Futures Forum: District Council sets up its own Local Housing Company
As covered at the time:
EDDC takes innovative step towards setting up local housing company | The Exeter Daily
New housing company set up by East Devon District Council 'to provide decent homes for everyone' - Devon Live
However, this had very little to do with actually building 'local housing' in East Devon - but was a ruse to plug the ever-increasing financial holes:
Establishing a Local Housing Company for East Devon District Council
The Chief Executive presented this report which set out the business case for setting up a Local Housing Company to be wholly owned by the Council with the purpose, amongst others, of providing housing in the general market (so outside of the Housing Revenue Account) and to generate a profit to provide income to the Council’s general fund.
EAST DEVON DISTRICT COUNCIL - Minutes of the meeting of Cabinet held at Knowle, Sidmouth on 8 March 2017
Although it might indeed magic up some affordables...
Futures Forum: Local Housing Companies >>> 'It is early days for this new model of house-building, but with their seeming commitment to quality design, the omens are promising for architects seeking work in the sector. Whether this model can bridge the gap in affordable housing provision remains to be seen."
This is a potentially very tricky investment indeed:
Futures Forum: District Council local housing company >>> "the ‘huge risk’ in speculating on the property market"
As warned at the time:
‘EDDC housing company could develop anywhere in country’, warns Sidmouth councillor
21 March 2017
Cabinet members backed the creation of East Devon Homes last week and officers will now prepare an initial business plan, identify the first projects and report back to the council.
If approved, the company will be financed by EDDC and any profits would come back to the authority. It could sell land to the company at market value – or potentially gift it – and then borrow money to finance projects.
The report says the company, run by a board of directors, will be able to operate on commercial terms, free of the ‘continual interference’ from central government.
‘EDDC housing company could develop anywhere in country’, warns Sidmouth councillor | Latest Sidmouth and Ottery News - Sidmouth Herald
Its website might well make the operation sound quite innocuous:
East Devon Homes - East Devon
But such 'independent entities' can operate very nicely in the financial and property markets:
UK public finance: councils build a credit bubble
Fuelled by cheap state loans, local authorities are trying to plug the funding gap with property investments
John Plender APRIL 25, 2017
If local authorities can outbid almost all other participants in the commercial property market, it is because they have access to cheap and flexible funding from the Public Works Loan Board, an arm of the Treasury that has been helping finance capital spending by local government since 1793.
UK public finance: councils build a credit bubble | Financial Times
And this has a very uncomfortable sense of déjà vu:
Bankruptcy risk as ‘desperate’ councils play the property market
Desperate councils risk being plunged into an Icelandic-style financial crisis after investing £1.5bn in the commercial property market
Bankruptcy risk as ‘desperate’ councils play the property market | Society | The Guardian
“Local authorities have a long and inglorious history of gambling in the financial and property markets,” the former business secretary Vince Cable told The Guardian. For example, in the 1980s Hammersmith & Fulham, a local authority in west London, was one of several councils that landed in financial chaos after getting involved in complex bets on interest rates. “In some cases they may succeed,” reckons Cable, “but there is a very high risk of bankrupting their local authorities” if the property market turns and the investments turn sour. That, in turn, could threaten a serious systemic risk to the property market and UK financial stability.
Bankruptcy risk as ‘desperate’ councils play the property market | Society | The Guardian
“Local authorities have a long and inglorious history of gambling in the financial and property markets,” the former business secretary Vince Cable told The Guardian. For example, in the 1980s Hammersmith & Fulham, a local authority in west London, was one of several councils that landed in financial chaos after getting involved in complex bets on interest rates. “In some cases they may succeed,” reckons Cable, “but there is a very high risk of bankrupting their local authorities” if the property market turns and the investments turn sour. That, in turn, could threaten a serious systemic risk to the property market and UK financial stability.
And this did not escape notice here in East Devon at the time:
It was ten years ago this coming week when councils lost spectacularly in their 'investments':
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