Liverpool housing firm failure caused by lack of clear policy strategy and robust delivery and business plans, report finds

A report published by Liverpool City Council has outlined the “lessons learnt” after its housing firm, ‘Foundations’, was placed in voluntary liquidation.

The report acknowledges that Foundations was created to deliver on “ambitious targets of social housing delivery” in Liverpool, which could not be met during its operation.

Through interviews and workshops, it was found that the company was created without a clear policy strategy and without “robust delivery and business plans” to guide how the company would meet its 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,” the report says.

This report's findings “include the need for clear and robust policy strategies, business cases and delivery plans to create council companies to ensure alignment with council objectives, feasibility, and deliverability”.

Liverpool City Council has announced that it is currently developing a new housing strategy and is about to appoint a housing director.

Foundations, set up under former mayor Joe Anderson in 2018, had promised to build 10,000 new homes. It has since emerged that it only built 18, which the company let on a “rent to buy” basis.

On 21 October 2022, Liverpool’s Cabinet approved a recommendation that Foundations be placed in voluntary liquidation.

The report published last week notes that the 10,000-home promise was communicated before funding was secured, which generated “high expectations that were difficult to meet”.

A “lesson learnt” outlined in the report is that the council should agree on “realistic scope” based on a clear understanding of the council’s objectives and capacity, and realistic timetables, and milestones in setting up new companies and their delivery plans.

The report outlines a lack of clarity regarding the relationship between Foundations and the council, “partly due to the absence of a shareholder agreement with reserved matters and shareholder representative”.

Due to this, there was “no clarity on roles and governance in the Council” which made it difficult to establish coordination, tasks, and responsibilities.

In terms of communication, the report notes that there was not a specific point of contact in the council to have direct and regular communication, who had the necessary authority to make decisions.

The 18 homes built by Foundations are being transferred from the council to a registered provider, which will take over the rent-to-buy arrangements.

A spokesperson for Liverpool City Council said that its focus is now on “enabling major schemes, such as Festival Gardens, and supporting a Community Led housing scheme”, which aims to unlock vacant land and properties for community groups to convert into new homes.

Lottie Winson

See also: Local Authority Insight Series: Local Authority Companies – How to Make Them Work In this webinar, three highly experienced public commercial lawyers explore the background and future of local authority-owned companies, examining the pressures and complications they face, the factors behind their creation and look at how councils can best manage their external companies to avoid the pitfalls that have led some to fail.