Gareth Bradford and Graham Russell presented a report which sought endorsement of an equity investment from the WMCA’s devolved Housing and Land funds to the 100-unit Marches H2O project to pilot a new affordable housing product in Wednesfield, Wolverhampton. It was explained that H2O was a proposed new affordable housing product which provided potentially a rental solution to local residents that gave long-term security, the benefits of home ownership without the risks and complete flexibility to leave whenever the tenant wished.
Councillor Steven Simkins supported the proposal and commented that the product bridged the gap for those tenants who currently struggled to obtain mortgages. He enquired when the resources would be made available in order that the scheme could commence. Gareth Bradford explained that due diligence and further legal matters needed to be concluded but that the WMCA was working closely with colleagues at the City of Wolverhampton Council on these matters.
Gareth Bradford and Graham Russell responded to further questions from members of the Board including:
· Whether a conflict of interest existed with properties being purchased from WV Living (a private limited company set up by the City of Wolverhampton Council);
· The identity of the Accountable Body;
· Whether consideration had been given to other options rather than the establishment of a Real Estate Investment Trust;
· The availability of a presentation on the concept;
· The grant of notional equity to Frontier Development Capital.
Councillor Mike Bird offered his thanks and congratulations to Frontier Development Capital for the work it had undertaken in bringing forward this initiative.
That subject to:
a) The results of detailed accounting, taxation and legal advice in relation to The Marches H2O Real Estate Investment Trust (REIT) which was to be commissioned jointly by the WMCA and City of Wolverhampton council;
b) The City of Wolverhampton Council confirming that it had secured all necessary approvals and funding to co-invest in the project;
c) Availability of the debt funding at the terms detailed in the proposal;
d) WMCA and City of Wolverhampton Council being involved in the selection of the property manager by Frontier Development Capital (FDC), the proposed manager of the H2O Marches REIT;
e) The completion of the detailed legal and financial documentation and due diligence to establish The Marches H2O REIT to the approval of the WMCA Director of Housing and Regeneration, the WMCA head of Governance and WMCA Finance Director;
f) The Ministry of Housing, Communities and Local Government (MHCLG) assurance that this novel investment and the re-use of returns to deliver the purposes and intent of the Land Fund and reduce the net investment commitment from the WMCA was compliant with agreed terms of the Land Fund and accepted as an exceptional proof of concept project:
1. That WMCA equity investment up to a maximum as detailed in the report from the WMCA’s devolved housing and land funds alongside the City of Wolverhampton Council’s investment to enable the delivery of 100 Help to Own (H2O) units on The Marches site in Wednesfield, Wolverhampton through the creation of a new Real Estate Investment Trust (REIT) or other suitable structure as an exceptional proof of concept pilot for a new affordable housing product called ‘Help to Own’ be approved. (It was envisaged that the investment would be in the form of equity but with the potential for the inclusion of capped first loss or other provisions to ensure viability, subject to detailed due diligence);
2. That it be noted that the funding was fully compliant with the WMCA Single Commissioning Framework (SCF) approved by this Board, the Housing and Land Delivery Board and the WMCA Board in March 2019 and which had been operational from 1 April 2019 and it be noted also that the scheme had progressed through each SCF Gateway Approval point on the way to this Board;
3. That it be noted that this funding was considered to be compliant with the requirements set by Central Government for devolved housing and land funds administered by the WMCA;
4. That it be noted that the report had been co-developed with Officers from the City of Wolverhampton Council, the promoter of the H20 Marches project;
5. That it be noted that the 100 units would be purchased from WV Living, a private limited company set up by the City of Wolverhampton Council;
6. That it be noted that the pilot would be subject to ongoing evaluation with six monthly reports to the Investment Panel and Investment Board as well as annual reports to the WMCA Board;
7. That it be noted that the report had been jointly developed by the WMCA Section 151 Officer, the Monitoring Officer, Director of Investment and Commercial Activities and the Director of Housing and Regeneration.