Rother council agrees loan facility for its new housebuilding company

Rother council leaders have approved plans to lend up to £80m to the authority’s housebuilding company.

Tuesday, 7th September 2021, 11:47 am

On Monday (September 6), Rother District Council’s cabinet agreed to establish a loan facility allowing the authority to lend up to £80m to Alliance Homes (Rother), giving the company funds to build up to 335 homes within the district.

The money is expected to be lent out on a short term scheme-by-scheme basis, with the individual loans likely to be paid back once the housing is sold. As a result, officers said it was unlikely that the full £80m would be borrowed at the same time.

Although it is the sole shareholder in Alliance Homes, the council would be required to lend at commercial rates. The council itself will fund the loans through both internal and external borrowing.

Bexhill Town Hall

While approved, scrutiny committee chairman Paul Osborne (Con) raised some concerns around oversight of the loans and asked whether it would be more appropriate for the decision to be made through a full council vote as he felt the decision was likely to be called in otherwise.   

He said: “We have seen over the years where councils have borrowed money and run into difficulties. You read the reports and hear on the news that the process wasn’t as good as it was and it should have been called in by someone. 

“I’m not saying this is going to go wrong, but I don’t want to be that person who didn’t ask that question.”

In response officers said, the principle of the loans had already been agreed by full council when it signed off on the company’s business plan. This could limit the ability to call-in the decision, they said.

Council leader Doug Oliver (Ind) meanwhile sought to reassure councillors on what the loan agreement would mean.

He said: “Perhaps we need some clarification or guidance on what this facility is. We are not going out and buying a Marriott Hotel or a Waitrose shopping centre; this is a line of finance to allow us as a local authority to provide homes for our residents. 

“You have to fund it somehow and this is a mechanism of funding it at the cheapest possible cost. 

“We are not borrowing £80m today and going out and spending it tomorrow. This is a line of finance that will be called in as and when over the programme of development of housing.”

Despite this cabinet member for finance Kevin Dixon (Lib Dem) argued in favour of continued oversight of the loan arrangements from both the council’s audit committee and its overview and scrutiny committee.

This, he said, was recommend to include annual reviews of Alliance Homes’ financial activities by the council’s audit committee. 

Cllr Dixon said: “Cllr Osborne is absolutely right and he is right to bring this up.

“The fact is this has gone wrong in other councils. You’ve only got to look to Croydon, they got into a terrible mess with various housing companies and we don’t want anyone to think we are going anywhere near that road, because we are not. 

“To strengthen this – and if it would stop a call in I think we should be doing it – that we add a recommendation that both the audit and standards and overview and scrutiny committees are encouraged to scrutinise the activities and borrowing of Alliance Homes (Rother).”

Battle housing site

During the same meeting, cabinet members also granted chief executive Malcom Johnston delegated authority to sell the council-owned Blackfriars site in Battle to Alliance Homes. 

Alliance Homes would then be expected to find a development partner to build out the site.

As with the loans, the land must still be sold in a manner that demonstrates good value even though the council is the sole shareholder of the company.