Councils use financial freedoms to invest in new affordable homes

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housing reform has opened new avenues of borrowing for municipalities seeking to develop

has been dubbed as the most radical change of municipal housing for more than half a century. Account reform of housing for advice made a part of the national debt of housing, and in return, they are free to manage the debt you want - up to a certain point. In some cases, that freedom means rushing to pay the balance as soon as possible. For others, a return to council housing could be on the cards.

Stroud District Council has invested £ 23 million in housing over the next five years to maintain its level of openness of debt and interest-only payments to the lenders. Carl Brazier, head of strategic consulting services to tenants, says: "After that, we can decide to increase the development program or erase some of the debt it felt more like a business like approach to clear debt 10. -15 Years. "

Some municipalities have the ability to borrow more. However, the interested public sector balance sheet, the government has limited the amount that you can borrow. The difference between the initial level of debt and the cover is different across the country.

Brazier said Stroud can borrow another £ 11m and plans to use this resource to invest in new housing. "We believe that we could build approximately 20 units per year," he said. "Not a lot, but it's a start."

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prudent strategies being employed to make the most of this additional debt. Camden council became private developer, with 50% of new homes built by the authority sale on the private market to finance new housing.

"We have £ 438 million of debt at the time and to borrow £ 87 million We use the margin as a revolving fund -. We borrowed to fund regeneration plans as they come in recipes that replenishes the fund, "said Rhys Makinson, deputy director of housing Camden. The city has a demand large enough to accommodate the required level of rental income is virtually guaranteed.

private sector loans Camden has a borrowing capacity sufficient to continue without a private sector partner. Other authorities may be forced to explore different options. David Hall, director of the social housing sector consultancy, said: "In some cases, they are just rubbing against the upper portion of the debt at the outset, the question is if you look and create separate vehicles s if they are classified as debt. or not. "

Barking and Dagenham Council has established a protection vehicle ad hoc see houses built with private sector investment. Earth Council is released and houses built with money from private investors Shore long. The Board authorizes and manages the property, paying Shore Long a fixed annual yield. After 60 years of home ownership again board.

• It will not be an option everywhere - the land office should have to contribute to the plan and rental income must be sufficient to cover the costs of administration and dividend investors, the most likely in the south-east of England to the north.
• But when it works, is likely to be attractive to investors reluctant to take risks. Ken Jones, director of the Housing Strategy Barking and Dagenham, says it is in talks with institutional investors on other sites. "The key to making this work is that the donor is seeking a long-term return safely," he said.

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Dolittle, Chief Trowers public housing sector and firm Hamlin believes that this type of funding model could be wider than the authorities are looking for ways to invest beyond the ceiling imposed by the government.

"If you are in balance, you will be subject to the debt ceiling," he said. "It must be a private vehicle., All paris are open. There are all sorts of ingenious ways to make institutional investors for social housing. "

debt is a dirty word in politics these days, but there are ways to maximize the investment in housing and mitigate risk. Richard Parker, Director of Housing at PricewaterhouseCoopers, believes that the mortgage debt early is a mistake.
"If you are looking for ways to get more performance from the existing assets of the public sector will be a missed opportunity," he said. "Local authorities could borrow twice against its existing asset base. Ago a great opportunity if local authorities have the imagination to challenge traditional approaches."

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