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Housing associations / right to buy


grey_man
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Here's a perfect storm brewing?

 

1. Warrington Borough Council has lent tens of millions of pounds to housing associations in other council areas to build housing and made available to them credit amounting to hundreds of millions.

2. An incoming Conservative Government gives the tenants of those houses the right to buy those houses at knock down rates, as per the Conservative manifesto.

 

God knows what the outcome might be for Warrington Borough Council, but isn't it possible that the people of Warrington will be left with a bill for potentially millions (tens of millions?) which has been used to build houses in St Helens, Merseyside and Chester?

 

Any councillors know the consequences or are prepared to answer?

 

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Surely the housing association who the money was lent too would still have to pay back the full loan amount though regardless of how much they sell the houses on for. 
They themselves would probably make money on the sales though as even knock down prices must be more than it costs them to actually build them.

 

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That's what would be interesting to find out, because isn't it also possible that it means the association's assets are worth far less than they were when the loan was made and so they may not be able to repay? That wouldn't matter quite so much if the house is in Warrington Borough because it's still a local asset, probably with people paying council tax and contributing to the local economy. That isn't the case if it's somewhere else. 

 

I also understand that for every HA house they sell, the local authority will have to build one more to replace it. Doesn't that also have an effect for WBC who have been paying to have them built mostly away from Warrington itself?  

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Which other councils are funding housebuilding in Warrington? And the same question would apply to them, wouldn't it? How does the Government obliging HA's to sell off their housing stock on the cheap and then build new houses in its place affect loans they have received from other LAs?  

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Fair enough but are they funded by another LA? And it still doesn't answer the original question.

 

I see from the news today that housing associations are saying that the move will drive many of them to bankruptcy. How much money does Warrington BC have sunk in these organisations? 

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Fair enough but are they funded by another LA? And it still doesn't answer the original question.

 

I see from the news today that housing associations are saying that the move will drive many of them to bankruptcy. How much money does Warrington BC have sunk in these organisations? 

£36 million secured by a first charge over properties with the assessed valuation being substantially more than the loan value. If a property is sold then the loan secured against it must be repaid or transferred to another property which does not already have a loan secured against it. In effect the WBC loans are no different, other than scale, to an individual taking out a mortgage with a bank. With regards to the right to buy policy, firstly it might only happen if there is a Conservative Government, and that we will know in less than three weeks, and secondly, housing associations are not part of government, they are private, not for profit organisations, many also being charities, therefore compelling such organisations to sell off their properties, if it is not something that they want to do, is a policy that will most likely be determined in the Courts.

 

Regarding bankruptcy, that would be most likely due to their own failure of effective management and oversight by their non executive directors. It is often the case that where housing associations do get in to trouble they are taken over by larger associations in order to protect the reputation of the sector....something that used to happen with building societies, with the Cheshire and Derbyshire building societies coming to mind in recent times.

 

PS I hope the above informs the discussion, and it is not my intention to make further contributions to it. Posters and readers are always welcome to email me via my WBC email address and I will do my best to answer any queries they might raise.It should be noted that it was largely at my behest that WBC set up a Treasury Management Board, of which I am a Member, to scrutinise these loans and to protect taxpayers' money, something that I personally take very seriously

 

 

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Thanks Paul. I know you don't want to get into a discussion on here but in my opinion the council has left itself a hostage to fortune with this one. Chances are that these loans won't be a problem but equally they might be, especially if one or more of these HAs fails, as might be likely if a future Government forces them to sell their assets at substantially below market value and replace them at full cost. They may well challenge this in the courts but then again I assume the Government would be changing the law to accommodate this policy?

 

The main point is that there remains a risk that the people of Warrington could end up funding housebuilding in other towns. Perhaps that is (very?) unlikely but it seems a remarkable risk for the council to take on.   

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