EDDC borrows £84.4m to boost social housing
PUBLISHED: 07:37 13 April 2012
EAST Devon District Council has hailed taking out an £84.4million loan as a "landmark day for social housing".
Authority bosses say the huge sum is the price of gaining freedom to run EDDC’s own landlord services.
They now hope to be able to pump more than half-a-million pounds into new social housing in the coming year.
It follows an overhaul of the Housing Revenue Account, the Government’s system of funding council housing.
But, despite the massive sum, EDDC could ultimately be better off - and end up with an extra £0.5million a year to spend on council housing.
The old system saw councils pay all the rents and receipts from sales of their council housing stock into a pot of money, which is then redistributed to ‘poorer’ councils in Devon.
This amounts to around £6million a year, totalling £180million over 30 years. But it has been argued that this system puts financially sound councils, like East Devon, at a disadvantage.
So the Labour Government decided that councils should retain all their rent income and receipts from right-to-buy sales and rent.
And, instead of paying into a pot every year, they can borrow £84.4m off the Government in one go, and pay it off over 30 years, cutting costs.
EDDC is borrowing the money over varying periods from the Public Works Loans Board with an average interest rate of 2.99per cent.
The council says it aims to pay the loans back as soon as possible, while ensuring it has sufficient funding to run an excellent landlord service.
John Golding, EDDC head of housing, said: “It is an exciting development and should lead to significant improvements in the services we can give to our tenants. Over the coming years, we’ll be able to invest more money in new kitchens, doors and heating systems, as well as initiatives to provide affordable warmth and energy efficiency in tenants’ homes.
“We’ll also be funding more disabled adaptations, sheltered housing upgrades, and car parking improvements. We will also be investigating building more new council homes.”
Mr Golding added: “The reason we’ll be able to make improvements to the service is that the loan repayment is less than the Government subsidy payment would have been.
“For 2012/13 our £6million subsidy payment is replaced by a £3.3million payment of interest and principal. Of the remaining £2.7million, we’ll use £2million towards modernisation and accelerating our plans for increasing the housing stock. We anticipate that the full amount of the loan will be repaid by 2038.”