Residential estate strategy review

Report: 12
Date: 16 February 2006
By: Commissioner

Summary

The Finance Committee has called for a strategic review report to their meeting in February 2006 in line with Property Asset Management Plans.

This report is in line with the MPS Modernisation Plans (Service Review) and the planned acceleration of estate changes to meet operational policing objectives.

This report outlines the historic context and recommends the way forward.

A. Recommendations

That Members:

• Note and agree the findings of this Review.
• Approve the implementation of the findings, namely to exit direct provision, over a phased period that respects current occupancy and contractual/obligation positions.
• Approve that funds released from residential disposals be added to the capital programme and prioritised (in line with agreed MPA/MPS processes) for modernisation of the operational policing estate. Approve that revenue savings arising be monitored and reported upon annually and these funds be used to address the maintenance backlog in the operational estate;
• Approve that a much reduced estate of some 200 residential units be held for operational and welfare cases going forward.
• Approve that the provision of hostel accommodation (Section Houses) is no longer appropriate and should be ceased as soon as practicable.
• That surplus residential estate assets be released in line with best practice and in terms of asset management planning for the operational police estate.
• That the impacts on officers be managed sensitively and as outlined in the relevant sections.
• That the consultees be advised of the Authority decisions.
• That the Director of Property Services be authorised to implement the strategy under existing delegated powers subject to an annual report to the Authority. Any reinvestment of funds to follow existing delegation and regulation processes.

B. Supporting information

1 The MPA Residential Estate currently comprises some 1020 quarters units – mainly flats and some houses – and some 740 bed spaces in 6 hostels known as Section Houses. The history of provision of housing to officers spans the entire 176 year history of the Service and has been through many policy, financial and other changes – the most important probably being the early 1990’s “Sheehy” changes which removed direct “service long” provision.

2 The estate is presently valued in the sum of some £250m and details on numbers and occupancy are shown at Appendix 1. Since 1992 housing accommodation has been allocated to officers for a fixed term although there are some units (currently 23 are housed in section houses and a further 229 in quarters accommodation), still occupied by pre Sheehy officers. For a detailed breakdown please see Appendix 1. Some 350 units that were surplus to MPS demand in 1992/93 have been short term let to Housing Associations but can be returned to MPA control over time, with vacant possession in the main, on a sensitive and managed basis.

3 The estate is clearly inadequate to house all officers and to address this the MPS assists officers and staff through a Property Services unit called “Property Zone”. This acts as a gateway, on a nomination/introduction basis, to external providers of housing such as Housing Associations, developers and “key worker” housing initiatives. In addition Property Zone acts to alert staff and officers to certain financial products such as equity share mortgages, HSBC Amanah home finance (compliant with Islamic finance protocols) and property insurance. The unit has been highly successful. There are currently 110 such advertisements on the website, ranging from rooms available for rent to flats and houses. The level of general enquiries cannot be fully quantified as hits on the website cannot be counted, but in a typical month there are approximately 50+ enquiries. In addition, enquiries in respect of the Office of the Deputy Prime Minister’s (ODPM’s) scheme for assisted financing for key workers are typically 30 per month. Most officers do not qualify for the core definition of “key worker” in London terms – mainly due to salary levels. [NB the ODPM’s scheme defines Keyworkers not by salary, but by job and within the MPS this is refined to particular categories of officers such as posts supporting front line operational policing.]

4 In relation to the Section House estate this is antiquated (due to poor communal facilities) and is regarded as no longer fit for purpose. Apart from a few rooms do not have en-suite facilities such as toilets, baths and showers which are provided on a communal basis based on an out dated model. Costs of upgrading the buildings are prohibitive and unfunded. Demand is also reducing as the units do not offer reasonable value for money and are generally unattractive, in social terms, in 2006.

5 Given that the Service is concerned just as much with Police Staff housing as that for officers it is considered appropriate to review the future of the residential estate. The Service no longer supports the need for direct, mass, provision for operational policing purposes.

6 In terms of officer recruitment a recent survey has shown a marked shift with recruits now often entering the Service with residential accommodation in London already in place. In part this is probably due to the older age profile of recruits and the focus on recruiting, in the main, from within London. There is also a clear shift in demand based upon changing expectations of officers and a desire to make their own decisions in respect of housing provision.

7 Key, headline, questions/issues which have informed the review are as follows:

• As the MPA cannot fund full housing provision is it appropriate to still seek to maintain a directly owned estate?
• As there are now many other housing options/routes available (as supported by Property Zone) is it now time to move away from direct provision (over time)?
• Could the capital tied up in the estate assets better be used to meet operational policing capital building needs and to augment already meagre capital funding levels for operational buildings?
• Should the Section House element be modernised/replaced even though it will inevitably deflect investment from operational building projects?
• In 2006 is it relevant to seek to offer direct accommodation, even for a limited period, and hence perhaps steer individual choice of those officers who elect to take direct accommodation?
• Should the MPA retain a limited number of units (say c200) to meet operational short term needs?
• Should the residential policy be widened (as it is under Property Zone) to seek to assist Police Staff as well as Officers?
• The current estate is old and with the exception of Central London it is dispersed. The estate could be “modernised” by trading in the old units for new units thus reducing management overheads, but still tying up scarce capital assets. Should this be explored further?

8. In executing any changes it is suggested time would need to be given to allow an orderly vacation and disposal/repositioning programme that meets Service needs and allows current occupiers to obtain alternative housing solutions fully supported via Property Zone.

9. It was considered appropriate to consult and seek views on this potentially sensitive issue before bringing a formal proposal to Committee in line with the agreed Partnership Agreements. Discussions have taken place as follows (advice to the Committee and based on Property Services input is recorded in bold italics within brackets at the end of each response from consultees):

1. The Federation: Whilst understanding the historic decline of provision they remain concerned that the salary/affordability issue may move against an exit from direct provision (over time) which will pose a recruitment and operational risk to the Service in the future. They are particularly concerned that a core residential provision be retained to meet welfare/Human Resource (HR) cases. They accept the value of Property Zone. They are also concerned that a policy change should not require early vacation by officers in occupation. A further meeting with the Federation is took place on the 7 February 2006 and a verbal update will be provided. (A core welfare residential estate provision is contained within the recommendation to the Committee. Future adverse housing and recruitment movements for officers are considered highly unlikely by both HR and Property Services. The recommendation before the Committee is based upon no officer being required to vacate before expiration of time limited allocation. For pre Sheehy officers the recommendation may require relocation but will not remove the contractual entitlements.)
2. METUS: Accept and understand The Federation issues. They also support the need to widen indirect provision to Police Staff in a manner that recognises their growing importance to front line and all round Service delivery/performance. The impact on Police staff employed to administer the residential estate is of concern (including aspects that will impact upon out sourced providers). (The policy proposed will meet so far as is practicable METUS concerns and expand eligibility.)
3. London and GLA Policy: Overall policy is moving away from direct provision and seeking to reflect individual aspirations. Any changes in MPA policy are not considered to be of wider impact upon key worker accommodation availability given the condition of the MPS stock. (The Committee are advised that Property Services works closely with other London agencies and this policy recommendation will expand MPA engagement in provision albeit by indirect routes.)
4. Partner providers: whilst not directly consulted Property Zone has received very positive feedback from indirect providers. (Property Services expanding contact with indirect providers is showing good results and there is no reason to doubt that this will continue.)

10. In essence the questions posed in paragraph 6 generate a limited range of options (that are often interconnected/inter reliant):

• OPTION 1: Retain the estate and modernise over time including replacing section houses with “studio flats”. The cost will be minimal but will mean some £ 250m + of capital being tied up in the residential estate assets. Such an approach will continue to pose issues for officers moving on after their allocation period and will not assist police staff.
• OPTION 2: Broaden the allocation criteria to include Police Staff and otherwise as Option 1. The additional “demand” will further diminish the ability to allocate fairly and still leaves the moving on issue unanswered after an allocation period. Costs of managing demand would be higher in revenue terms.
• OPTION 3: Decide that direct housing provision is not part of the MPS/MPA core function and that the residential estate should be exited in a phased and responsible manner as allocation periods expire retaining core needs for some 200 units.
• OPTION 4: Continue and expand the remit of “Property Zone” for officers and Police Staff as a responsible employer whilst exercising Option 3. Expansion of Property Zone would be achieved by redeploying staff/posts currently managing the estate, as it shrinks, and would hence entail no additional revenue costs. The criteria on which Officers and Staff are eligible for accommodation would need to be revisited. This option would also move away from match funding schemes similar to those previously run by ODPM, to utilising “no cost” solutions when available.
• OPTION 5: Transfer the current estate and liabilities immediately to a suitable organisation for a reduced capital payment. This would mean the MPS and MPA loses management control and accepts a lower total cash receipt at the date of transfer. A large one off capital receipt is not required by the MPS/MPA.

Recommendation: The MPS Investment Board have confirmed that Option 4 be recommended to the Authority. Detailed transition plans can be promptly put in place. It is suggested that proceeds be prioritised for re-invested in the Operational Estate based upon detailed proposals/business cases. Detailed provisional transition arrangements are exemplified in exempt Appendix 2.

C. Race and equality impact

1. There are some potential issues in relation to the location of the current estate and the size of accommodation offered. The location of units reflects the Service’s history (and indeed London urban patterns going back more than 30 years) and is often in areas that mitigate against “moving on” locally at the end of the allocation period. This can be most disruptive to families with children of school age. In addition current locations do not represent the range of London communities so can be away from religious and other facilities now sought, understandably, in 2006.

2. The Section House estate is considered to be extremely poor in being unable to offer levels of privacy expected in 2006 and this can be a significant issue for officers of certain religious beliefs and/or other preferences/lifestyles. It also could be viewed as offering an environment that is unattractive to women and people of differing sexual orientations.

3. Although there is only limited evidence of this, the make up of the residential estate as described in this report could lead to the provision being favoured for occupation only by males and those with limited family or religious needs.

D. Financial implications

1. Direct provision currently ties up some £250m (£90m if some 200 units were retained) of capital funds.

2. Reduced user (officer) demand for section house space, combined with the value offered to meet Internal Audit criteria, means that the revenue account cannot be retained in “balance”.

3. The residential estate is forecast to generate £3.2m (total) revenue income in 2005/06. If the estate were “sold down”, as recommended under Options 3 and 4, the loss of income in Property Services budgets would hence be significant and require compensating financial adjustment. It is not possible to predict the revenue savings (maintenance etc.) as this will depend on vacation rates, exit strategies for multi occupied blocks and impact on out sourced service contracts. No significant savings on outgoings are anticipated until year 3 of the exit plan. It is proposed that these savings be carefully monitored and reported annually to Members. In view, however, of the maintenance backlog which is still growing across the whole estate it is proposed that any savings be redeployed to address underfunding of the maintenance liabilities in the operational estate. The financial income (revenue) loss represents a 1.3% return on Capital Resources committed to the residential estate. In effect the sale of the estate would enable the MPS/MPA to access capital at a rate of 1.3% per annum which is significantly lower than alternative borrowing rates available under Prudential Code procedures/opportunities (excluding the non cash need to set aside Minimum Revenue Provision – MRP).

4. The current, operational building, capital budget has a significant shortfall (c £50m per annum) and the modernisation of the operational estate is urgent but constrained by capital funding limits set in the MPA Budgets. Service Review/Met Modernisation has set the acceleration of operational estate change as a high priority although no further funding has been identified at this stage.

5. By moving to indirect residential provision modest revenue savings could be achieved or used to support expanded activities of the Property Zone unit to meet the work that would be involved in having a limited direct estate. Directly employed staff / posts currently managing the residential estate would be reassigned to support the operation and running of an expanded Property Zone operation. The impact, if any, on out sourced providers on respect of redundancy or TUPE will be formally assessed once Members have made a decision. Costs in this regard are not expected to be significant and redeployment opportunities exist.

6. A decision to invest in a new form of Section House estate would be unfunded within MPA budgets and if investment were decided upon would divert funds presently allocated for renewal of operational front line buildings.

7. The MPA is under an obligation to achieve best value on disposal and maximising receipts would greatly assist in meeting front line operational building needs. It is for this reason, and the need to meet existing allocation obligations to occupiers, that a phased disposal programme is envisaged under certain options. Certain properties also have development potential. This would not, however, preclude consideration being given to disposal as part of the wider London Housing Policy agenda. The MPA has worked successfully with London and National agencies before in this regard but each location would need to be considered individually and is beyond the scope of this report.

E. Legal implication

In executing any change detailed plans would be put in place to ensure respect for current occupier entitlements.

F. Background papers

• Estate Strategy – Building Towards the Safest City.
• Finance Committee Report 17 February 2005 – Rent Review of Residential Estate 2005 – includes a report on Section House demand and previous Internal Audit recommendations.
• Finance Committee 7 December 2004 – Estates Update – includes an item that deals with current arrangements for proactive management of the residential estate as an interim measure.
• Allocation Criteria.

A bound copy of these reports has been placed in the Members Library and can be emailed to Members or a copy provided on CD.

G. Contact details

Report author: Alan Croney, Director of Property Services

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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