Agenda item

The Executive Member for Regeneration submitted a report for Executive’s consideration.

 

The site at Newham Hall was identified in the Local Plan (2014) for residential development. It was the Council’s largest parcel of surplus land at 71ha. With 42ha of net developable land the site had capacity for approximately 1,000 dwellings (Appendix 1).

 

Although the land had not been marketed for sale, Middlesbrough Council had received two speculative offers for the land in the last three years. More recently, the Council received a Joint Venture proposition from Homes England and entered into an Exclusivity Agreement with them for the period December 2022 - September 2023.

 

Following assessment of these offers and insights from market research the report sought approval for Middlesbrough Council to:

·         progress with the disposal and marketing of the land independently rather than sell to a third-party developer or through a Joint Venture with Homes England; and

·         to utilise LUF2, Towns Fund grant, Strategic Highways and S106 monies, other developer contributions and Council capital programme resources to undertake site de-risking to ensure best consideration for the site at the point of sale.

 

The disposal of the land was recommended in order to meet the Council’s requirements to generate capital receipts, increase annually recurring revenue streams and, as the value of the individual site exceeds £250,000 it was a key decision.

 

The report would seek continued delegated authority to be granted for the Director of Regeneration and Director of Finance to ensure a smooth and efficient disposal and delivery process to take place.

 

The implications of the recommendations of the report had been considered by the appropriate officers of the Council and were set out in the main body of the report.

 

The overall integrity of the Local Plan (2014) depended upon the land supply identified within it being made available. Following Executive approval in 2017 to terminate the Agricultural Tenancy, approval to dispose of the land was granted by Executive in July 2022 via the Asset Disposal Business Case process (Appendix 2 - Confidential).

 

Middlesbrough’s housing offer needed to keep pace with the demands of the market. The release and development of this suburban site would allow that to be achieved; stemming outward migration and making Middlesbrough a more desirable place to live, with a quantity of residential properties that would address the needs of a changing, growing and evolving population.

 

The development of new housing was a key component of the Council being able to achieve financial sustainability through growth in its tax base which generated increased Council Tax income. In addition, the capital receipts generated from sale of land, including housing sites, would support the delivery of the Council Plan and its Medium-Term Financial Plan (MTFP).

 

The Executive Member commented the report was focussed on securing investment from the site rather than specific planning considerations.

 

 

ORDERED that Executive:

1.    Approve the approach of Middlesbrough Council acting as the master developer for the Newham Hall site - being financially responsible for bringing the site forward for phased disposal and marketing without external intervention or support from Homes England;

2.    Approve the use of the awarded Levelling Up Fund 2 and Towns Fund grants, Strategic Highways Section 106 Funding, other developer contributions and existing Council capital funding of £4.129m dedicated to Housing Growth or other projects already contained within the current capital programme to unlock and de-risk the Newham Hall housing site;

3.    Approve Delegated Authority for the Director of Regeneration in respect of Public Open Space and Land Appropriation process and;

4.    Approve Delegated Authority for the Director of Regeneration and Director of Finance for further amendments to the proposed disposal route.

 

OPTIONS

 

Don’t sell the land

 

This would have resulted in significant financial implications for the Council, including no capital receipt and no Council Tax revenue growth. Failure to dispose of the land would have been contrary to the Local Plan (2014). The overall integrity of the Local Plan depended upon the land supply identified within it being made available; the Council would be open to significant challenge from the housebuilding industry if it was seen to constrain land supply. Furthermore, this approach would have resulted in significant abortive costs for the Council resulting from the due diligence work undertaken to date and the cost of legal proceedings relating to the farming tenancy.

 

Sell the land as a whole now 

 

Advice from Knight Frank highlighted that this approach did not demonstrate Best Value for the Council. The approach would have presented a vastly reduced land receipt and there would have been significant uncertainties around the timescales for delivery which could have negatively impacted upon Middlesbrough’s housing supply and Council Tax income, especially as the land did not come with the benefit of an outline planning permission. To undertake this approach would have also negated the Council’s ability to spend the grants received, which would have further reduced the Council’s net receipt.

 

Sell the land without the benefit of outline planning permission or a masterplan

 

It was known that developers would pay for the benefit of a de-risked site. Disposal without planning consent would have proven financially and strategically detrimental to the Council and proven risky for developers, potentially leading to fewer than normal offers and at a reduced financial rate. A masterplan was a planning requirement for a site of this size. Without both the planning permission and masterplan the ability to manage development and competitively market the land would have been significantly reduced.

 

Install highways and electricity infrastructure using LUF2 and Towns Fund then sell the land as a whole

 

Whilst this option would have de-risked the site and provided benefit against the capital receipt it would have been less so than the preferred option, as the potential existed to achieve a greater income over time as land values increased. This option also increased the risk of land banking and stagnating the supply of available homes.

 

Enter into a JV with Homes England

 

Independent advice and professional analysis consistently drew the conclusion that the proposal to collaborate with Homes England on the disposal and delivery of the Newham Hall housing site did not present Best Value for Money for the Council. Under the terms of the payment mechanism proposed by Homes England, the Council would have only received a capital payment equating to 50% of the land value, further reducing the overall value of the Council’s asset from the perspective of best consideration.

 

Accept Offer made by Independent Developer

 

Independent advice and professional analysis highlighted that both offers made did not present Best Value for Money for the Council.

 

REASONS

 

The report contained financial information considered to be commercially confidential. Where reference was made to these figures, which related to valuations and identifiable expenditure, specific reference would be provided to the confidential appendix – Appendix A, which accompanied the report. A series of supplementary papers supported this report as Appendices. Two had been identified as confidential, as they provided descriptive rationale for the confidential figures.

 

The development of Newham Hall would bring an underutilised Council held asset into far more beneficial use in the future – creating a new community and a high-quality place.

 

Newham Hall was critical to the supply of land for housing development and was in turn critical for supporting economic growth in the town and the delivery of Council services. 

 

The disposal of the subject parcel of land was recommended in order to meet the Council’s requirements to generate capital receipts and increase annually reoccurring Council Tax revenue streams.

 

The development would produce in the region of 1,000 residential dwellings which would primarily be a mix of Council Tax Bands ranging from B to F. Modelling of the site indicated that upon completion this would generate additional Council Tax income of approximately £2.5m per annum on completion, based on current Council Tax levels.

 

Middlesbrough Council had received three offers for the land in advance of it being marketed for disposal. It was concluded that the presented offers did not demonstrate Best Value for Money (BVM) for the Council, with advice from external, independent property consultants, Knight Frank demonstrating that the Council would likely have received a higher residual land value than those offered.

 

It was proposed that Middlesbrough Council acted independently of third-party involvement in disposing of the site. This approach allowed the Authority to retain the greatest level of control and independence over the delivery of the site and the procurement of the necessary consultants. It would allow the Council to control the release of development parcels in a timely manner to ensure that the site’s disposal was proportionate to market demand and avoid over supply. It would also reduce the Council’s reliance on third parties, protecting the Council from political or economic shocks. 

 

Despite its size, and the presence of competing sites, professional advice provided by Knight Frank indicated that there was room in the market for the site to be brought forward at this time.

 

Installation of an electricity connection would allow the Council to de-risk the site through increasing the accessibility of the parcels of land available for development, which would in turn expedite the delivery of housing numbers and income. Whilst this reduced risks and upfront investment requirements for developers it placed the Council in greater control of the overall disposal allowing multiple phases and products to be developed simultaneously and preventing the site from stalling.

 

The commissioning of due diligence was in line with the Council’s own policy to maximise capital receipts. A masterplan was a policy requirement as set out in the adopted Local Plan. It was a valuable tool in the planning and development process. The National Planning Policy Framework (NPPF) emphasised that good design was a key aspect of sustainable development, and that design guides (such as masterplans) should be prepared to provide clarity over design expectations and a framework for creating distinctive places with a consistent and high quality of design. Masterplans were used to ensure high quality schemes are delivered and in line with national planning push for developments to meet local standards of beauty, quality, and design. Poor quality and ill-thought-out developments were a real risk if there was no masterplan in place.