a £10 million Home Improvement Loan Scheme. This Scheme constitutes repayable funding, to enable local authorities to develop loan schemes to support private sector homeowners improve poor quality housing.
Relevant Issues and Options
4. The funding from Welsh Government to the Vale of Glamorgan Council for a Home Improvement Loan fund amounts to £844,229, to be claimed in full by 31 March 2016. This funding must be repaid to the Welsh Government by 31st March 2030. Welsh Government will not charge interest on the repayable Loan Fund.
5. Welsh Government is anticipating 5% bad debt against the total fund and it has agreed to write off half of the first 5% of bad debt. The Council must underwrite any remaining bad debt. Interest earned on the balance of the Loan Fund not used within 6 months must be added to the loan fund. Loan funding not committed or awarded in a reasonable time (not defined) must be passed back to Welsh Government.
6. The repayable funding from Welsh Government is available in two instalments of £295,480 and £548,749, the first to be drawn down by 31st March 2015 and the second by 31st March 2016. The second instalment cannot be drawn down if the first instalment has not been committed and awarded. The repayable Loan Fund must be used to offer private sector homeowners a loan with which to make their properties warm, safe or secure.
7. This is not a statutory duty for the Council but the funding will support the Council's Empty Property Strategy, Private Sector Housing Renewal Strategy and Housing Improvement programmes, both through its Regeneration and Welsh Housing Quality Programmes. Unlike the recent funding from Welsh Government for houses into homes loans, Welsh Government is not specifying the terms and conditions of the loan products.
8. To enable the Council to meet its strategic housing need and ensure that any product offered is competitive with high street lenders the following products will be offered.
Home Repair Loan - A loan targeted to owner occupiers to assist in essential repairs.
Landlord Loan - A loan for landlords who will offer accommodation to support the Council meet its homelessness responsibilities.
Leaseholder Loan - A loan for leaseholders within Council owned blocks of flats to assist in meeting the cost of essential repairs or upgrading the buildings to achieve better energy efficiency.
Empty Property Loan - A loan targeted to owners of empty properties who wish to occupy the empty property following renovation, to assist in basic renovations.
9. To ensure the funding is secured, the loan will need to be registered with the Land Registry as a charge against the property. Through experience of offering the Houses into Homes loans, first charge lenders are unlikely to agree to a deed of priority. As a result, companies which have granted a mortgage on a property generally will not agree to limiting their charge on the property to the amount of that loan. Without this agreement, any charge the Council places on the property to secure its debt is not as secure as it could be and will always rank behind a first charge (which invariably secures further advances by that lender). This limits the availability of the loan to owners who have no debt secured against the property and this factor will need to be considered when implementing the loan scheme.
10. All loans offered to private sector owners must be repaid in full. The loan will be interest free but the local authority will charge an administration fee of 15% on each loan awarded, to cover the administration cost of the scheme. To enable the Council to offer the above loan products, the terms and conditions of this financial assistance must be detailed within the Council's Private Sector Housing Renewal Policy 2014. Appendix 1 details the amendment to this Policy.
11. There are several delivery options for the local authority to administer the individual loan application process: delivery in house, collaboration working with another local authority, or outsourcing the whole process to an external partner. These delivery options need to be explored further to enable a model to be developed that will enable the scheme to operate within the funding generated by the fee income from loans.
12. This loan funding is not an in-scope service for the Public Protection collaboration project. The Vale of Glamorgan Council has not offered financial assistance to owner occupiers to repair their homes for several years, so the demand for the service is not known.
Resource Implications (Financial and Employment)
13. There is no additional revenue funding from Welsh Government for the loan scheme. Resources required to deliver the scheme must be met by the local authority. To cover this cost, a maximum fee of 15% will be charged from the capital allocation for each loan to generate an income to fund the administration of the scheme.
14. To set up the home improvement loan scheme, 0.2 FTE staffing will be required for 3-6 months. This resource is only required to develop the scheme.
15. Initial work on the delivery of the loan scheme via in-house staff indicates a 0.5 FTE post at a band H (subject to Job Evaluation) is required at a cost of £18,333 per year. The 15% administration charge will also be used to cover the cost of Legal Services administering the loan agreement and registering the charge, and for Finance to set up repayments, collect and monitor those payments, and, if required, to pursue missed payments. There will also be a cost of providing the affordability assessment of owner occupiers, estimated at £200 per loan. Initial estimates indicate that there will not be enough revenue funding generated from the scheme to off-set all the Council's revenue costs if delivered in-house.
16. As a result, further work is required to scope the costs of the other delivery options to provide a cost comparison for the service and determine the financial viability of the scheme's running costs. Out sourcing the administration of the loan scheme to the market is untested, while the interest and costs of delivering the scheme are unknown at this time.
17. Once lending stops to individual loan applicants, there will be no fee income generated. However, there will still be a revenue cost to administer the repayment of individual loans and take action against non-repayment. When scoping the delivery options, these cost implications will need to be included in the appraisal.
Sustainability and Climate Change Implications
18. Through the improvement of homes, the loan scheme will have a positive impact on creating sustainable communities. It will also enable homes to be repaired and improved, positively affecting on the property's fuel efficiency and the residents' health and well-being.
Legal Implications (to Include Human Rights Implications)
19. There is not a statutory duty on the Local Authority to provide funding to home owners to repair or maintain their homes.
20. To ensure compliance with State Aid rules, the Council cannot lend to a landlord who has benefited from other grants or loans (that are outstanding) to a value of £163,500 in the last 3 years. To ensure compliance, checks will be undertaken as part of the loan process.
21. The power to offer the home improvement loan is provided within the Regulatory Reform (Housing Assistance) Order 2002. To exercise this power, the Council must amend its Housing Renewal Policy 2014 to detail the terms and conditions of the loan offer. If required a further report will be presented to Cabinet to recommend the necessary amendments to the policy.
22. The Financial Services and Market Act 2000 (Exemptions) (Amendment) (No2) Order 2003 exempts local authorities from regulation by the Financial Conduct Authority but they must offer a comparable service. This is detailed in guidance issued by Department of Communities and Local Government in 2005.
23. By securing the loan on the Land Register, this exempts the Local Authority from the Consumer Credit Act 1974.
24. The local authority will not be offering its grants agency service to owner occupiers to assist in the completion of works due to the additional requirements and financial risks this creates under the Consumer Credit Act 1974.
25. All loan applicants will be required to agree to a registered charge against their property to protect the Council's financial interest.
26. The Welsh Government award of Repayable Funding is made pursuant to sections 70 and 71(1) of the Government Wales Act 2006 and sections 126 - 128 of the Housing Grants, Construction and Regeneration Act 1996.
Crime and Disorder Implications
Equal Opportunities Implications (to include Welsh Language issues)
28. As this is an interest free loan, there are no known implications for applicants of different religious backgrounds.
29. Corporate Outcome - Vale of Glamorgan residents have access to affordable, good quality, suitable housing and housing advice and support.
30. Development Services Outcome 1 - Residents of the Vale feel safe in their communities, are healthy and have a good quality of life.
31. Development Services Objective 1 - To improve the health and wellbeing of the residents and visitors by delivering a range of targeted and accessible services.
Policy Framework and Budget
32. This is a matter for Executive decision.
Consultation (including Ward Member Consultation)
33. None as the matter is not Ward specific.
Relevant Scrutiny Committee
34. Housing and Public Protection.
Welsh Local Government Association Home Improvement Loans Toolkit
Elen Probert, Principal Housing and Pollution Officer - Tel. 01446 709833
Irene Thornton, Senior Lawyer, Legal Services
Carolyn Michael, Financial Services
Laura Davis, Finance Officer, Development Services
Rob Thomas, Director of Development Services