Contact: Jon Pittam, ext 7400

1 Introduction

1.1 Powers in the Local Government Act 2003 enabled the district councils to reduce the council tax discount granted to owners of second homes with effect from 1 April 2004. The additional income is shared with the County Council and fire and police authorities in proportion to their precepts.

1.2 Six of the eleven district councils in Hampshire decided to reduce the discount in 2004/05 giving the County Council additional income of £1.16m, as the following table shows.

1.3 Cabinet confirmed in February 2004 that agreement should be sought with all the district councils on ring-fencing the additional income in their areas for use on affordable housing with nomination rights for County Council key workers.

2 Progress

2.1 Discussions have continued with officers from the district councils with the aim of agreeing a countywide protocol for the use of the additional income for affordable housing. It is now clear that they see little prospect for reaching such an agreement. The main reasons are:

· differing views between the districts about whether key worker housing is a priority in their individual areas. Some districts support social housing as a priority for the use of the income but would prefer a wider definition than just key workers or the inclusion of other public sector workers. Others may have non-housing priorities.

· for those districts that support an affordable housing proposal, a lack of agreement about the most appropriate model for a key worker scheme, which could include subsidised ownership, subsidised rents, new build, or repayable interest free loans to enable key workers to buy from the existing housing market

· concerns about the extent of the demand from the County Council's key workers for affordable housing. There are fears that schemes involving authorities buying or building houses could be left unfilled if demand does not materialise. There are also concerns that there may be a geographical mismatch between the demand for affordable housing, which may be greater in the north and north east of Hampshire, and the location of second homes in the south that give rise to the additional income. Some district officers fear this could undermine the County Council's commitment to spend the additional income in the district areas in which it arose

· concerns about possible competition with other existing key worker and affordable housing initiatives.

3 The way forward

3.1 Individually, the district councils wish to reach agreement with the County Council to make sure that the additional income is used in their own areas. With a countywide agreement unlikely to be achieved, it would be reasonable to develop individual agreements. If the County Council's first priority of affordable housing for key workers is not agreed, wider priorities for community services could be pursued.

3.2 Cabinet has already agreed that the income from Fareham of £0.1m should be allocated to highway and footway improvements in the Borough. In addition, Cabinet has earmarked 50% of the income from Test Valley for its short-term priority of young people, crime and punishment, subject to a pilot scheme in Andover.

3.3 East Hampshire are thought to be interested in developing a `homebuy' scheme in which the local authorities give the key worker a grant towards buying a house in the open market, subject to repaying a proportional share of the proceeds when the house is sold. This concept could be developed as a pilot scheme and extended to other districts if successful.

3.4 In addition, discussions are continuing with New Forest District Council concerning the development of a County Council owned site in Cannon Street, Lymington for social housing. Part of the development could be earmarked for key workers, using the second homes income to provide the necessary subsidy. This development project could also act a pilot, as it differs from the `homebuy' proposal from East Hampshire.

3.5 The Director of Property, Business and Regulatory Services will report to the Executive Member, Policy and Resources in November on further partnership opportunities with local district councils and housing associations. This could release some surplus sites for affordable housing development in areas where planning permission for more general residential development is not likely.

3.6 The additional income is paid over to the County Council by the districts on a monthly basis throughout the year as part of the precept. As a result, the income will not be received in full for 2004/05 until next March. This timescale allows final decisions on the use of the additional income for 2004/05 to be taken during the remainder of the financial year.

3.7 Some of the districts are currently applying the reduced discount for second homes and are likely to review their policy for 2005/06 in the light of representations from second home owners. This may lead to a reduction in income in 2005/06. On the other hand, some of the five districts not currently applying a lower discount may decide to do so with effect from 2005/06. The extent of income likely and its use in 2005/06 can be reviewed when making final budget decisions in February 2005.

3.8 With the establishment of pilot Area Committees in Havant and Test Valley, it would be possible to involve them in deciding how any additional income raised in their areas in 2005/06 should be allocated. However, unlike Test Valley Borough Council, Havant Borough Council did not reduce the discount in 2004/05 and have yet to decide their policy for 2005/06.

Recommendation

1. The recommendations are contained in the decision sheet summary which precedes this main report.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1. Published works.

2. Documents which disclose exempt or confidential information as defined in the Act.

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