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Liverpool City Council’s failed housing company had unrealistic targets, report finds
A council housing company which built just 18 homes before being wound down had unrealistic targets and no funding to meet them, an independent report has found.
Foundation Homes, Liverpool City Council’s (LCC) wholly owned company, was set up in 2018 under Joe Anderson, the mayor at the time, with promises that it would build 10,000 homes.
But last year the council moved the company into voluntary liquidation, despite just 18 homes being built. Its problems have now been laid bare in a “lessons learned” report presented to LCC’s companies governance sub-committee.
The report into Foundation Homes found the company had failed to meet its targets for many reasons. It said the 10,000-home target was communicated before funding was secured and “realistic targets” set.
“This created unrealistic expectations and presented reputational risks to the council and the company if the targets were not met,” the report said.
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According to the report, the council had used external consultants to develop an outline business case, but this was based on “unrealistic assumptions and insufficient understanding of the Liverpool context”.
The report also highlighted how Foundation Homes had not secured the internal funding required to deliver on its ambitions, and said there was a lack of agreed investment from the council.
According to the report, a provision of £350m was included in LCC’s housing capital programme for the delivery of new homes in the city, which the company would be able to access and draw down.
However, there was no business case to determine how and where the money should be spent, and the allocation was subsequently removed from the capital programme.
The report also said that “limited consideration” was given to how Foundation Homes could access other public funding, such as grants from Homes England or the combined authority, to supplement council investment into the company.
Furthermore, the council had not communicated with existing landlords in the city to understand local needs.
The 18 homes built by Foundation Homes are now being transferred from the council to a registered provider, which will take over the rent-to-buy arrangements.
When the council formally closed the company last October, Sarah Doyle, its cabinet member for development and housing, said: “Liverpool City Council has been reviewing all of the companies it has established over the years to examine their role and function and to consider whether they are delivering best value for the taxpayer.
“Foundations was established to deliver thousands of new homes across the city, but it became apparent that this was no longer a viable proposition.”
LCC decided to pull the plug on Foundation Homes in 2021, after a highly critical report into the council by inspector Max Caller uncovered weaknesses in the housing vehicle.
“Had [Foundation Homes] continued in its current form, the accumulation of LCC-funded debt based on highly marginal schemes, not forecast to come good for many years, would have presented a major problem,” Mr Caller said at the time.
Mr Caller’s report was commissioned by the government as part of increased scrutiny of the Labour-controlled council following the arrest of Mr Anderson in 2020.
Mr Anderson was later released on bail after being investigated over claims of bribery and witness intimidation relating to building contracts in Liverpool. He denies any wrongdoing and the investigation – codenamed Operation Aloft – continues.
An LCC spokesperson said the focus now was on enabling major schemes such as Festival Gardens, and supporting community-led housing schemes.
The council recently adopted a community-led housing asset disposal policy, which aims to unlock vacant land and properties for community groups to convert into new homes.
LCC is currently developing a new housing strategy and has just appointed an interim director of housing.
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