Kensington & Chelsea RBC has had to cancel £73m worth of housing and regeneration works as the borough struggles with “unprecedented demands” on its capital programme in the aftermath of the Grenfell Tower fire.
The council’s latest estimate is that it will need to spend more than £230m as part of a package that will provide permanent accommodation for all the victims within 12 months of the fire.
As a result a number of previously planned projects, including spending almost £10m on purchasing properties for temporary accommodation, have been cancelled to help balance the books.
A report which went before Kensington & Chelsea’s cabinet on 19 October, said the Grenfell Tower fire “has placed unprecedented demands upon the council’s capital programme”, especially in relation to the costs associated with buying permanent properties for former Grenfell Tower residents.
Of the £72.8m worth of projects to be axed, the biggest is a £36m scheme to buy out leaseholders on the Pembroke Road estate with a view to the council redeveloping the area.
The proposed construction of a new library and youth centre in North Kensington, worth £17m, has also been put on hold.
LGC reported at the beginning of October that the borough had already committed more than £75m to support victims. The most recent report said an additional £155m was required.
“At present this expenditure is being treated as general fund capital expenditure,” the report said. “Discussions are ongoing with [the Department for Communities & Local Government] as to how this expenditure is to be treated in the longer term.”
LGC previously reported that more than 30 councils carrying out fire safety improvement works to tower blocks have asked DCLG for financial assistance amid warnings of a knock-on impact on other schemes.
Kensington & Chelsea’s capital strategy and asset management board has reviewed the council’s capital programme until 2020 “with a view to freeing up existing resources to fund the requirements of the Grenfell acquisition programme while still maintaining schemes that are contractually committed, meet essential maintenance needs or have a significant degree of matched funding or income generation”.
Kensington & Chelsea “traditionally funded” its capital programme through selling assets, grants and developer contributions, the report said. It added: “The royal borough has traditionally avoided borrowing which obviously comes with additional revenue costs. The council will, if it is to both meet the requirements of the Grenfell replacement programme and the need to invest in owned assets, need to both borrow and seek other sources of income.”
The council normally provides about £5.5m revenue funding towards its capital programme but the report said the borough will “cease” to do this and will instead use that money to “meet the cost of funding any required borrowing”.
About £20m of section 106 contributions will also be put towards the cost of funding the revised capital programme along with almost £12.5m of the council’s £21m funding pot from car parking income.