RESERVATIONS remain over a £100 million joint venture to build 1,000 affordable homes.

The major house building partnership between the city council and Hyde Housing Association will go before the housing and new homes committee tonight following a two-month delay.

Conservative councillors say they still have serious concerns about the financial risks involved while Green members want the scheme to be more “ground-breaking” by dropping profit margins and rents.

Committee chairwoman Anne Meadows said it would help hundreds of low income families stay in the city and hundreds more onto the property ladder.

The partnership aims to build 500 affordable rent and 500 shared ownership homes over five years with the first houses coming to planning by the end of 2017.

The project has been on hold after councillors raised concerns at the last housing meeting.

Hyde said it has answered 80 questions on the scheme since then but serious concerns still linger.

Conservative Joe Miller said doubts remained whether the scheme offered best value for money as the council had not opened negotiations with other affordable housing providers.

He said: “Some of our questions have been answered but some cannot be answered because of the way the process was carried out from the offset.

“We should be going through a procurement process and seeing what other affordable housing providers can offer us.”

The news comes amid a crisis over affordable homes with developers behind two huge projects saying cheaper homes may not be viable. Matsim developments has voiced fears about its £80 million scheme near Hove Station and Crest Nicholson has offered £1.2 million to the council to dispense with affordable homes in its Davigdor Road scheme.

Tory housing lead Mary Mears said she had serious concerns that existing council home sites and housing revenue account land (HRA) were being considered by the joint venture. Hyde said HRA sites had been selected during modelling but had been rejected for the project going forward.

Cllr Mears said: “Why are they just modelling it if they have no intention of using those sites?“Certainly they know the sites and we are not being given enough information.”

Green housing spokesman David Gibson said the scheme could be truly “ground-breaking” if Hyde and the council lowered profits to make rents truly affordable.

He said: “The council need to compare rents not to the market but to what people’s incomes actually are.”

“These improvements can be achieved if the council and Hyde accept a model for working that projects a lower profit than the 8 per cent projected rate of return from the scheme.”

Hyde development director Tom Shaw said: “Every single home would be meeting the housing need here.“Because they were developed here in Brighton and Hove, they would not be sold to anybody somewhere else in the UK and so every home would be reducing the council’s housing list.”

Cllr Meadows said affordable homes were urgently needed: “We have a real opportunity to make a difference to families and individuals working hard and struggling to get by.”

PARTNERSHIP THAT HAS RAISED SOME SERIOUS QUESTIONS

How did a joint housebuilding venture for 1,000 properties come about?

Hyde raised the proposal with Brighton and Hove City Council in response to the “massive need for affordable housing”.

Hyde development director Tom Shaw said the situation had reached a point where something had to give and a different approach was needed.

Mr Shaw said: “We could go and do this on our own but if we are working with a partner then the investment will go that much further.

“We are not required to offer below affordable housing, we are offering to do it.”

So is it a partnership of two equals?

With both parties putting in 50 per cent of the £100 million costs and receiving 50 per cent of the returns, on paper yes.

Opposition concerns are that this is a proposal brought and set up by Hyde and so the ultimate beneficiary will be the housing association.

Councillors are wary about giving council officers too much freedom to negotiate the finer parts of the scheme with Hyde’s savvy staff.

When the scheme launched, it was intimated that both partners would offer up sites from their own portfolio but as it has developed the emphasis has been on council owned or purchased sites leaving Hyde free to develop their own land at the more profitable mix of market and affordable.

Hyde said it will also be bringing its team of architectural and construction partners to the table to offer better value for money.

This may bring some concern to residents who did not think much of “The Sackville Sausage” at the former Sackville Hotel or the “Laundromat” homes in Falmer Avenue, Saltdean.

So will these homes be genuinely affordable?

Hyde unsurprisingly say yes. They say these new properties will make a big difference for residents currently working hard on minimum wage and struggling to get by.

Mr Shaw said the homes were more affordable than the council homes currently being built under the council’s new homes for neighbourhoods scheme.

He said: “I don’t think anybody can argue they are not affordable.”

Labour councillor Anne Meadows said the affordable rented homes would save each family £108 per week compared to a market rent and were on average over £10 per week lower than rents for the council’s own new build homes.

But Green housing spokesman David Gibson said even by the council’s own markers, which states that rent should be no more than 25 per cent of gross household income, the homes aren’t affordable to at least four out of every ten city households earning less than £24,500.

He wants the joint venture to take less of a profit and pass on even more savings to residents.

Will the joint venture make a profit then?

The joint venture will make an 8 per cent return on its investment or – to put it another way – a £6,000 surplus per year on each house.

With no shareholders, Hyde said its returns would go back into building more affordable homes while the council could use their own profits as they see fit, going back into the general fund to stave off further cuts or use the returns to build more affordable housing.

Greater profits could also help make the joint venture more resilient should it run into any difficulties.

Difficulties? Are there any risks attached to this project then?

To its critics, the greatest risk of the joint venture is that it borrows against the council’s general fund rather than the more traditional route of borrowing against the Housing Revenue Account (HRA).

Should there be a shortfall, it would have to be covered from within the general fund, which has very little flexibility in the face of ongoing cuts.

In a worst case scenario, opposition councillors fear that might mean further cuts to services to pay off the loan.

Hyde say the scheme has been model tested for even the most catastrophic of house market crashes with property price drops of 40 per cent.

The model has also been tested through a combination of worst case scenarios involving rising construction costs or interest rates, each time still standing firm.

Hyde said the scheme would not be exposed, with only around 50 homes being sold at any one time, and should a market crash occur shared ownership properties would become affordable rent properties.

Any other concerns?

Those critical of the project claim that HRA sites which are already home to council tenants are being considered for the project meaning residents might have to be rehoused.

They are worried the joint venture could cherry pick choice sites leaving the council to go it alone on its remaining, more challenging sites.

Hyde said it was asked to look at HRA sites to be tested for the model but they had been ruled out as the project was not designed to replace existing council homes.

What is likely to happen tonight?

It’s likely to be another long meeting to match September’s six-and-a-half hour epic.

Despite opposition councillors’ reservations, it is not likely to be stopped in its tracks as all parties agree on the venture’s fundamental principles so it seems set to go on to the policy, resources and growth committee next month.

Before then the Chancellor will deliver his autumn statement on November 23 where some hope he might lift councils’ HRA borrowing cap and remove one of the key drivers for the joint venture.

WHAT IS AFFORDABLE HOUSING?

AFFORDABLE housing is the burning issue within the city.

The difficulties in delivering it when land prices and market rents are so high has been apparent in recent days with the struggles of two major schemes in Hove to deliver an affordable element.

In order to tackle the problem head-on, Brighton and Hove City Council has shown ambition in committing itself to building 500 council homes by 2020 and in unveiling a joint venture for 1,000 more affordable homes.

Under the joint venture, rents would be 40 per cent of gross pay to a household earning the new national Living Wage rate of £8.55 per hour by 2019.

Current estimates by the council suggest this would require an average 40 per cent discount on the market rent and a 20 per cent discount for the Government’s affordable rent levels.

Rents will also go up less under the joint venture in line with the Consumer Price Index (CPI) which council officials say will ensure that rents do not rise at a higher rate than the cost of living and should keep pace with wage increases.

It is a lower increase than usual rent increases for housing associations and councils which are usually set at CPI plus 1%.

Council bosses said rents would not be pegged to the National Living Wage because any increases are politically controlled and so hard to predict.

Green housing lead David Gibson said: “Given the acute shortage of new homes in Brighton, the proposed partnership with Hyde Homes is certainly to be welcomed. However, the proposals need to improve.

“Yes, the measure proposes ‘affordable’ housing – but affordable for whom?

“We need to make sure that the rent levels are not defined by the council, Hyde or by the market, but by people’s real wages.”