Council offers borrowing provision

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finance to help housing associations in the Borders to continue building much needed social housing across the region could be coming in future from Scottish Borders Council.

Low interest loans of up to £10 million are being made available to organisations such as Berwickshire Housing Association who are currently struggling to borrow money at affordable rates.

SBC councillors have agreed to the council borrowing the money from the UK Government’s Public Works Lending Board and passing on the finance to four of the region’s housing associations who are the largest registered social landlords in the Borders, including Berwickshire Housing Association. The interest rates incurred by the council for borrowing from the Public Works Lending Board would be repaid by the housing associations, plus a one per cent administrative charge.

Although the council is no longer a housing provider it still retains responsibility for ensuring that there are sufficient houses available for rent, and the region’s registered social landlords have been set a target of building 100 affordable houses each year. But without the money being available to build the houses that target could become meaningless.

SBC’s corporate finance manager Paddy Fagan admitted to councillors: “These targets will be undeliverable without provision of additional assistance by the council.”

The idea for the council to borrow the money and pass it on to the housing associations came about in 2009 when Eildon Housing Association, who had been appointed the lead organisation to handle the Scottish Government’s affordable housing programme in the region, were finding it difficult to finance house building because they were having to fund it themselves prior to receiving the Scottish Government contribution. By the time the legal and financial issues involved in SBC lending to the housing association had been ironed out, Eildon Housing Association has secured the short-term funding from other sources, but the possibility of future loans remained.

The principle of the council obtaining the finance on behalf of the housing associations has been accepted by councillors this month after the scheme was recommended to them by Mr Fagan.

He did warn: “Although security will be taken in the form of housing stock and/or land, if there was a default, the council would still need to address the practicalities of liquidating such assets to return the investment.” Councillors, however, felt it was a risk worth taking to continue to increase affordable housing in the region.

With Eildon Housing Association now regarded by the Scottish Government as the lead developer of social housing in the Borders they will develop new affordable houses on behalf of Berwickshire Housing Association, Scottish Borders Housing Association and Waverley Housing, with ownership of the new houses transferring to these housing associations once they are completed.

However, the Scottish Government has suspended its usual affordable housing programme arrangements and in its place housing associations have to bid for a “greatly reduced level of grant of around £40,000 per house” which they will get once the houses are completed, rather than upfront.

In a recent Scottish Parliament debate on infrastructure investment, Jim Hume, Scottish Liberal Democrat MSP for the South of Scotland and housing spokesperson, attacked the Government for their “U-turn on socially rented housing”.

Mr Hume said: “Sadly, the investment plan did not contain anything that we didn’t already know; there will still be a cut of 30% to the affordable housing budget in the next financial year.

“The Government’s plans will not make any inroads into waiting lists containing hundreds of thousands of households. The Government must reverse course and scrap the cuts to the affordable housing budget but it also needs to be honest with this Parliament – there were, originally, to be 30,000 new homes for social rent but this has, apparently, been amended to 20,000 affordable houses.

“The Housing Minister (Alex Neil) surely cannot ignore the letter he received from six prominent housing organisations calling for greater investment in housing. The sector is crying out for greater assistance and the message is loud and clear: the Government just aren’t doing enough.”