Closure of 3 Rivers Housing Firm
Council statement regarding 3 Rivers Developments
Back in 2017 the Council decided to set up a wholly-owned, commercial, property development company, called 3 Rivers which aimed to deliver high quality homes in Mid Devon, while providing a financial return to the Council.
The formation of this new firm was against a back drop of significant funding cuts from Central Government and at a time when councils were being encouraged to come up with new funding streams to support service delivery.
A lot of preparatory work was undertaken before the company was formed, which included assistance from external legal and financial advisers and visits to a number of councils, who had already set up similar ventures successfully. This preparatory work was done in order to ensure that robust systems of legal, commercial and financial governance were created from the outset. These controls have been the subject of a number of reviews, which concluded that the controls and processes for 3 Rivers were legal, robust and working effectively.
While 3 Rivers has delivered successful housing projects in Mid Devon since it began, notably the Orchard, Halberton, Threwstones, Tiverton and a development of social housing in Burlescombe, the Council decided in March 2023 that 3 Rivers would not embark on any new projects.
In recent years trading conditions have become significantly more challenging and the company has faced project shut downs, material price increases of 20-50+%, restricted site availability, the loss of the main contractor at a key site, rising interest rates and major uncertainty in the housing sales market.
In the regular updates to the Council, Members were informed that the investment in 3 Rivers was unlikely to yield the returns previously forecast, and after a decision not to support the company’s revised business plans in February, and following further professional, external advice the Council decided to “soft close” the business. This process will enable 3 Rivers to finish its two ongoing projects in Tiverton and Bampton and will ensure that all contractors, suppliers and tradesmen are paid in full, and all associated company property warranties will be honoured.
The Council has always focused strongly on the governance between itself and the company and risk and exposure have been closely monitored from the outset, including drawing on external auditors and sector experts as required. However, in order to prevent further potential financial exposure and refocus on delivering excellent public services the Council has made the decision to move to a soft closure of the company.
Councillor Luke Taylor, Leader of Mid Devon District Council, said: “In the lead up to the elections in May we made a manifesto pledge to bring financial stability to Mid Devon Council. This new administration knows it has to work hard to regain the trust of the electorate that previous administrations have lost and the closure of 3 Rivers is a step we are taking towards doing that. Whilst some may wish to point blame at individuals or specific causes, this will only incur significantly more costs and an ongoing burden. Our Scrutiny Committee has already announced a process to look at lessons learned and I can confirm this administration has no plans for any future arms-length businesses. We must now focus on strengthening the financial position of the Council and focusing our efforts on delivering high quality services for our communities.”