Report on Department for Social Development – Advanced Land Purchases

pac-report-on-dsd-advanced-land-purchases.pdf (393.38 kb)

Executive Summary

1. The Comptroller and Auditor General (C&AG) has reported for a number of years on his significant concerns on matters relating to Housing Associations. The Committee noted that in the last few years there has been a general improvement in the results of the regulatory inspections carried out by the Department for Social Development (DSD) and this improvement has been driven, at least in part, by the Department. 

2. Notwithstanding this overall improvement, the Committee was deeply concerned by the handling of issues that arose in two particular schemes. These two schemes received Advanced Land Purchase (ALP) grants totalling £8.9 million from the Department but no social housing was ever actually built in the schemes.

3. In Helm Housing Association there were major problems surrounding their governance and their ongoing developments which were reported by the Department and also by the C&AG in 2012. These issues have now been largely resolved within Helm but the Committee was extremely concerned about the ‘flip sale’ of property at Great George’s street which allowed a third party to make a profit of £3.25 million by buying and selling it to Helm on the same day. The Committee views it as unacceptable that this has not been satisfactorily explained despite investigations having taken place.

4. The purchase of the land at Great George’s Street was financed by an ALP grant in 2007 of £8.1 million which was intended to lead to a development of 130 social housing units - however none were ever built due to problems obtaining planning permission. An agreement for Helm to repay the grant to DSD was reached in 2014 although this will be by means of instalments up to 2017, some 10 years after the grant was paid over, and no interest is being charged. The Committee is hugely disappointed at how long it has taken to recover public funds and has made recommendations relating to improving due diligence before grants are paid and the charging of interest on recoveries of ALP grants.

5. A similar issue arose on an ALP grant to Trinity ^[1] Housing Association in respect of a proposed development at Crossgar. In this case £0.8 million was paid in early 2008 for a proposed 12 unit development – however this was never actually built because planning permission was not forthcoming on the site. When it became abundantly clear in 2012 that planning permission for a viable social housing scheme on the site was not going to happen the Department asked for its grant to be repaid. At that point Trinity threatened the Department with legal action to retain its money as it said there was still a possibility of a development on the site. Similar legal obstacles were threatened again in 2013 when the Department again attempted recovery of the grant.

6. In the Committee’s view Trinity’s behaviour was unacceptable as the Association had a public duty to repay the money when it had not been possible to progress the development. An agreement to recover the grant was only achieved in 2015 and the Committee was appalled that this allowed Trinity to retain £0.2 million of the original grant to cover expenses it had incurred at the site even though no development had taken place. As with the agreement made with Helm there is no provision for the recovery of interest.

7. There was also a further issue relating to a potential conflict of interest on the acquisition of the Crossgar site and relating to Trinity’s involvement on another potential development in Newtownards. The former Chief Executive of Trinity, Mr Canning, clearly stated in his evidence to the Committee that he was unaware of the proposed Newtownards development until 2009. The date is hugely important because Mr Canning should have declared a conflict of interest in relation to it when Trinity first registered the site with NIHE in 2007.  Following the evidence session the Board of Choice Housing Association (the new body which includes the former Trinity) commissioned its own investigation which strongly indicates that Mr Canning was in fact aware of the Newtownards development at a much earlier stage than he revealed to the Committee. In the Committee’s opinion Mr Canning’s evidence was completely lacking in credibility in this important element of the enquiry and was therefore completely unacceptable.

8. The Committee was surprised that even after the issue was brought to the Association’s attention in 2009 it was not handled properly by either the Chief Executive and Chair of Trinity or the Department.  Indeed when a number of questions about the handling of the conflict were put to the Chief Executive of Trinity it was completely unacceptable that these reasonable questions were not properly answered and that the Department was threatened with legal action by the Chief Executive. The Committee has made a number of recommendations relating to the identification and handling of conflicts of interest and that Departments should not be prevented from doing what is right merely by the threat of legal action.