Contact: Jon Pittam, Contact Ext: (01962) 847400 Email: [email protected]

1 Introduction

1.1 Cabinet confirmed in September 2004 that agreement should be sought with district councils on an individual basis on ring-fencing the additional 2004/05 income raised from the reduction of the council tax discount on second homes. The additional income is shared with the County Council and fire and police authorities in proportion to their precepts.

1.2 Six district councils reduced the council tax discount for second home owners in 2004/05 and £1.16m additional income was raised for the County Council as a result of their decisions. Since September 2004 all six districts have been in discussion with the County Council on their proposals for use of the 2004/05 income in their areas. To date Cabinet has agreed proposals in East Hampshire, Eastleigh, Fareham and the New Forest.

1.3 The County Council's share of the additional income raised in 2004/05 and 2005/06 is as follows:

Table 1 - additional income

2004/05 2005/06

£000 £000

Basingstoke - 109

East Hampshire 158 154

Eastleigh 59 49

Fareham 97 101

Gosport - 59

New Forest 571 625

Rushmoor - 75

Test Valley 156 142

Winchester 119 172

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Total 1,160 1,485

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1.4 Because of the slow progress in developing a practical solution for Housing in 2004/05, and in order to keep the council tax increase as low as possible, the County Council used the additional income, with the exception of £200,000 held in reserve, to fund accredited community support offices in 2005/06.

2 East Hampshire

2.1 Cabinet approved in December 2004 a Homebuy scheme for County Council and East Hampshire keyworkers using the income available to the two councils from the reduced discount in 2004/05. The scheme could support up to five employees from the County Council and potentially one from East Hampshire.

2.2 The scheme would be managed on behalf of the two councils by Swaythling Housing Society. Swaythling were approached in the Autumn to assist with the scheme as it was felt that their experience as local agents for the Government's keyworker housing scheme would be beneficial.

2.3 Swaythling indicated that to avoid the Homebuy loans from becoming a taxable benefit to the employee an agent such as themselves would need to manage the scheme at `arms length' from the County Council. In recent weeks it has emerged through informal discussions with Her Majesty's Revenue and Customs that this arrangement would not be sufficient to prevent the loans from being treated as a taxable benefit.

2.4 We estimate that the taxable benefit that would arise on a typical £30,000 loan is £1,500 per annum and the employee would be liable for income tax and national insurance (NI) of approximately £500 per annum. The cost to the County Council of the employer's NI contribution would be £200 per annum per County Council loan of £30,000.

2.5 Progress on development of the East Hampshire Homebuy scheme and a similar scheme in the New Forest has been slow since Cabinet approval was granted. This was due to the tax issue and delays in getting agreement on the contract between the three parties involved. Should approval be granted to continuation of development of the scheme as a taxable benefit the County Council would need to produce a new legal agreement for consideration by Swaythling and East Hampshire District Council. Once agreed Swaythling will then need the approval of the Office of Fair Trading (OFT) to proceed. Swaythling have been informed by the OFT that due to the small scale of the scheme it will not be treated as priority work and that we should not expect a result for a number of weeks. It appears unlikely that we would be in a position to launch the scheme until early Autumn. Approval is sought for continuation of development of the scheme as a taxable benefit.

3 Eastleigh

3.1 The Executive Member for Policy and Resources agreed at the decision day on 14 April to pool the County Council's share of the additional income raised in Eastleigh in 2004/05 (£58,700) with Eastleigh Borough Council's own share (£7,600) to provide funding for a specialist housing occupational therapist post for the physically disabled. The income raised in 2004/05 will be sufficient to fund the post for three years. It is expected that recruitment to the post will occur in September/October.

4 Fareham

4.1 Cabinet has agreed that all the County Council's 2004/05 income from the Fareham area should be allocated to highway and footway improvements in the Borough.

5 New Forest

5.1 A New Forest Homebuy scheme has been in development alongside that in East Hampshire and has also been subject to the delays identified above. Cabinet agreed to earmark £300,000 of the County Council's income in 2004/05 for earmarking for Homebuy. This could support nine County Council keyworker applicants. New Forest District Council has allocated its share of the income in 2004/05 to its own separate social housing priorities.

5.2 At the Policy and Resources Executive Member decision day on
14 April 2005 the recommendations of the Buildings Land and Procurement Panel were agreed that part of the income from New Forest in 2004/05 should be earmarked to provide a subsidy for keyworker housing units at the site of the Old School Building, Cannon Street Lymington which the County Council is selling to the Swaythling Housing Society. The subsidy of up to £80,000 (£20,000 per unit for 4 units) will only be necessary if the County Council is unable to nominate keyworkers for the units on either a shared ownership or intermediate rental basis. The need for the subsidy will not become clear until mid 2006 at the earliest.

5.3 The report to Cabinet in December 2004 raised the possibility of providing keyworker housing units at a site owned by New Forest District Council at Challenger Way, Dibden. The District Council has offered another part of the site to the County Council free of charge for the construction of a day centre for older people. The District Council will require payment for the part of the site to be used for keyworker housing. The current estimate of the subsidy required from the County Council for 5 keyworker units is £410,000 if the County Council is able to nominate key workers willing to take the units on a shared ownership basis. This would rise to around £600,000 if keyworkers are only prepared to accept the units on an intermediate rental basis, probably payable on a phased basis. It has proven difficult to fill shared ownership schemes elsewhere in Hampshire. These figures would be subject to refinement as the development is progressed.

5.4 The Homebuy proposal (£300,000) and the Lymington scheme (up to £80,000) could use £380,000 of the income of £571,000 available from the New Forest area. The balance of £191,000 would not be sufficient to meet the estimated subsidy required for the full Dibden scheme (£410,000 to £600,000), but would meet the cost of one or two key worker units and this approach is recommended.

5.5 New Forest District Council had previously suggested using some of the income from 2004/05 to offer loans and, possibly, some pump-priming grants to Hyde Housing Association to renovate empty properties to bring them into use for renting to County Council key workers. There is enthusiasm for this idea but as outlined above, there is unlikely to be any funding available if Dibden proceeds.

5.6 Approval is sought for the continuation of the New Forest Homebuy scheme as a taxable benefit and Cabinet is requested to confirm its priorities for how the income raised in the New Forest should be split between Homebuy and other keyworker schemes as set out above.

6 Test Valley

6.1 Cabinet has earmarked 50% of the additional County council income for its short-term priority of young people, crime and punishment. Test Valley Borough Council has also approached the County Council about using the remaining income for a keyworker housing scheme in the Test Valley area. The Borough Council has spent its share of the income so the proposal would only benefit County Council key workers.

6.2 The Test Valley Homebuy scheme would operate on the same basis as the schemes in East Hampshire and the New Forest. The remaining funding available for use in the scheme is £78,000 and is sufficient to help up to three County Council keyworkers.

6.3 Approval is sought for continuation of development of the Homebuy scheme as a taxable benefit

7 Winchester

7.1 Winchester City Council have yet to come forward with a firm proposal for the use of 2004/05 income in its area.

8 2005/06 Income

8.1 Cabinet agreed in February 2005 to earmark £200,000 of the income from second homes in 2005/06 to continue after a review, the initiatives started in 2004/05 on affordable keyworker housing.

8.2 No decision has yet been taken on the allocation of this £200,000, which could include continued support of the Homebuy initiatives in East Hampshire and New Forest. That decision would need to take account of:

· The separate Cabinet initiative to stimulate affordable housing schemes on the County Council's sites in partnership with housing associations and district councils

· The Government's consultations which closes on 25 June 2005, on Homebuy to help more keyworkers, social tenants and other first time buyers than under its current scheme to purchase a share of a home to get a first step on the housing ladder.

9 Recommendations

9.1 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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