The horror story of the fumbling, futile Foundations

The 20 houses at Tunstall Street which were supposed to be transferred to Foundations on completion but instead were transferred to a housing association at a loss of between £1 and £2 million

Tonight, at the Companies Governance Committee we will be looking at the daft absurdities of the complete failure of the Foundations Company set up with grand gestures by Mayor Joe Anderson back in 2017. Anderson’s aspiration was to build 10,000 new social rented homes and households who were not eligible for tenancies from Housing Associations. The Council believed that Foundation Homes would address their needs.

In launching the Company Anderson told the World that this would be the game changer for housing in Liverpool. The provision of 10,000 homes would indeed have been a game changer. If the homes had been provided that would have been true but there was never any possibility of them achieving that as, I have to say, I said at the time.

Anderson also claimed that he had got the Government to write off more than £500,000,000 of outstanding debt hanging over the Council from when it had its own housing stock. This is just incorrect. I negotiated with the Labour Government more than 2 decades ago the write off of debt provided that we did not build any more council houses. The Labour Governments of Blair and Brown did not like Council housing any more than the Tories before and after them.

The write off would have been needed from the Tory Government if the Council had built 200 homes at social rent when it would have to reopen a Housing Revenue Account to keep rent money separate from tax money.

So the Company was established and a chair was appointed, Frank Hont, who had lost his seat in Childwall to the Liberal Democrats days earlier took the top job.

However, the total results of a lot of all this effort and blustering was the provision of just 18 homes none of which were for social rent. Two other schemes were conceived as part of the Foundations Programme at the time both of which also ran into huge and public difficulties.

The scheme in Tunstall Street was to provide social housing but had to be flogged off to a housing association at losses between £1.5 million and £2 million depending on how much grants clawed back by Homes England. The scheme in Fazakerley was to provide about 30 socially rented homes (the number kept changing as budgets were revised) as part of a mixed ownership development. Again, these had to be disposed of to the housing association managing the overall scheme at a loss.

This all went public before a delivery and funding plan had been approved and realistic targets had been set. As with any new company, Foundations required investment from its owners (the Council). The Council approved an investment £0.75m in the company in 2018, and business support grant of £0.17m in 2019. Also, the company managed to secure loan agreements with the Council to acquire 18 properties totalling £2.4m. This represented the main source of financing for the company.

In fact, the costs was more than this because much of the costs were hidden in the Council’s overall budget. The Labour Group were unceremoniously bundled out of their offices and staff were seconded in to make the Company work.

It was clear to me from the start that this was never going to work. The start up and running costs of this type of development are huge. The infrastructure needed to run a small housing company is proportionately bigger than a large one where there is a greater spreading of overheads. Any small business of this nature inevitably makes a loss in its early years, but these losses were never quantified inside council budgets.

It was found that the company was created without a clear policy strategy to support and justify this decision and without robust delivery and business plans to guide how the company would meet its defined objectives. It was also identified that the company needed a baseline of information to understand its financial implications in capital and revenue. Also, the company did not secure the internal funding required to deliver on its ambitions during its operation.

There was no engagement with Registered Providers in the city to understand housing needs, the role of RPs in addressing this, and what the Council’s role could be to complement this. This is absolutely vital as the Council had to transfer all its housing stock to housing associations back in the late 90s and first decade of this century to enable them to borrow the money to pay for the improvements and demolitions which were badly needed in the 42,000+ homes that we transferred.

So where does this leave the Council’s housing staragy now? The simple answer is nowhere as we do not have one and are just in the process of appointing a strategic housing director to oversee the development of a strategy. It is now 4 years since the Tory Government allowed Councils to build housing again but to date none have been provided in our City and there are no plans to do so.

I think there are things that the Council could do:

It has vast land holdings which could be transferred at little or no cost to housing associations subject to development agreements about the ongoing development of the land.

It should develop localised strategic partnerships with social housing providers so they can cost effectively look at suitable opportunities within an area to enable it to provide greater control of what housing is provided so that it can deliver the concept of neighbourhoods and communities that we have all signed up to.

It could enforce planning conditions which are available to them on private sector developers to ensure that 20% of any new development over a certain size should be for social or low cost housing.

It could develop its own HMO delivery plan to take over through management orders some of the many problem Houses in Multiple Occupation that besmirch parts of the city.

It could do these and more. Above all it needs to develop a strategy which is properly supported by all public and private sector housing providers in the City so that it can use its available muscle, resources and finances to tackle the appalling problems of poor or none-existent housing that too many of our citizens face.


About richardkemp

Leader of the Liberal Democrats in Liverpool. Deputy Chair and Lib Dem Spokesperson on the LGA Community Wellbeing Board. Married to the lovely Cllr Erica Kemp CBE with three children and four grandchildren.
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